Is Conti’s Truck Tyre Production Heading East?

Tyres & Accessories sister publication Neue ReifenZeitung recently published reports that Continental has been considering moving its truck tyre production East and linking it with certain Russian tyre makers in the wake of the announced closure of its high tech Hannover-Stoecken truck tyre production plant. For a number of years the Russian tyre manufacturer Nizhnekamskshina has worked together with Continental within the framework of a technical agreement, having previously been involved in a technical partnership with Pirelli. The possibility of forming a 50:50 joint venture has been talked about since 2007, however to date the entire result of this joint effort is that the Russians are building a truck tyre factory and Continental is “only” contributing know-how and organising production processes, as well as delivering all the required equipment. The target is said to be for production capacity to exceed one million all-steel tyres per annum.

The Russian truck tyre market almost exclusively centres on 20 and 22.5-inch tyres. Experts estimate that an investment of at least 200 million euros and probably around 250 million euros would be needed to set up such a factory. A competitor of Conti estimates that the market for all-steel tyres in Russia varies between one and 1.2 million pieces. This means that Nizhnekamskshina would require a market share of 100 per cent for the factory to be utilised at full capacity. It is quite clear that Nizhnekamskshina cannot manage this alone, so what role will Continental really play?

This much is certain: Continental’s Executive Board would certainly not at present submit an application for investment in a Russian tyre factory to its Supervisory Board. However the modern tyre building machinery from the Hanover factory could be shipped to Russia and be utilised as an investment in the factory in place of capital, a backdoor way of investing in Russia. Such a move would of course be a bitter irony for the Conti engineers, chemists and technicians, without whose know-how the factories in Russia and Slovakia could never have been built – having previously been told that investment in such new facilities would make jobs in their own market more secure, the fruits of their labour now instead being used to take them away. A step beyond talk over the Russian truck tyre factory is speculation that Continental will actually, bit by bit, withdraw from truck tyre manufacturing.

It’s not easy to spot a potential buyer for the division. Who fits the bill? It is also clear that Dr. Nikolin will not replace a closed factory in Europe with a new one there, even if the market should rapidly recover. The possibilities for expansion in Europe therefore seem very restricted, and the feasibility of marketing Russian manufactured tyres in Europe in the future is still very difficult to gauge.