Russia the key driver of Nokian’s growth

In its 2011 annual report, Nokian Tyres has singled Russia out as the company’s strongest growth area. Reporting rising sales in all Nokian’s key regions – the Nordic markets, Central Europe and Russia – and growing market share in the last two of these, president and CEO Kim Gran stated that “as expected, this development was strongest in Russia, which, boosted by the car business, represented approximately one-half of our growth.”

Sales of new cars are skyrocketing in Russia, with last year’s new car sales figures 39 per cent above those of 2010. The news is also good in the replacement tyre sector; Nokian reports that replacement market deliveries increased by more than 30 per cent year-on-year, a move it says trails an improving Russian economy, lower stocks at distributors and strong consumer confidence.

To meet this strong demand, Nokian is increasing capacity in Russia. “Implementation of the new production lines in the Russian plant was brought forward,” Gran commented. “We adopted the use of a new generation of production technology which will significantly improve our productivity. Both of our plants (in Nokia, Finland and Vsevolozhsk, near St. Petersburg in Russia) were working at full capacity in late 2011, and we began the construction of a new, highly modern plant in Russia. The new plant will commence production in summer 2012 and secure the preconditions for growth during the coming years.”

The Vsevolozhsk plant entered operation in 2005 and by the end of last year ten production lines were in operation, giving the facility an annual capacity of around 11 million passenger car tyres. Tyres from Vsevolozhsk are sent to over 35 countries, and Nokian Tyres claims to be the largest exporter of consumer goods in Russia. Total weekly output of car tyres in Vsevolozhsk grew from 250,000 to 360,000 pieces a week during 2011. As Gran mentioned, production will expand further through the construction of the new plant and warehouse next to the current facility. The new plant is estimated to commence production with two production lines during 2012, and further increases in capacity will take place during 2013–2014. This will increase annual passenger car tyre capacity further by five to six million tyres.

Nokian Tyres claims market leadership of Russia’s premium tyre sector and states it is the largest manufacturer of premium tyres in the country. In 2011, Russia and the CIS countries accounted for 27 per cent of Nokian Tyres’ total net sales. Overall, an estimated 36 million passenger car and van tyres were sold in Russia last year, and the market is estimated to grow by 15 to 20 per cent a year.