Tires & Rubber Offers a Russian Podium

Today, when we think about the Russian market, two thoughts are most likely to arise in the minds of most Western Europeans. First, Russia is, or at least will be, a giant tyre market; and, second, most of us don’t know that much about this market and its players. One of the reasons we don’t know much about the Russian tyre market although it is so large in size is that there are almost no tyre exports from Russia and the CIS states into Western Europe, in particular for the passenger car tyre segment. It appears that the Russian tyre market is still locked up as if the iron curtain remained firmly in place, although admittedly Russia is absorbing ever more tyre imports from the West. As a matter of fact, not many well-established relationships exist between Western tyre manufacturers and wholesalers (or even retailers) with companies in Russia. What we hear and know is that the market is currently developing at such a speed that any company must maintain a certain level of persistence in order to stay in the game. The “Tires & Rubber” exhibition, which took place in Moscow from March 4 to 7, nourishes the idea that common ventures and established relations between Russian and Western European tyre market players are still a rare thing, although we can see that Russia is – step by step – emerging from the dark and entering the international scene.

The Tires & Rubber show clearly is one the most established events of its kind in the tyre world. This year it took place in the Russian capital for the eleventh time. In spite of this, or maybe because this is the case, any comparison with an exhibition like the “Reifen” show in Germany is entirely misleading. And this is not only true because the size of the Moscow tyre show can barely be compared to the size of the Reifen show. Tires & Rubber, for example, this year attracted 197 exhibitors, which is seven per cent greater compared to last year’s show. These exhibitors booked a combined floor space of about 2,500 square metres and attracted 8,800 visitors, which in turn is a plus of 2.6 per cent. 2,900 of these visitors came from abroad. All these figures are clearly surpassed by the bi-annual tyre show in Germany, which takes place again this May. But when we say there can barely be any comparison between both shows, we also mean that both shows apparently attract a different clientele. Of course, tyre manufacturers, wholesalers, distributors and other market players are present during the four days of the Tires & Rubber show in Moscow. But it is not they who dominate the picture and create the most distinct first impression. It is not companies offering a range of finished, market ready tyres that dominate the show, rather companies whose products and services are used during the tyre production process. Raw material suppliers, tyre and steel cord manufacturers, machinery producers and others such firms dominate the ‘big picture’ at the show. Thus, in the widest sense of the word, the Tires & Rubber show can barely be called a “tyre trade show” and it certainly is not a leading show in the way the Reifen show is acknowledged as being. The Moscow show can instead be compared with events like the “Tire Technology” expo in Cologne. And it would even be justifiable to call the Moscow show “Rubber, Technology & Tires,” without causing the organisers any harm.
Nevertheless, we have to admit that there is not much on offer with regards to tyre shows in Russia. Here and there are local shows, for example commercial vehicle or automotive shows (the “Automechanica Moscow” took place as a concurrent event at the same venue). Companies from Western Europe, however, would be well advised to come to visit the Tires & Rubber show in order to hear and see what’s going on in the Russian tyre market. A prerequisite to this should be that these companies exhibit during the show (see more on this issue below). Such a presence is particularly seen as a requirement with regards to Russia’s fast changing market environment. An “obligation to attend” the Tires & Rubber is particularly apparent among retreaders and their material suppliers, among wholesalers and distributors from Germany or Benelux, and – again – among machinery and equipment providers.
The fact that Tires & Rubber could easily be promoted as the “Rubber & Tires” show can be seen from the number of raw material and other suppliers attending the four-day show as exhibitors. Because Russia has without a doubt a strong reputation for its chemical and raw material industry, it comes as no surprise at all that companies from this area of the tyre industry are present during “their” show. This is in particular true because the tyre industry is one of their main customers – in Russia and abroad. And it also does not come as a big surprise that major tyre manufacturers from around the globe and from Russia, in particular from Russia, are painfully absent during the event in Moscow. Not one single tyre manufacturer producing tyres in Russia used the Tires & Rubber show to present itself and its products to a wider audience. Amtel-Vredestein was missing, so was Sibur-Russian Tyres, Nizhnekamskshina, Nokian, Matador and also Michelin. Also other companies that would not have been out of place were also absent, such as Hankook (an exhibitor in past years), Yokohama or Continental. Of course, every single one of these companies certainly has good reason not to exhibit during the Tires & Rubber show, not least the high prices the organisers charge (the same applies to the hotels and everything else in Moscow). We are not attempting to point the finger at those who were absent; we merely wish to illustrate the character of the event. Few exceptions to the rule can be noted: Rosava (from Ukraine) was there, so was Belshina (Belarus), and – like all the years before – Goodyear Russia. Random visits to the Goodyear stand explained why other major players decided not to exhibit: vast emptiness.
