Pirelli drives increased presence in North America

WATKINS GLEN, N.Y. — The setting, indeed, seemed quite appropriate.

As the engines of race cars squealed in the distance, Claudio Zanardo, CEO of Pirelli Tire North America Inc., and his right-hand man, Ian Coke, director of quality and chief technical director of the Pirelli Tire North America, relaxed on leather furniture in a cozy lounge, set up for the Lamborghini racing teams that would compete later that day.

The pop-up lounge, on the grounds of historic Watkins Glen International Racetrack in upstate New York, is plastered with advertisements for watchmaker Roger DuBuis. One of those watches can be yours for as little as $40,000, or if you're really in a spending spree, $100,000-plus.

Two Lamborghinis are parked at the entrance to the lounge — both fitted with Pirelli tires — while business at the adjacent Lamborghini souvenir shop is brisk, price be damned.

It was the perfect mix for Pirelli & C. S.p.A., the Milan-based tire maker, who has been in auto racing for more than a century of its 150 years in business.

The collaboration between Pirelli and Lamborghini dates back to 1963, the year in which Ferruccio Lamborghini asked Pirelli to supply the tires for the first car of his new company, the 350 GTV.

Four decades later, Zanardo said, Pirelli tires are positioned toward "the premium customer, the prestige customer."

"That part of the market is our market," he said, "so we need to serve these customers. We offer the best product in terms of quality for the right car, with the perfect technology, the perfect strategy."

That strategy was on full display during a ride-and-drive event the tire maker hosted in late June. Zanardo and Coke joined other members of the North American tire trade press in New York City, home not only to Pirelli Tire North America's home office but also the "The Lamborghini Lounge," a nondescript office building from the outside that is anything but inside.

The group then headed to Watkins Glen International Racetrack in upstate New York. Pirelli execs drove a 2022 Huracán Spyder, (base price $207,000), while the media drove Lamborghini's SUV models, the Urus (base price $225,500).

The caravan weaved through the streets of New York City, making the 245-mile drive through New York, New Jersey, Pennsylvania and up to New York's venerable raceway.

There, the media watched the Lamborghini Super Trofeo race series, with Huracán Super Trofeo EVO vehicles.

It was the perfect way to emphasize one of the clear messages Pirelli wants to convey to customers worldwide: Its commitment to auto race benefits the products it sells to consumers.

"Racing for us is part of our DNA," Zarnado said, above the din of race cars locked in time trials outside. "We need racing to develop new products, to study new technologies, to work together with (original equipment manufacturers)."

Zanardo, who succeeded Pietro Berardi as CEO of Pirelli North America last November, previously worked at Ducati Motor before joining Pirelli in 2015. He said that bringing Pirelli's technology and passion to the racetrack not only is important, and but it also benefits consumers.

"When we develop new things, develop new technologies, we can bring that to the market in our products we bring to consumers," he said. "This is an important truth for us, that we want to develop and never stop investing in there."

Coke, a 36-year Pirelli veteran currently based at the tire maker's plant in Rome, Ga., said all elements involved in designing a race tire "pushes the organization to innovation."

The compound of a race tire won't be used on a consumer tire, he noted — "Consumers would be very unhappy wearing these tires out after a half an hour, but going 100 mph," he said — but any conclusions drawn by analysis afterward help make consumer tires perform better.

"It does allow us a way to look at how we build the carcass and the strength of the carcass, the types of reinforcements that we use, all the components that go into a tire, plus push it a step further," Coke said. "We can reverse engineer that, and it ensures we can build it into a tire."

According to Coke, the thousands of sensors built into a race tire help enhance the use of modeling simulation, or predictive simulation.

"We take all that information back, and we build that into our modeling," Coke said. "That is the same modeling that we use for the passenger car tire or the SUV tire. So the benefit is pushed back downstream, and it makes us quicker, more innovative and more creative."

A professional driver pushes the limits of the car and its tires, and data derived from that helps Pirelli develop a better consumer tire, the executives said.

"Analyzing all of the data, you can understand what is working good, what can be improved," Zanardo said. "It's not just one factor. It's many factors. It's not just one secret. There are a lot of small secrets that altogether make the best product."

One fact that isn't much of a secret is Pirelli's desire to grow its share of the North American market.

In its most recent financial report, the tire maker reported double-digit growth in sales and earnings for the quarter ended March 3, boosted by 33% growth in North America. The Americas region represents 35% of Pirelli's global sales.

"We are pretty happy about the first six months of the year," Zanardo said, while noting industry difficulties surrounding the supply chain and increasing costs of raw materials.

