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Pirelli taps high-end products to drive Asia market
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PIRELLI expects an average annual growth of 16 percent in Asia Pacific over the next three years as the Italian tire maker seeks to strengthen its leadership in the premium segment.
The region, where sales rose 14.5 percent to nearly 500 million euros (US$692 million) in 2013, or 8 percent of its global total, is already Pirelli’s fastest growing market. By 2016, Asia Pacific sales could reach 770 million euros, according to regional CEO Carlo Costa Ardissone.
“The growth strategy for the region will continue to be developing and maintaining a close partnership with auto manufacturers,” said Ardissone, who is based in Shanghai.
The company, which supplies factory-installed tires to BMW, Audi and Mercedes-Benz cars as well as to trucks and buses, is banking on rising demand for high-end products. The 14.5 percent growth in Asia last year was contributed by a 19 percent increase in car tires, and a 29 percent jump in high-end products.
And that growth was largely related to China, where the rising middle class and a new younger generation of sophisticated consumers are changing the rules for its consumer market and companies, from automakers to luxury brands, that serve it.
The premium car market is rising three times faster than the overall auto market in China, and about 80 percent of Asia’s premier cars are registered in the country, according to Marco Solari, Pirelli’s Asia Pacific commercial director.
The company is good at using motorsport events to build brand and boost sales in Asia, including as the sole tire supplier to Formula One. Pirelli started a new three-year contract with F1 this year, which has several stops in the region, including the China Grand Prix over the weekend.
Still, the sponsorship is not only about money and promotion as the tire maker said it has been seeking to introduce technologies from race tracks to roads.
One example is run-flat tire, for which Pirelli said it is the first manufacturer in China. A run-flat tire is designed to resist the effects of deflation when punctured, enabling the vehicle to continue to be driven at reduced speeds for limited distances. The technology has become a key requirement to achieve sustainable growth in the original equipment manufacturer tire market, Pirelli said.
In retail, Pirelli also plans to increase the number of its brand stores in China to 3,000 by the end of the year from more than 2,000 now, Solari said.
Pirelli set up a plant in Yanzhou, Shandong Province in 2005 to start local production, where it also installed 120 R&D staff out of its 1,400 R&D engineers worldwide.
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