Pirelli to pump $200m into Chinese plant

A worker produces tires at the Pirelli & C SpA tire factory in Jining, Shandong province. [Photo / Agencies]

Investment by tire giant to make Shandong facility its largest

Pirelli & C SpA, the Italian tire giant, is planning a $200 million investment to make China its largest global manufacturing center by 2014.

Gregorio Borgo, CEO of Pirelli Asia Pacific, said that the expansion is necessary to keep pace with the huge potential market for its tires coming from China's surging demand for luxury and sports-utility vehicles.

"By 2014, our manufacturing base in Yanzhou, Shandong province, the only one in Asia-Pacific, will become the biggest in the world for Pirelli," he said.

"From 2012 to 2014, we are investing around $200 million in China, the world's largest vehicle market."

Pirelli reported a turnover of 353 million euros ($468.4 million) in Asia Pacific in 2011, and it is expecting a 23 percent year-on-year growth in 2012, helped by rising demand for more expensive vehicles in China.

"The Asia-Pacific market contributes 7 percent of our global turnover, and we are targeting to increase that," added Borgo.

The world's fifth-largest tire maker established its Yanzhou plant in 2005, with a first production line manufacturing truck tires.

In 2007, it added a passenger tire production line with a 5 million annual capacity, with its tires exported around the world.

"We hope to double that production capacity of passenger car tires to 10 million by the end of 2014," said Borgo.

The company built a motorcycle tire production line in 2012, delivering 1 million more tires, mostly exported to Japan and Australia.

The company's overall $200 million investment will also include considerable spending on helping the Italian brand expand its dealer network across China.

"We have seen strong consumption growth in second- and third-tier Chinese cities, and so we will increase our distribution coverage beyond first-tier cities and provide more end user access to our products," said Borgo, adding planned distribution outlets will "be linked with 4S (sales, spare parts, service, survey) car stores" in high-income areas.