A growing manufacturer in a growing market – Pirelli's truck business

Ugo Forner, senior vice president of Pirelli’s truck business unit, shares an insight into a sector of the world’s fifth largest tyre maker that is sometimes concealed in the shadow of the company’s sporting ambitions (such as Formula 1) and its positioning as a leading high performance passenger car tyre brand. This sector is of course commercial vehicle tyres, a business in which Pirelli has a presence in many markets around the world, including South America, where it is market leader; indeed, the region is considered the company’s “cash cow”.

According to Pirelli’s figures the global truck tyre radial market amounted to 135 million units last year. Annual growth rates are forecast at more than five per cent (Pirelli’s current forecast covers the period until 2015), a figure reflecting ongoing development and growing levels of radialisation in China (where Pirelli’s tyre production is technologically on par with Western standards) and a number of other markets.

Last year Pirelli’s Industrial business turned over 1.68 billion euros, 88 per cent of which was generated through the truck business (the remaining 12 per cent is accounted for by the company’s ‘agro’ business). Notably, Forner estimates the EBIT margin to be around nine per cent and this is expected to increase to 11-12 per cent in 2014. The truck radial business is a global growth area and Pirelli anticipates its participation in this sector will be accompanied by a four per cent average annual growth in turnover.

Between 2011 and 2015 the Italian manufacturer intends to invest around 400 million euros in increasing its global truck tyre radial capacity. An important aspect of this investment is the company’s new factory in Argentina, which is being erected at a cost of US$300 million and as of 2016 should produce some 700,000 units a year. However Pirelli’s investment is not just about unit figures, and also involves the upgrading and modernisation of its product portfolio: In 2010 45 per cent of Pirelli’s tyre lines had been on the market for less than three years; by 2015 this proportion should have reached 65 per cent. Truck tyre product cycles will be shortened, as Pirelli is gearing up to consolidate its position as a manufacturer of cutting-edge products.