Demand, he said, remains strong, especially for large-diameter tires.

"We going after segments most important to us, the 18-, 19-inch tires that are growing in the market," he said. "It's the place where we want to compete."

And the tire maker certainly is plugged in to another growing market segment: electric vehicles.

Over the last few years, Pirelli has focused on developing a range of products for the EV market, along with its OEM partners including traditional partners as well as EV-specific companies, such as Rivian and Tesla.

Every week, it seems, the tire maker announces the release of a new product to one of its lines, particularly for its Pirelli Elec, a package of tire technologies developed for electric cars and plug-in hybrids for the aftermarket.

Although EV sales jumped more than 70% in the last quarter of 2021, EVs still account for less than 3% of cars on U.S. roads today, according to the U.S. Department of Transportation

"I know there's a lot of media coverage about the EV," Coke said, "but if you look at the percentage of the real market, it's still (very small). But it's still growing. It's going to come like a tsunami. This thing is going to roll out. The big players are coming in now."

Coke expects demand for EV trucks and SUVs to explode, and he said the tire maker is developing premium products for these segments that address the differences in torque, load and noise/comfort level that set these products apart from standard tires.

"Designing products to cater for those range-conscious, or battery life-conscious consumers who look at the actual wear rate, mileage ... that's our job. We have that technological advantage, and our strategy is to lead the way on this one."

It's just as vital, Coke said, that Pirelli develops EV tires specific to the U.S. market, as opposed to products designed for the European market.

"The technology, we can use the same, but the balance and attributes for the end-consumer have got to be for this market," Coke said. "This is an all-season market. It's a different all-season from a European all-season. We have to be very conscious about that."

The continued development of the next generation of EV tires for the U.S. market is one of the key reasons Pirelli recently announced a $15 million investment at its facility in Silao, Mexico.

Plans call for the tire maker to build a technology and digitalization hub for production in order to implement Industry 4.0 principles and strengthen the innovation ecosystem at the facility.

The hub will be housed in a 71,900-sq.-ft. expansion of the factory premises.

The new hub will include areas for modeling; testing; digitalization; sensory enhancements; and robotics applications. It is expected to create 450 direct or indirect jobs centered around R&D.

That investment is in addition to $36 million budgeted last fall to raise the plant's annual capacity about 9%, to 7.2 million tires.

While Zanardo said expansion plans were under way before he was promoted to his position, it seems clear he pushed hard for the additional investment.

"Everything we do in Pirelli, we do things together," Zanardo said.

"We are a team. What I'm doing is to keep pushing on addressing every investment in this region because it's for the best. If you want to grow, you need to invest. And we want to grow. There's no other solution."

The Silao factory is celebrating its 10th anniversary this year, one of three milestones for the tire maker.

The company is celebrating its 150th anniversary, while the factory in Rome, Ga., Pirelli's lone North American plant, was inaugurated 20 years ago.

"During all of that time, Pirelli has never stopped investing," Zanardo said.

Coke said Rome serves as a "niche" factory, producing 350,000 to 380,000 tires annually, depending on the mix. Most of the tires produced are 20-inch and above in rim diameter, of which 45% are 22- or 23-inch.

According to Pirelli, the plant is the only one in the world to produce a range of tires certified under Forest Stewardship Council (FSC) guidelines covering sustainable production methods.

The FSC-certified tires, versions of the Pirelli P Zero high-performance range, will be supplied to BMW North America Inc. for fitment on the car maker's hybrid X5 xDrive45e sport-activity vehicle.

The tires contain FSC-certified natural rubber and rayon that confirms that plantations are managed in a way that preserves biological diversity and benefits the lives of local people and workers, while ensuring economic viability, achieving a sustainable tire production milestone.

"If you asked me what Rome wants to be, it wants to be the first to do things," Coke said, noting the plant manufactures large-diameter tires, up to 30 inches. "We want to do the things that other people can't do."

So what does the tire maker with a Lamborghini lineage appeal want tire dealers to know about their premium products that they might not already know?

"(Dealers) need to understand we have the right product for their customers," Zanardo said.

"We need the dealer to explain this. It's important to talk with us, to be our partner, and together we want to go where the customer is, to give the end-customer the right product. This is our mission, and this is the same mission that the dealer has."

Zanardo called dealers "the real fruit of the market. We need to talk with them, we need to listen to them, and they need to put themselves in a listening approach. We want to talk and we want to listen."

"We are here to develop American products, and we want to stay true to our brand," Coke said.

"We're a smaller player in this market. We want to be a bigger player. We can only do that if people talk to us and we talk to them. That's the message."