Pirelli & Cie SpA is entering into a joint venture with the Hixih Group for ownership of a consumer tire manufacturing plant in China.
The plant will be known as Jining Shenzhou Tire Co. Pirelli will have a 49% stake in the joint venture and will control operational management of the plant. The cost is about 65 million euro, and Pirelli has the right to increase its ownership up to 70% between Jan. 1, 2021, and December 2025.
Pirelli says the investment will give it "the necessary production flexibility in the high value segment , taking into account the evolution of the Chinese market, the expected developments in the electric car segment and the increasing share of homologations obtained in the original equipment segment in China, Japan and Korea."
The transaction, which is subject to approval by local authories, is expected to close by the end of 2018. Pirelli says it will not affect its financial targets established in the 2017-2020 business plan.
"The acquisition of a significant stake in this technologically advanced system for consumer tires will reinforce the group's high value strategy, which sees (Asia Pacific) as a key growth factor through a strategy that involves the continuous improvement of the product mix, the digitalisation of processes and constant attention to environmental sustainability."
The plant, in Yanzhou, is near Pirelli's Chinese production and research and development site. "This will further strengthen Pirelli's operations in Yanzhou, which today is one of the most advanced tire factories in the world, focused on the production of high performance tires."