Tommi Heinonen, vice president, North America, for Nokian Tyres P.L.C., said the tire maker is on a "clear path" to its future with a focus on electric vehicles (EVs), sustainability at all levels and continued investment in its Dayton, Tenn., facility. Here, he answers our Mid-Year Q&A.
Business has been promising. We are encouraged by the demand we see from customers, and we are optimistic about our path forward as we raise supply at our Dayton factory to meet that demand. A mild winter was not ideal for our winter tire business, but we are seeing growth in the all-season and all-weather segments as our customers and their drivers embrace products such as the Nokian Tyres One, Nokian Tyres WR G4 and the new Nokian Tyres Outpost family, each of which will grow in volume throughout 2023 and into 2024.
There is no question Nokian Tyres faced big change at the global level as a result of the war, but that has resulted in even heavier focus on the importance of our North American operations. For that reason, our growth plan in North America remains largely unchanged. We still plan to reach full capacity at our Dayton factory by next year, which was always our plan. While the plan has not changed, the stakes have certainly risen. Our exit from Russia and construction of a factory in Romania allows each business area, including North America, to do what is best for customers in our regions.
Yes, we have been calling this change the "New Nokian Tyres." We no longer make or sell tires in Russia, but we have a plan to achieve over $2 billion in annual sales by 2027. North America is a big part of that goal, and expanded production in Nokia, Finland, and our new factory in Romania will help us reach the capacity needed to increase our sales. While our strategy may have changed after the war, we are still confident in the traditions that have always made us unique: great products, close relationships with customers, a motivated team and a trusted brand with drivers.
Things are very busy at the Dayton factory. We are hiring 125 workers this year and training them in our processes and company culture. At the same time, we are adding equipment inside our existing footprint so we can double capacity by next year. We can now make LT-metric sizes in Dayton for the first time.
Our team is embracing the challenges and opportunities that come with that growth. More than 80 employees were nominated to serve as mentors for our new hires, and we expect production volume to continue increasing until we hit our capacity goal.
After adding 125 workers this year, we will have around 475 team members at the Dayton factory. This is 75 more than initially projected, thanks to strong demand for our products and an excellent workforce in southeast Tennessee. We do not have another big hiring push on the calendar just yet, but we hope to continue our growth in Dayton for decades to come.
The Romania factory is part of our strategy to make tires in the markets where we are selling them. The vast majority of all-season and all-weather tires we sell in North America will be made here, and we do not plan to sell Romania-produced tires here. The Romania factory, and expansion in Dayton, allow us to tailor our regional product mix to the demands of drivers in each business area.
Raw materials prices have increased for every tire maker, and we are no different. But as the situation is becoming more stable, the global supply chain has stabilized, too — good news for every manufacturer.
We cannot share specifics about our pricing strategy, but we will continue adapting as dictated by costs and the needs of our customers.
As a Scandinavian company that makes tires in an area of the world where EVs are very popular, we have factored the needs of EV drivers into our product development process for several years. We formulate our rubber compounds to maximize comfort and efficiency — more than 90% of our tires are in the lowest categories of rolling resistance. We construct our tires to withstand heavier loads.
As the inventor of the winter tire and a leader in the winter space, we do make EV-specific winter products. Our winter EV tires, the Nokian Tyres Hakkapeliitta 10 EV and R5 EV, were tailored to acutely meet the challenges of torque, weight, noise and efficiency. There is a segment of drivers within the EV winter market that values these tailored benefits, and they have responded strongly to these offerings.
We will continue to develop innovations that serve the needs of EV drivers within our existing product lines, even in tires that are not classified as dedicated EV products.
We are pleased to see fellow tire makers join the mission to find sustainable driving solutions, whether in the makeup of our tire compounds or by making production practices greener. Sustainability is an area where we all can win.
All-weather tires continue to become more popular as drivers wish for year-round tires that are safe in winter weather. We never want to replace a winter sale with an all-weather sale, because winter tires are still the best products for sustained winter conditions. But when it makes sense for all-season drivers to find better winter protection, we are seeing more competitors join us in this space. We believe all-weather tires are different enough from all-season to deserve their own segment. It seems that other tire makers are starting to agree.
The EV space is an area with good potential. In some cases, such as winter, it makes sense for us to offer dedicated EV tires, but in all cases, we are placing special focus on meeting the needs of EV drivers with our full product lineup.
The all-terrain Nokian Tyres Outpost nAT is an exciting product for us. We make it here in the United States, and it offers unique qualities to meet the needs of North American drivers. As supply of the Outpost nAT grows, we are getting favorable feedback from our customers. They, and we, believe it will be a successful addition to our North America-specific product portfolio.
Any technology that makes driving greener will help the industry change the game. We are on a quest to make our tires from 50% renewable or recycled materials by 2030, and other tire makers have similar aspirations. Replacing synthetic ingredients with natural ones will appeal to drivers, help the environment and elevate the reputation of our industry.
In addition to our goal to use 50% renewable or recycled materials to make our tires, we are also focused on making production as eco-friendly as possible. Our new Romania factory will be the first zero-CO2-emission tire factory in the world. That is a big step forward in our plan to reduce emissions across our production network. Meanwhile, our Dayton factory is the only factory in the industry to earn LEED v4 Silver certification. These initiatives are not easy or cheap, but they are important.
We are busy doubling production in Dayton, hiring 125 workers and launching construction in Romania. We are also building a 600,000-tire warehouse in Dayton. These things are keeping our calendar full!
How will we make strides forward in the area of microplastics? Many of us are passionate about sustainability, and this is an opportunity to meet the moment in a powerful way.
We are growing in new and exciting ways. In spite of recent adversity and short-term supply challenges, we have a clear plan to build a new Nokian Tyres rooted in the same high-quality products and strong relationships that have always been our hallmark. We are optimistic and excited for the future, because we are energized by our close partnerships with customers.
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