Michelin Investing in Emerging Markets

Michelin managing partner, Michel Rollier, has spoken of the French tyre manufacturer’s plans to invest $2 billion in increasing its capacity in emerging markets between now and 2012. French newspaper Les Echos quoted Rollier as saying "our problem is that the growth of our capacity is insufficient compared with demand" at this year’s Michelin Challenge Bibendum event in Rio de Janeiro. “We cannot equip a manufacturer in North America and tell him we're not able to do it in South America," he reportedly explained.

Michel Rollier’s comments follow suggestions from some sources that Michelin is lagging behind its main competitors when it comes to its presence in the emerging BRIC (Brazil, Russia, India and China). However, in the future BRIC countries are expected to have “an increasing share in the sales revenues of Michelin tyres,” managing partner Jean-Dominque Senard said.

In order to achieve this Michelin’s plans include $400 million of investment in Brazil to expand its two factories in Campo Grande and Itatiaia. For China and India, Michelin’s focus will reportedly be on commercial vehicle tyres. Michelin has previously announced plans to build an $800 million factory in India and has plans to invest a similar amount on a factory in China. However, perhaps unsurprisingly given macro-economic instability and the previous experience of other tyremakers the former USSR, Russia is not a priority for now, Rollier told Les Echos.

Interestingly, Rollier added Indonesia and Eastern Europe to its list of emerging markets interests: “From a share of 33 per cent now, we expect the growing markets of BRIC, Indonesia and Eastern Europe to have a share of 40 per cent in the value of our sales,” he told journalists at the Challenge Bibendum event, with a 10 year time frame in mind.

BRIC countries currently contribute about 23 per cent of the French tyre major’s production, but this could grow to around 30 per cent. Michelin has 72 plants in 19 countries in total.

Immediate activity in India

India’s Economic Times reported that Michelin gave details of plans to hire about 200 people in India this year as it gears up to start production from its Chennai plant in the next two years. “Our goal is to hire a little less than 200 people this year. They will be sent to Thailand for a three-week course once they come on board with us, after which they will be assigned to one of our overseas facility till the plant in Chennai becomes operational,” Michelin President (Africa, India and Middle East) Prashant Prabhu said. He said the company has already hired about 60 people for its Chennai plant.

Prabhu was confident that the company’s decision to focus on the truck and bus radial tyres is the right strategy: “The rate of radialisation of truck and bus tyres in India is…about 10-15 per cent, which is the lowest for any market of such a big size…It offers a lot of potential for us,” he said.

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