Last November, Pirelli signed a memorandum of understanding with Indonesian automotive component manufacturer PT Astra Otoparts Tbk regarding a joint venture factory. Now the tiremaker reports it has signed an agreement with Astra to build a new factory in Indonesia its first in the country for the production of cross-ply motorcycle tires.
The agreement’s formalization was timed to coincide with a visit to Asia by Italy’s Foreign Affairs minister Giulio Terzi di Sant’Agata, and it was signed by Uberto Thun, senior vice president of Pirelli’s Moto business unit and Siswanto Prawiroatmodjo, CEO of Astra Otoparts. The accord entails the creation of a joint venture in which Pirelli will hold 60% capital and Astra the remaining 40%. The joint venture will invest a total of $120 million between 2012-14 for the erection of a new factory.
Construction of the new plant, located a short distance from Jakarta, is expected to begin in the fourth quarter of 2012. The site will cover 25 hectares and, when fully operational in 2016, should employ 750 people. The factory is expected to become operational from the second half of 2013, with an estimated production of around 2 million cross-ply motorcycle tires the following year.
When fully operational in 2016, plant output could reach a total of 7 million pieces; of these, 3 million will be sold as Astra brands, while the remaining 4 million equal to about 25% of all Pirelli’s global moto production will carry the Pirelli or Metzeler brand names.
In relation to the group’s “local for local” strategy, 20% to 25% of the Pirelli brand production made in the Indonesian plant will serve the original equipment and replacement markets of the Asia Pacific area, a region where the moto market is forecast to grow at an average annual rate of 3.5% from 2011-14. The remaining output will serve all the markets where Pirelli operates, with the exception of South America.
Pirelli says the new facility will not only allow it to strengthen its moto production capacity which, according to forecasts made as part of its industrial plan, will grow from 13 million pieces in 2011 to 16 million pieces in 2015 but also to have a direct presence in the Asean area’s largest economy, which with a circulating pool of 250 million motorcycles is the biggest motorcycle market in the world. Of this total, 68 million are in Indonesia, a country whose moto market is growing by more than 10% each year. Indonesia-based production is, incidentally, exempt from export duties to other Asean markets, while raw material costs will be relatively low thanks to the strong local presence of natural rubber producers.
Astra Otoparts is Indonesia’s foremost automotive component company. It produces components for both OE and replacement markets, and the firm counts most of the world’s major car and motorcycle makers amongst its clients. Astra’s automotive spare parts satisfy growing local demand and are also exported to 49 countries in the Middle East, Asia Oceania, Africa, Europe, and the Americas. The company has established three representative offices in Singapore, Dubai, and Australia. Astra employs around 33,000 people and has been listed on the Indonesia Stock Exchange since 1998. Its consolidated revenues in 2011 were 7.36 trillion rupiah (£500 million). (Tyres & Accessories)