At this point it seems appropriate to ask whether this phenomenon is a symptom or the cause behind the absence of major tyre industry players. Are the major Russian tyre manufacturers and the so-called “ex-pats” with local Russian production such as Nokian and Michelin not exhibiting simply because the show’s visitors are not interested in their products? Or is it that the potential visitors who would be showing up at a possible Nokian, Michelin or Amtel stand are just not coming because the show in its present guise has little to offer them? It’s the old conundrum of the chicken and the egg… The answer, it seems, is quite simple: How could a multi-billion dollar corporation not be in a position to successfully sell tyres in Russia without being present during the Tires & Rubber show and entering into nitty-gritty tyre talk with dealers and traders from both sides of the Ural mountains? The answer is obvious! The Moscow tyre show, like many other small and similar events around the globe, is not considered one of the “leading shows” everybody knows about (such as Essen or SEMA) even though they all want to play in the same league and want to be seen as a must-attend show. In other words: If somebody in Russia wants to buy Michelin or Nokian tyres he will call, regardless of presence or absence at any tyre show.
Earlier within this text we claimed that the Russian tyre market is mostly a closed market with barely established links into the West and few exports, in particular with regards to passenger car tyres (in terms of imports this again is a somewhat different story). But when we look at commercial tyres we can identify a decent exception to the rule. Just recently, Sibur-Russian Tyres – Russia’s leading tyre manufacturer – established its first own distribution subsidiary in Western Europe (Germany). In addition to truck tyres, Sibur-Russian Tyres is exporting agricultural tyres (Voltyre) and is widely accepted as a market player in this niche market. That said, the fact that the Russian/ex-Soviet tyre market can be regarded as a mostly closed market is also apparent when looking at another example, one that also illustrates how some tyre manufacturers in these countries see themselves. Although the Tires & Rubber show is presented and portrayed as an “international” tyre show, even the larger companies in attendance, such as Rosava (Ukraine) or Belshina (Belarus) don’t consider it necessary to have English speaking staff around at their stand, nor English language promotional material, catalogues or brochures. Without an interpreter or a good command of the Russian language communication (and business) is somewhat restricted.
Nevertheless, although tyre manufacturers producing in Russia did not show up and exhibit during the Tires & Rubber show and although others did not appear to be prepared for an “international” audience – the exhibition did have an international flair. This was highlighted – again – by the overwhelming presence of Chinese companies among the 197 exhibitors, most of whom featured their OTR tyre competence. While about 60 per cent of all exhibitors came from Russia and other former Soviet states, Chinese companies made up the second largest national group among the exhibitors at the show (12 per cent), ahead of the Germans and the Italians.
The Chinese OTR tyre manufacturer Techking Tires, for example, used the Tires & Rubber show in order to present itself and its new Russian distributor TransCity (Moscow). “We want to present our brand in Russia and the CIS states,” says Techking’s regional manager Tonya Su. To date Techking Tires has only managed to sell a small quantity of OTR tyres in Russia but it has to be pointed out that the relations with TransCity were only established last September. Things will obviously pick up very soon, especially now that the Chinese OTR tyre newcomer has exhibited in Moscow. While only a few manufacturers from Russia or other CIS states are present in China and elsewhere, Chinese manufacturers in turn are already talking about marketing support, optimisation of distribution structures and such things. Techking Tires at least believes that its concept based service and products (and not just its products alone) will soon be established in Russia and lead to “long-lasting partnerships.”
Equally optimistic is Guizhou Tyre in its approach to the Russian tyre market. Guizhou is a Chinese commercial tyre specialist that also offers some radial passenger car tyres. “We want to explore the market; for us it’s a new market,” says a representative of Guizhou Tyre during the show. The company’s presence is focused mostly upon promoting Guizhou’s OTR, industrial and skid-steer tyre programme. It is firmly believed that Russia – the “country of raw materials” is also suffering under the shortage of large OTR tyres – will generate a strong demand for Guizhou’s products and thus will make a reasonably good sales market. The Chinese company believes that in future there will be even more companies from the Far East setting foot on Russian soil. This will particularly be the case if Russians buy their OTR tyres according to price considerations alone and not because the price-performance ratio is satisfactory. Guizhou’s commercial tyres would be ready to meet both of these requirements, the company representative says.
