Pirelli - Formula Russia

AFP Photo / Pool
Formula 1 tyre manufacturer Pirelli is going to start production at two modern Russian plants.

According to the company, Pirelli will pay 222 million euro to the Sibur Tyre Company for both plants investing additional 200 million euro to increase capacity.

“In 2012, the Kirov plant will produce around 6.5 million tyres, Voronezh – 2 million, with further growth of capacity to 4 million tyres in 2014. In 2015, Pirelli plans to produce more than 60% of tyres on Kirov plant under its own brand while all Voronezh plant products will be Pirelli branded.” the company says in a statement.

Earlier in 2008 Pirelli, Russian Technologies and Sibur tyre signed an agreement on jointly developing tyre production with an an option for Pirelli to acquire the Russian production facilities.

“In accordance with the agreement Voronezh Tyre Plant will be transferred from Sibur to the joint venture of Russian Technologies and Pirelli, including the possibility of the additional transfer of other tyre assets to the joint venture” a Sibur representative said.

Pirelli plans to acquire the Kirov plant his month, and the Voronezh facility next year according to the Vedomosty daily.

80% of tyres from the Russian plants are for the domestic market. On in seven Pirelli tyre will then be produced in the Russian plants. “The intention of the company to import some tyres due to the fact that the production of luxury tyres will be unprofitable because of low demand for that range in Russia,” says Konstantin Yuminov, analyst at Raiffeisen bank.

He adds that Voronezh plant is up to date and can easily produce premium tyres.

Pirelli expects to earn 300 million euro in Russia in 2012 increasing to 500 million euro in 2014.

Experts believe this partnership is advantageous for each party concerning the distribution of investment risks. Above all, the contract gives Pirelli privileges to acquire existing manufacturing assets instead of investing in construction.

Deputy Director for Strategic Development at Sibur Russian Tyres, Igor Karavayev, believes the Russian market is one of the most attractive for international companies in the current conditions. “The only way to establish a successful market in Russia and to gain a reasonable market share is to produce here simply because importing more than 1 million tyres per year is logistically inefficient,” he said.

Currently Pirelli has about 2% of the Russian market, and with the new plants it intends to increase that to 20%. So it won't be long before Russian boy racers will have more chance to drive on rubber from the Formula One provider.