Russian tyre producers and car industry amid decline

04:43' PM - Wednesday, 12/08/2020

24,4 million tyres were made in Russia during the first half of 2020, which is by 16,5% less than a year earlier. There was a slight decline in production volumes in April and May due to coronavirus restrictions.

The whole automotive industry demonstrated the biggest reduction in industrial production in the country in May, the Russian Statistics Service said. The production of vehicles, trailers and semi-trailers plunged by 42,2% by May 2020. The service named the suspension of enterprises’ operation at the peak of the epidemic, an absence of imported components and lower demand as the reasons.

“Restrictions on the operation of enterprises and organisations in some sectors and segments of the economy as well as other measures taken to prevent the spread of the coronavirus infection kept influencing the economic activity in the country,” the Federal State Statistics Service explained.

By the Russian Trade Ministry’s estimate, car production in 2020 can reduce by 30%. The fall in the automotive industry gave rise to a reduction in the production in the tyre industry inextricably linked with car manufacturing. Like other enterprises, tyre factories suspended their operation at the peak of the pandemic, which significantly reduced production volumes. In January-May 2020, according to official statistics, 19,9 million tyres, or by 18% less than during the analogous period last year, were made in Russia. In May alone, tyre production volumes in the country turned out 40% below the May 2019 level.

The Tyre Manufacturers Association paid attention to the fact that the pandemic hit Russian tyre producers during the period of active sales — the “summer” season when winter tyres are replaced for summer tyres. In the end, the season has almost been lost, organisations of the wholesale and retail network didn’t create a financial backstop for the low season. Market players will likely face customers’ lower purchasing power during the “winter” sales season. A second wave of the epidemic isn’t excluded either. “Now it is hard to make forecasts, but by our preliminary estimate, the tyre market can decrease by at least 24% by the end of the year,” Executive Director of the Tyre Manufacturers Association Nadezhda Churmeyeva told Realnoe Vremya.

The decline in tyre production in Russia began as early as 2019 after the sector’s five-year growth. In 2014, Russian tyre manufacturers produced 52,4 million units, 57,6m in 2015, 60,1m in 2016, 65,1m in 2017, 67,5m in 2018. But tyre production in 2019 already reduced by 10%, to 60,5 million (over a billion tyres a year is made around the world). Moreover, the share of imports, according to the Federal Customs Service, is, in contrast, rose by 7,5%, to 34,4 million, or $2 billion in monetary terms. This excludes those tyres imported to our country with new cars, trailers, bicycles and any other wheeled mechanisms that also have spare wheels. Car imports in Russia, according to the FCS, also grew by 3,2% last year, to 302,500, the number of imported lorries increased by 13,7%, to 29,900. So another 1,66 million units were brought to our country (four wheels in the car plus a spare wheel): 1,51 million cars, 149,500 lorries.

Russian companies account for about 40% of the Russian tyre market, the other factories make products under foreign brands. Some of leading enterprises with plants in our country are Finnish Nokian Tyres (Vsevolozhsk, 17m tyres), Nizhnekamskneftekhim PJSC (Nizhnekamsk, 10m tyres), the Italian holding Pirelli with plants in Kirov (6m tyres) and Voronezh (a joint venture with Rostec SC, 4m tyres), the German concern Continental (Kaluga, 4m units), the Russian holding Cordiant (with plants in Yaroslavl (3 million tyres) and Omsk (a million)), the French holding Michelin (Davydovo settlement, Moscow Oblast, 2 million tyres), the Japanese concern Yokohama (Gryazinsky District, Lipetsk Oblast, 1,6m tyres), another Japanese company Bridgestone (Ulyanovsk, a million tyres) and others. Products of American Goodyear are also widely represented in Russia, though the company doesn’t have production sites here — only a representative office and a warehouse in Moscow, while tyres for the Russian market are made in Poland and Slovakia.

Shipping in tweaked plans

Tyre producers working in Russia are back to work after a shutdown of plants. However, the fall in demand for tyres, distributors and retailers’ overstocking had an impact on production plans.

