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China plant to become Pirelli’s largest

YANZHOU, China (March 8, 2013) — Pirelli Tyre S.p.A. is investing $200 million through 2014 at its plant in Yanzhou to more than double annual capacity for car tires and boost truck tire capacity more than 20 percent, making the plant the company’s largest worldwide.

The investment/expansion is in addition to the start of production last year at Yanzhou of premium motorcycle tires and Pirelli’s involvement as a minority partner in a plant in Yanzhou for the production of steel tire cord.

The projects “reaffirm the strategic value” that the Chinese market represents for Pirelli, according to the firm.

Pirelli disclosed the investments locally in China in April 2012 but the extent of the project came to light internationally only recently after Pirelli Asia/Pacific CEO Gregorio Borgo discussed the expansions with Chinese media.

Once completed, the expansion will raise annual car tire capacity to 10 million units from 4.1 million, Pirelli said, and truck tire capacity to 850,000 units from 700,000. The plant also now has annual capacity for 1 million motorcycle tires. The steel cord venture is projected to have annual capacity of 16,000 metric tons.

Prior to this latest round of investment, Pirell had invested around $400 million in the Yanzhou plant since acquiring a stake in it—known then as RoadOne Tyre Co. Ltd.—in 2005.

The tire maker raised its ownership stake in Pirelli Tyre Co. Ltd. (China), the venture that controls the Yanzhou complex, in 2011 to 90 percent from 75 percent, paying nearly $40 million for the additional 15-percent stake.

By the time the new phase is completed, the 1.94 million-sq.-ft. Yanzhou facility will employ a staff of more than 2,800. Pirelli said it also plans to expand the size of its sales network in China to more than 3,000 points of sale in 2014 from fewer than 1,000 in 2011.

Strengthening the company’s presence in China is part of Pirelli’s broader expansion strategy for the Asia Pacific markets, which accounted for about 7 percent of Pirelli’s global sales last year. Pirelli is forecating 23-percent annual growth for the region for the 2012-2014 period to about $850 million.

Apart from the Yanzhou plant, Pirelli is building motorcycle tire capacity in Indonesia in a joint venture with local auto parts maker Astra Otoparts Tbk., where Pirelli expects annual production to hit 7 million units by 2016.

Mr. Borgo, a Pirelli veteran of more than 20 years—including 15 in Asia/Pacific—was named CEO of the Asia/Pacific region last year.

Source: Tire Business

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