They can become a distributor of Power International Tires LLC. Experts consider such a scenario for the sale of the plant to be “good”, although it will take at least a year to restart it.
The fact that Michelin and Power International Tires are close to concluding a deal was told by Kommersant sources. A representative of the French company confirmed that the option of selling Russian assets is being considered. However, he did not specify who would become the new owner of the factory in the Moscow region.
Factory in Davydovo
Michelin is negotiating the sale of a factory in the Moscow region. The plant with a capacity of 1.5-2 million tires per year (mainly for passenger cars) was launched in 2004. The asset did not play a significant role in the revenue of the French group: production in the Russian Federation accounted for only 1% of the total production of Michelin and 2% of sales.
In March 2022, amid the start of a military operation in Ukraine, Michelin suspended operations in Russia. Including the work of the plant near Moscow was stopped. Later, the owner of the enterprise announced that he would be forced to leave the market and transfer the asset to local management.
Michelin cited technical problems as the reason for this decision – difficulties with the supply of components “under conditions of general uncertainty.”
In its report on the results of the first half of 2022, the French group estimated the losses from the suspension of work in Russia at 202 million euros. The company had 1,000 employees in the country, including 750 at the plant in Davydovo.
At the beginning of this year, Michelin announced that it was considering several scenarios for exiting the Russian market. Including the company allows the sale of a plant near Moscow to third parties. However, the search for a buyer and negotiations dragged on, the concern noted.
What is known about the potential buyer
Power International Tires LLC was registered in 2000. The company specializes in the sale of wheel rims, imported and domestic tires and other products.
According to Kommersant, in October 2022, the company received certificates of conformity for tires of the Chinese brand Hifly for cars and trucks.
The sale of the Russian Michelin plant to this distributor is “a good option,” says Mikhail Burmistrov, head of Infoline-Analytics. The interlocutor notes that the company is already cooperating with Chinese suppliers and may expand this partnership in the future.
Nevertheless, it will be difficult to quickly load the enterprise in Davydovo even by a quarter, says Burmistrov. In his opinion, it will take at least several months to restart the factory, as the new owner will have to rebuild the supply chains. In this regard, it will be possible to fully resume the work of the plant no earlier than in a year, he concluded.
What’s happening in the market
Michelin is the second largest tire manufacturer in the world. The company became the first among foreigners who managed to localize the production of their products in Russia.
However, the Finnish Nokian Tires was the largest player in the local market. In autumn 2022, the company announced plans to sell its plant in Vsevolozhsk with a capacity of 17 million tires per year. Tatneft intends to buy the factory for 400 million euros. At the beginning of the year, the deal was approved by the Federal Antimonopoly Service.
In addition to Michelin and Nokian Tires, other major players have suspended their activities in Russia. Among them are the Japanese Bridgestone and the German Continental. Foreign companies cited disrupted supply chains as the main reason.
Another company, the Italian Pirelli, has decided to limit the operation of its factories and suspend investments in Russia. In particular, it reduced the volume of production to the minimum level necessary to fulfill obligations to Russian employees.
In recent years, about 30-40 million tires per year have been sold in the Russian Federation on average. By September, their stocks in the country amounted to more than 80 million pieces, the Honest Sign reported. The TsRPT (labeling system operator) then ruled out the possibility of a shortage of tires. They said that the stocks will be replenished at the expense of the remaining production and imports in the country.