JAKARTA, Indonesia (April 25, 2012) — Pirelli & C. S.p.A. is partnering with P.T. Astra Otoparts Tbk. of Indonesia to build a motorycle tire plant in Indonesia in a four-year project valued at $120 million.
Pirelli will own 60 percent of capital of the as-yet unnamed joint venture the companies are forming. Astra Otoparts, a Jakarta-based automotive components maker, will own the remainder of the venture, which will produce bias-ply motorcycle tires, primarily for the domestic and other Asian markets.
The new plant is expected to come on stream in the second half of 2013 with an estimated annual production of around 2 million tires in 2014, Pirelli said. When fully operational in 2016, output should reach 7 million units annually.
Construction of the new factory, located a short distance from Jakarta, is expected to begin in the fourth quarter. The site will cover 62 acres. When fully operational, in 2016, the plant will employ 750, the partners said.
Astra will take 3 million of the plant's output to sell as Astra brands, while the remaining 4 million—equal to about one-fourt of Pirelli's global motorcycle tire production—will be sold as either Pirelli or Metzeler tires.
Pirelli expects 20 to 25 percent of the tires it takes from the new plant will serve the OE and replacement markets of the Asia Pacific area, where the two-wheeler tire market is forecast to grow 3.5 percent annually through 2014.
Ubert Thun, senior vice president of Pirelli's Moto Business Unit, and Astra Otoparts CEO Siswanto Prawiroatmodjo signed the joint venture agreement this week in Jakarta.
The new facility will allow Pirelli to not only strengthen its annual motorcycle production capacity—which is expected to grow about 23 percet to 16 million units by 2015—it also will provide Pirelli with a more direct presence in the Asean area's biggest economy, with roughly 250 million motorcycles on the roads.
Having production capacity in Indonesia will be free of export duties to Asean markets and reduce the cost of raw material supply thanks to the strong local presence of natural rubber producers, Pirelli said.
Pirelli produces motorycle tires in plants in Breuberg, Germany, and Gravatai, Brazil, and is building a plant in China. Two-wheeler tires accounted for about $575 million in sales last year, or 7 percent of Pirelli's global revenue.
Astra Otoparts produces a range of auto parts for both the OE and replacement markets. Its sales last year were $845 million.