The northern hemisphere spring has come at last and it’s time for motorists in Russia to switch from winter to summer wheels. The first warm sunshine of the year is also a reminder of the gains awaiting foreign tyre makers that are flocking to Russia to establish manufacturing ventures.
Among the latest to arrive is a partnership between Bridgestone and Mitsubishi of Japan, set to invest Y37.5bn ($377m) in a new tyre making plant in Russia’s Ulyanovsk region.
Bridgestone has taken a 90 per cent stake in the joint venture, which will build its factory in the Zavolzhe industrial zone about 900km south east of Moscow. Once up and running in 2018, the plant will have capacity to make around 12,000 tyres a day, dwarfing similar foreign ventures in Russia.
“The construction of this new plant will enable the group to be closer to the market and supply our products to customers in a timely manner,” Bridgestone said in a statement on Monday.
Separately, Mitsubishi has agreed to join Bridgestone’s marketing efforts in Russia and the CIS by taking a 20 per cent equity stake in the company’s Moscow-based sales division.
Rising car ownership in Russia over the last two decades has driven a surge in tyre demand. The European Bank for Reconstruction and Development, which has supported tyre making ventures by Michelin, Nokian and Germany’s Continental, estimates the market is worth more than $5bn a year.
It’s not difficult to see why. Harsh weather in Russia, where the ground is frozen for five months a year, plus the nation’s treacherously potholed roads take a heavy toll on vehicle wheels. Most new passenger cars come with a set of summer wheels, leaving drivers to invest separately in tyres capable of gripping icy winter roads.
Ostentatious driving styles are another factor. As pedestrians in Moscow know, Russians like driving fast and prefer to screech to a halt at zebra crossings rather than anticipating obstacles ahead – good for the James Bond image but hard on the wheels.
Bridgestone and Mitsubishi’s plant will begin producing tyres too late to capture the surge in new car ownership that has transformed Russia into Europe’s second biggest auto market. After rising by 11 per cent last year to 2.9m units, growth in new car sales is expected to stabilise this year and could even fall if the Russian economy slides into a recession.
But unlike new cars, tyres are not a discretionary item. As long as Russian winters are cold and roads bumpy, the outlook for local tyre makers should remain bright.
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