Conti greenlights $320M Russian tyre plant

Conti greenlights $320M Russian tyre plant
04 July 2011

Kaluga, Russia -- Continental AG has selected a site in Kaluga, about 100 miles southwest of Moscow, for a $320 million, 4 million unit-per-year car and light truck tyre plant that should be on stream by year-end 2013.

The announcement culminates a year-long search for a suitable site for a tyre plant and is the fourth major tyre capacity expansion disclosed by Conti in the past few months. The expansions represent nearly $1.5 billion in investment and more than 12,000 units of new annual consumer tyre capacity.

Kaluga is a city of more than 325,000 inhabitants on the Oka River where vehicle makers Volkswagen A.G., Volvo A.B. and PSA Peugeot Citroën have assembly plants.

Nikolai Setzer, head of Conti’s Passenger/Light Truck Tires division and member of the executive board, cited Kaluga’s good infrastructure, central geographical location and Conti’s positive experience with an existing automotive electronics plant there among the “special advantages” of the site.

“Our strategic goal is to achieve above-average and profitable growth in particular in the emerging markets,” Mr. Setzer said.

Continental has had a sales organisation in Moscow since 2005 and claims to be one of the largest foreign tyre suppliers in the country.

Conti expects to break ground on the plant before year-end and be ready to start phase-one production by year-end 2013 with 400 employees. The plant will be engineered to allow Conti to double capacity “when the time comes,” Setzer said.

The Russian government has promised to support the new site, Conti said, without divulging details of what type of support.

By establishing production in Russia, the P/LT tyre division will benefit from the removal of import duties and from reduced transportation costs, Setzer said.

Continental will focus on Continental-, Gislaved-, Barum- and Matador-brand summer and winter tyres at the plant. The new employees will receive training at other Conti passenger tyre plants, Setzer said, a concept that proved successful for the Hefei, China, plant, where production began this past spring.

Conti did not disclose the physical size of the plant or acreage acquired.

“This way, we want to ensure that tyres made in Kaluga for the Russian market are built right from the start in accordance with our high production standards that apply throughout the world, and so perform just as well as those made at our established factories,” Setzer said.