Wealth of retreading experience in Latin America helping Pirelli in Europe

Pirelli has heavily invested in the commercial vehicle tyre segment for a number of years now. This investment has covered the development of technologically-advanced tyres and the company’s outstanding fleet segment service portfolio. The overall aim is to minimise vehicle operating costs, which today represents the central criterion for companies needing to mimimise cost per mile in order to remain competitive within their respective markets. Following this logic, retreading naturally plays an increasingly strategic role.

Turnover within the ’Industrial’ business, which covers truck, agricultural and OTR tyres plus steel cord, currently accounts for approximately 27 per cent of Pirelli’s total turnover. Close to 70 per cent of this turnover originates in two geographic regions: Europe generates 33 per cent and South America a further 36 per cent. The remainder is divided between growth markets such as the Middle East, Africa, Asia Pacific and North America (including Mexico). With 11 production sites – in Italy, Romania, Turkey, Egypt, China and Brazil – plus sales networks in 160 countries, the Industrial business unit is estimated to have achieved an annual turnover of around 1.7 billion euros last year. The pace of development within the commercial vehicle tyre segment is occurring much more quickly in emerging countries as it is in mature markets, and over a number of years Pirelli has built up a strong presence as market leader in the rapidly growing Latin American markets, particularly in Brazil. In regards to its retreading activities there, the Italian tyre maker has not taken the traditional path when developing its business; instead of developing its business from Europe to Brazil via Latin America, it has done it the other way around. In fact, its retreading market presence in Brazil and Latin America can hardly be compared with that in Europe, and that is without mentioning the number of local partners it has. “We gain all our experience and competencies in these markets then transfer and use them in other markets, such as Europe,” comments Alberto Viganò, marketing director of Pirelli’s Industrial business unit, to Tyres & Accessories. The company’s range for the Latin American market includes its own ‘Novateck’ retread brand, whose treads are produced by Marangoni at plants in Brazil and, starting last year, Argentina. While Marangoni itself holds a considerable market share in Latin America and aims to increase its share of sales to 20 per cent by the end of next year, the two Italian partners are united by a common language and are able to rely on each other. The prospects for further developing the collaboration between the two companies are good and, although not permitted to delve into further detail, Viganò hints that exciting plans will be announced in the coming months.

Pirelli operates a network of 125 certified partners in Brazil, including several who are still undergoing official approval from Pirelli’s technicians. Just recently the company supplemented its Novateck range with treads from its popular :01 series. This Novateck product follows up the premium tyre range’s local launch at the Fenatran commercial vehicle show in São Paulo last October. All Pirelli-made truck tyres are considered retreadable as Novateck products, both those from the premium Pirelli range and from the second brand Formula.

Against this backdrop, tackling the European retreading market seems a complicated affair. Negative trends within our region have caused the total number of annual retreads to decline four per cent to 5.1 million units, while the number of new truck tyres sold has increased seven per cent to 8.8 million units.

There are numerous factors behind this development, however the main reasons are a shortage of casings and the growth in imported – and often not retreadable – new tyres from China; these imports have risen from 1.4 million to 1.9 million units. Given the political and particularly economic uncertainties in many European countries, many fleet operators have decided in favour of purchasing affordable new Chinese tyres rather than investing in retreading and the purchase of retreadable new tyres. Yet despite the market environment in Europe, Pirelli’s global retreading strategy progressed well last year, supported primarily by its business in Latin America and especially Brazil.

“We have concrete growth plans for the European market in 2014, particularly in the key Italian, German, British and Swedish retreading markets,” the Industrial business unit marketing director shares. Viganò says that Pirelli will proceed with the 2013-initiated acquisition of the multi-brand Däckia chain in the last of these markets. “Retreading is especially significant in Sweden. We’ve invested further in compounds for tread production in order to reduce rolling resistance and increase mileage, something achieved through specifically-developed ring treads.” In Europe and Turkey, Pirelli can thus offer its latest generation of truck tyres – the :01 series – with compounds optimised for retreading and as ‘rings’. Including the 50 retreading partners in Europe and Turkey, around the world Pirelli now cooperates with a total of 175 retreading partners.

The company declined to share in detail how it will further develop its retreading business. Viganò says that depending on the results of a feasibility study, investment in mould cure retreading within Europe is a possibility. Pirelli anticipates a further growth of mould cure retreading over pre-cure retreading within this region; Viganò considers a 50 per cent share a real possibility. We can also expect a deepening of the partnership with Marangoni in Europe during the course of this year, especially in relation to the United Kingdom, Germany, Italy and Turkey. But that’s not all; last year Pirelli got underway with new partnerships in Australia, Saudi Arabia, Kenya and China. In this last market, Pirelli has begun a project together with Marangoni and a local partner; this involves both new tyres and retreads. In addition, the company intends to expand into the retreading of agricultural tyres in Latin America and in doing so round out the business.

“Novateck has developed into a valuable brand in Latin America and we’re greatly profiting from this in Europe. Admittedly, we still have a long way to go here. However, thanks to the strong technological improvements and the right partners, I am convinced that we will also do a good job in Europe,” concludes Alberto Viganò.