The joint venture of Pirelli and Rostec, Voronezh Tyre Plant, suspended the production till the end of the month in March. The closure of the border and downtime of European car manufacturers at the peak of the epidemic made the Voronezh tyre producers tweak their production programme. During the same period, Pirelli suspended the operation of the tyre factory in Kirov but has already relaunched the production. Other enterprises also took a forced production pause.

“Our factory closed but resumed its operation on 13 April because according to a decree of the government of Kaluga Oblast No. 271 as of 6 April 2020, the president’s Order No. 329 as of 2 April 2020 didn’t apply to Continental Kaluga PLC,” the company’s PR manager Anna Dundukina told Realnoe Vremya.

“The factory Bridgestone Tyre Manufacturing CIS PLC in Ulyanovsk resumed the production on 17 June 2020. The production was suspended from 14 May to 17 June 2020 due to the necessity of optimising the balance between demand and supply. Moreover, most office workers of the factory in Ulyanovsk and all employees of the Moscow office keep telecommuting to provide their safety and minimise health risks. We are carefully monitoring the situation and taking necessary steps as it is unfolding. The Bridgestone company is doing its best to provide a sufficient stock of products in warehouses to meet clients’ requirements. Shipments in Russia, CIS countries and Europe are carried out in accordance with adjusted plans,” said a PR manager at Bridgestone Tyre Manufacturing CIS PLC Lyudmila Kharcheva.

The interlocutor of the newspaper thinks that the company continues “carefully analysing the market on a daily basis”. If needed, they are taking additional measures to optimise warehouse stocks and the business to provide the availability of products.

“According to the data we have, the domestic tyre market reduced by 7% in four months this year, including the car tyre market went down to by 15% at once. It is no surprise. Personal cars were used less during self-isolation. The population’s incomes also shrank, demand also did at the same time. Tyre production in the country fell by 12%. A decline has been registered in the biggest segment for car tyres again — by 19%. Other segments have demonstrated growth: tyre production for light lorries has risen by 26%, tyres for lorries — by 17%, for agricultural machinery — by 9%, industrial tyres — by 39%,” head of the Sales Monitoring and Analysis Department of the Sales Office at Nizhnekamskneftekhim PJSC Ildar Martyshev outlined the situation.

Analyst of FINAM GC Aleksey Kalachev thinks that the tyre industry can easily be considered one of the areas affected by the coronavirus pandemic. Demand for tyres depends on sales of new cars, which dropped by 70-80% in different countries during some months depending on imposed restrictions. The expert noted that neither was Russia an exception where a record fall in sales of new cars and commercial vehicles was registered in April — by 72,4%.

“Production of cars in Russia comparably reduced in April by 72,9% year on year. Together with the fall in output, of course, demand for tyres decreased as well. But the tyre market is dependent on the size of the car fleet and road traffic intensity because tyres should be replaced for new ones from time to time, which creates the main part of the demand. Moreover, the decline in sales of new cars is mainly a postponed decline. But in the regime of self-isolation and digital passes, people drove less, traffic decreased, tyres don’t wear out when cars stay idle, it isn’t postponed but lost demand,” Aleksey Kalachev stressed.
As a result of the downtime of tyre producers, commercial enterprises have suffered as well. Experts consider that the market of tyre sales is waiting for players to enlarge.

“The financial stability of the tyre producing network is concerning the most now, first of all, it is representatives of retailing. Not all manufacturers will highly likely manage to survive this economic crisis,” thinks Executive Director of the Tyre Manufacturers Association Nadezhda Churmeyeva.

According to her, the imposition of mandatory tyre labelling scheduled this year can be a deterrent. However, the Russian Ministry of Trade claimed they were ready to discuss a postponement of this requirement with tyre producers. - Source: Realnoe Vremya-

Sponsor links (Provided by - The web cloud services for enterprises)
Thiết kế web, Thiết kế website, Thiết kế website công ty, Dịch vụ thiết kế website, Dịch vụ thiết kế web tối ưu, Giải pháp portal cổng thông tin, Xây dựng website doanh nghiệp, Dịch vụ web bán hàng trực tuyến, Giải pháp thương mại điện tử, Phần mềm dịch vụ web, Phần mềm quản trị tác nghiệp nội bộ công ty,