Other non-Chinese manufacturers have also realised that, so far, the Russian tyre market offers a huge potential for selling OTR tyres. One of these companies, for example, is the Italian retreader Gomme Piave, which together with a partner has founded the new company Wellrock Italia. Just like Techking and Guizhou, Gomme Piave/Wellrock Italia was a newcomer to the Tires & Rubber show this year. While Gomme Piave retreads smaller OTR tyres between 20 and 35-inches in diameter (mould-cure retreading), Wellrock Italia is a specialist in retreading giant OTR tyres up to 63-inches, says Lucio Trevisan and Dr. Robert Buijs, representatives of the two Italian companies. The company has already much experience in pre-cure retreading during its half century of history, and today the focus is clearly on mould-cure retreading and its advantages, which are said to also be of help in acquiring new Russian customers. The two sister companies retread about 10,000 tyres per year.
The ability of a market like Russia, with its increasing number of Western trucks and fleets operating according to Western standards, to offer increasingly large potential for companies in the retreading business has convinced a number of companies to exhibit this year in Moscow. One of the experts convinced of Russia’s growing potential is Marco Mandrioli, sales and marketing director in Marangoni’s “Retreading Systems” business unit and at the same time managing director of Ellerbrock in Germany. According to him, full-range and system suppliers “have a lot of opportunities” in Russia. Only this year three new customers will open their retreading shops in Russia fully equipped by the Italian Marangoni group and supplied with its treads and compounds (one of these companies will even be a Ringtread retreader), says Mr. Mandrioli, whose company hasn’t missed one single Tires & Rubber show aside from the very first one. This year’s show proved that Russian customers finally seem to wholly understand the concept of retreading. However, Mr. Mandrioli continues, Russia is still far away from being “a mature retreading market”. But it is in particular these ever changing requirements and conditions set out by the Russian tyre market that should be seen as the great challenge. Although, as we said, the Russian tyre/retreading market is far from reaching maturity, fleet operators, freight forwarders and truck drivers are more and more understanding the importance of professional tyre management, part of which always is the careful treatment of tyres and casings – the retreader’s raw material.
Nevertheless, it is particularly the availability of casings in Russia that has to be regarded as the major obstacle for the large-scale implementation of the “concept of retreading” in the country. When Mr. Mandrioli talks about the retreadability of Russian truck tyre he prefers to talk in questions rather than statements, although there obviously have been and still are major improvements with regards to this issue. In addition to this problem, Western A brand casings are difficult to get hold of in Russia, and these are necessary for comprehensive support of a fledgling but growing market, may it be for Marangoni’s Ringtread retreading or any other traditional technology.
According to figures provided by Marco Mandrioli, the Russian truck tyre market demands about 200,000 retreads per year. However, only about one third of this annual consumption is actually produced within Russia. The vast majority of retreads thus are imported by Russian companies, also and in particular from German retreaders like RuLa, Hämmerling and others. These companies seem to have a decent market share on the Russian retreading market. There are currently “about 15 to 20 retreaders” in Russia, the sales and marketing director continues. It is this very vague figure that signifies how young and how sparsely developed the Russian tyre/retreading market actually is. Marangoni and Ellerbrock can at least claim that they supply half or more of Russia’s retreaders with its Ringtreads, treads and retreading materials, and that the Italian-German group supplies at least half of its respective customers’ demand.
Joe Krimpenfort, general manager of Galgo Pre-Q Europe, believes that other figures on the Russian retreading market are more accurate. According to him, there are 15 retreaders operating in Russia. These companies supply a maximum of 50 per cent of Russia’s local demand for retreaded truck tyres per year, which – he thinks – is only about 120,000 units. So, with regards to domestic Russian retread production, figures coming from Galgo and Marangoni/Ellerbrock are, at about 60,000 units, very close to each other. Where both market players obviously differ is the number of retread imports coming to Russia. Within the next two year it is expected that the number of Russian retreaders is going to double to 30, the general manager, whose company this year exhibited at the Tires & Rubber show for the first time, continues.
