Pirelli’s Tronchetti Provera: “In Russia we will continue to grow”

Football magnates such as Arsenal’s second-largest shareholder Alisher Usmanov  and Chelsea’s Roman Abramovich may have lost nearly losing $809 million (£516 million) $450 million (£287 million) already with the collapse of the rouble, but Pirelli’s Marco Tronchetti Provera remains optimistic about the tyre maker’s chances in Russia.

In an speech given to the Italian media on 10 December, Tronchetti Provera said: “The weakness of the rouble will not create problems to Pirelli”. Speaking during the “Bau Bau” event at the Bicocca Hangar modern art museum, he explained the reason for his optimism: “Russia is a small portion of our turnover. It represents about 4 per cent. In Russia we are growing a lot with high-end products. Moreover, it’s a very good hub for export, so I think that, even in this situation, our results this year will improve significantly, in relation to last year, and can continue to improve. We will find the balance point between export and production for internal market.”

Indeed Tronchetti Provera suggested the Pirelli’s Russian figures would turn black in 2015 despite adverse conditions and predictions of a Russian economic slowdown in 2015 coming from the Russian government itself: “Our goals are confirmed…This year will reach a positive result, after the start-up costs which we paid in previous years. We are growing in a very good way also in production capacity and market share. Finally, we have also exports markets from Russia to develop next year.”

However, we have to point out that these comments were before the most recent and most dramatic pressures on the Russian economy. Others are much gloomier about prospects for automotive (and by implication) automotive related businesses. For example, IHS Automotive principal analyst Tim Urquhart said today (18 December): “OEMs are increasingly looking at their business risk in Russia as a result of the collapsing value of the currency. There is little point in manufacturing and importing vehicles that are going to lose money simply because the ruble’s ongoing slide is so dramatic. And that’s even if buyers can be found for these vehicles given the corresponding decline in the passenger car market.”

According to IHS Automotive analysis, the light vehicle market is down by 11.6 per cent in the first 11 months of the year, showing there is little organic demand in the market despite the introduction of the Russian government’s vehicle scrappage scheme at the start of September. The analysis continues: “With the rouble having lost around half its value against the dollar since the start of the year, and the economic stability that has been the cornerstone of the Putin administration under threat, it is likely that OEMs will look further at revising their Russian business strategies in the coming weeks and months.”

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In March Tyres & Accessories interviewed Pirelli’s global marketing vice-president Matteo Battaini on the subject of Pirelli’s involvement in Russia, see “Russia a growing part of Pirelli’s business?” for more.