Italian tyre company starts joint venture
By Liu Jie (China Daily)
Updated: 2005-10-13 08:38
YANZHOU, Shandong Province: Italy-based tyre producer Pirelli launched its first joint venture in China yesterday in order to get a foothold in the world's fastest growing market, and help further expansion in the Asia-Pacific region.
Pirelli will take a 60 per cent stake in the joint venture with Shandong Roadone Tyre. It will invest US$90 million.
Located in Yanzhou and covering 500,000 square metres, the joint venture will produce high-quality truck tyres with an initial annual production capacity of 540,000 tyres.
"At full capacity, the plant will be able to produce more than 1.2 million tyres a year," said Francesco Gori, general manager of Pirelli Tyre Sector.
The product is destined for China, Southeast Asia and Australia, with local and export sales initially expected to each account 50 per cent.
The joint venture's goal is to capture 3 per cent of the Chinese radial truck tyre market by the end of next year, with a future aim of growing at twice the speed of the market.
"We believe that China will become a key market for tyre producers in coming years and it will become our base for Asian penetration," said Gori.
Official statistics show that China's tyre market represents 9 per cent of world sales, with a value of some US$8 billion last year. Radials account for more than 60 per cent of sales. The production of radial tyres exceeds 100 million units, equal to 50 per cent of China's total tyre production.
Niu Yishun, chairman of Yinhe Group, the parent company of Roadone, welcomed the co-operation with Pirelli and pointed out that the Italian giant's high technology and well-known brand will help the joint venture gain more market share.
Gori believes Roadone's new and advanced production facilities, and its mature local sales network, will allow Pirelli to consolidate its presence in China.
However, insiders and experts say that competition in China's tyre market has intensified with the entry of a group of powerful multinationals, such as Goodyear and Bridgestone, and following the growth of domestic giants.
"But we have an explicit target - the high-end sector, which differentiates us from others," said Gori.
The Italian tyre conglomerate wants to further expand its investment in China to US$180 million in the next few years.
Pirelli has 24 tyre plants in 12 countries and regions as well as the one in China, with a sales volume of 3.225 billion euros (US$3.87 billion) last year.
(China Daily 10/13/2005 page10)