Whether or not the Russian retreading market will take on a strategic role for material suppliers from Europe or the Americas (Galgo is a Mexican company) remains to be seen, Mr. Krimpenfort adds with a hint of doubt. To date Russia has merely been “a market of opportunities” where only one sales argument really counts: the right price. In addition to that, the vastness of the Asian landmass makes logistics in Russia very difficult and often expensive.
Other companies from the retreading industry, companies that have exhibited at previous Tires & Rubber shows, such as Kraiburg or Bandag, were missing this year around.
However, newcomers showed up in their stead, companies like CIMA Impianti. The Italian manufacturer of vulcanising presses (exclusively) for the retreading industry has engaged in business with a new importer in Russia, a company called Himmashtorg, one that also represents other tyre industry firms including Israel’s Pelmar Engineering (also a first timer at the show, the first time an Israeli company has exhibited) and Barwell International from the UK. Although CIMA Impianti has not yet made any noteworthy business in Russia, this is set to change in the very near future, says Alessandro Vignolini. “We want to explore what the potential of the Russian market is. And we want to be the first of the Russian market,” he says. In addition to that the Italians believe the speed at which the Russian tyre market is currently developing will even increase, although, as Mr. Vignolini continues, it still is “a long way to go” until the Russian retreading market becomes as equally developed as the European market.
With regards to “development” it is machinery suppliers that offer a good indicator of where the market currently stands. As said previously, the Tires & Rubber show had above average representation by equipment (and raw material) suppliers to the new tyre industry, such as the Dutch VMI group. As Harm J. Voortman, president sales and projects CCO of VMI, points out in an interview with Tyres & Accessories, the three major Russian tyre manufacturers Sibur-Russian Tyres, Nizhnekamskshina and Amtel-Vredestein have all strongly invested into the modernisation of its production facilities and the increase of quality product capacities. Over the next years, then, increasing investments in Russia will be made by Western tyre manufacturers, Mr. Voortman continues. What is true with regards to leading tyre manufacturers, as pointed out above, is equally true for machinery manufacturers and suppliers to the new tyre industry: market leaders such as VMI Epe Holland need not be present with their own stand on the Tires & Rubber show in order to meet their customers. But for Harm J. Voortman it also is a question of prestige: “You just have to be there.” And, by being there, high-profile representatives of leading Russian tyre makers are showing up at VMI’s stand, if the impressions of the author of these lines are correct.
The German Hofmann Maschinen- und Anlagenbau GmbH has also invested considerable money into its presence during the four days of the Moscow tyre show. As Tanas Manolevski and Jörg Möller from Hofmann – leading manufacturer of balancing, testing and tyre building machinery and equipment – point out, Tires & Rubber is also an “ideal meeting point” although they also think it disappointing that the major Russian tyre manufacturers – Sibur-Russian Tyres, Nizhnekamskshina and Amtel-Vredestein – did not exhibit. Currently, Hofmann’s observation is that the amount of investment undertaken by tyre manufacturers in (not necessarily “from”) Russia is slowing down; some decisions about the upgrading of facilities or the installation of new, more modern capacities and the like had been postponed by some. There is currently “a major insecurity among Russian tyre manufacturers” with regards to the near future, Hoffmann’s representatives say. These insecurities are nourished partly by investment plans put into place in Russia, such as Continental supporting Nizhnekamskshine to build a new truck tyre factory. They are also nourished by companies currently experiencing a very critical stage in their operations, such as Amtel-Vredestein. The Russian-Dutch company apparently has financial difficulties and urgently needs to sort out things such as the sale of the Moscow Tyre Plant, which it acquired only a short time ago, or the expansion of the showcase “Voronezh II” factory where construction work is proceeding slower than scheduled.
For the Slovakian tyre manufacturers Vipo and Konstrukta Industry the Moscow Tires & Rubber show also is “the right show to exhibit,” as Anton Jablonicky points out when talking to Tyres & Accessories. Vipo’s marketing and sales manager continues to see good demand from investors in Russia who feel “the right atmosphere” there. However, as Jablonicky believes, investments from tyre manufacturers in Russia will become less than today in another two to three years when current expansion plans or plans to upgrade a facility have already been put in place.