YANZHOU CITY, China (Oct. 2, 2007) — Pirelli Tyre S.p.A. expects to begin producing passenger tires by the fourth quarter at a new factory in Yanzhou City, following an estimated $100 million investment over the past two years.
The new capacity will encompass Pirelli's full range of passenger tires in 14- to 18-inch rim diameters, with an emphasis on the high end of the market, according to Giuseppe Cattaneo, CEO of Pirelli Tyre Co. Ltd. (China), as the firm's venture in China is now known.
Pirelli plans to market the passenger tires domestically and throughout Asia, Mr. Cattaneo said.
At full capacity the new factory is designed to produce 4.5 million tires annually. Pirelli declined to reveal the physical size of the new plant, built in the same Shandong Province industrial park as the existing truck tire plant, which originally was built by RoadOne Tyre Co. Ltd.
The addition of passenger tire capacity in Yanzhou was part of a three-year, $180 million expansion and modernization project. Industry sources say Pirelli may invest another $200 million in a second-phase expansion that could double annual capacity to 9 million units. Pirelli has released no timetable for a second phase.
The truck tire plant—a 60-40 joint venture with RoadOne Tyre previously known as Yanzhou Evolution Tyre Co. Ltd.—is rated at 1.2 million radial truck tires a year, although annual output is closer to 700,000, Mr. Cattaneo said.
Pirelli and RoadOne formed their joint venture in 2005.
“We are happy with 700,000,” Mr. Cattaneo said. “Technically the truck tires are for the local market; a marginal amount is exported.”
The expansion should add about 500 jobs to the 1,500 currently in place at the Yanzhou facility, Pirelli said, as production ramps up.
The factory uses raw materials supplied by Pirelli's usual international suppliers, including rubber from Thailand and Malaysia.
Pirelli Tyre Co. (China) sells tires using two approaches, Mr. Cattaneo said: classical distribution selling to regional provincial distributors and retail shops. Pirelli sells through two types of shops in China:
* Shopping Shops: a corner section of a store devoted to Pirelli. The company supplies more than 400 of these in China; and
* Power Stores: Flagship stores devoted to Pirelli tires and accessories. The company supplies about 20 such stores in China's major cities. The aim is to have a flagship store in every Chinese city with a population of more than 1 million.
Pirelli's joint venture partner is a subsidiary of Yanhe Group, a conveyor belt manufacturer.
Mr. Cattaneo has been CEO of Pirelli's Chinese company since 2004, joining the company after seven years in China with other companies, including Antibioticos Biotechnologies S.p.A., Gruppo Antibioticos S.p.A. and Gruppo Arquati S.p.A.