Pirelli CEO Eyes More Growth in High-Diameter, EV Segments

June 27, 2022

Claudio Zanardo has been CEO of Pirelli Tire North America Inc. (PTNA) for only eight months, but he’s moving the company forward on a number of fronts, building on its strengths. Zanardo and Ian Coke, chief technical officer, Pirelli North America, discuss those initiatives in this MTD interview.

MTD: Can you describe PTNA’s performance last year and during the first six months of 2022? What have the challenges been? What have the bright spots been?

Zanardo: The market has been strange in the last 18 months, because of the pandemic situation and the shortage of raw materials, components - everything. We can say that we are growing. Last year, we were able to go back to numbers and volumes that were more aligned to the pre-pandemic period and this year, we are seeing very strong growth, particularly in the higher (end) of the market - the 18- and 19-inch (segment.) That is where we compete and where we are. North America is a very important market for us. We are growing because we’ve done a lot of investment - and in particular, specific products for this region. 

MTD: You have mentioned that PTNA outpaced the market last year..

Zanardo: We are growing very well thanks to all the investment we have done, particularly in the range that is growing more. The 18-and 19- inch market is very resilient and is growing a lot. Our part of the market is growing. People are recognizing our product and are asking for our product.

MTD: You’re making significant investments at your plant in Silao, Mexico, which is intended to be a key driver for Pirelli’s growth in North America. Can you elaborate? (Editor’s note: Pirelli announced this past May that it will invest $15 million in the Silao plant over the next several years. That includes the establishment of a new research and development center at the facility.) 

Zanardo: This year, we are celebrating the 150th anniversary of Pirelli. We have two plants in the region - one is the plant in Rome, Ga,, which is celebrating its 20th anniversary, and (one) in Silao, Mexico, which is celebrating its 10th (anniversary). It’s a never-ending story of investing, growing and putting new resources there. We need to be in the market, near our customers and near where the demand is. 

We are investing in two ways. One is capacity. We now have reached, more or less, 7.2 million tires (annual) capacity in Mexico. Most of these tires are dedicated to North America. And on the other side, we are investing in research and development and building a new R&D center in Mexico. We need to have development near the market - not just production.

MTD: Are you running at maximum capacity in Mexico?

Zanardo: Almost. We are really pushing hard because the demand is there.

MTD: What’s the maximum annual capacity at the Rome, Ga., plant?

Zanardo: The Rome plant is around 350,000 to 380,000 tires. It depends on the mix we produce.

Coke: Ninety-five percent of our production (there) is 20-inch and above, of which 45% is 22-inch and 23-inch. The Rome production is more of the niche fitments, which we specialize (in).

Zanardo: Silao is the place where we do big volumes. In Rome, (it’s) small lots …. mostly dedicated to OE. In Silao, we are working for OE, as well, but also replacement is a big percentage.

MTD: PTNA continues to land key OE fitments. Can you discuss your OE strategy? Is it the same as it has been? For example, are you looking to expand your fitments in the light truck category?

Zanardo: We are. We’re investing a lot. We work together with almost all the carmakers. It’s an important investment for us because we develop technologies together. We are investing a lot in new homologations. And as of today, we are working a lot with all the electric (vehicle) players - not just (new ones), but the traditional ones who are jumping into the electric world.

MTD: Electric vehicles (EVs) are still a small part of the overall car parc in North America. What opportunities do you see for PTNA to be a significant player in the EV tire market?

Zanardo: The EV market is still small, but is growing a lot. Now we are seeing the first signals of that in the replacement channel. We have around 250 homologations already on EVs at the worldwide level. And we are working with the U.S. players who are active in electric cars - fully dedicated electric (manufacturers) like Tesla and Rivian, but also traditional carmakers.

MTD: Do you see the EV market growing quickly?

Zanardo: Yes. The interest in the end consumer is there. And the investment in OE is there. 

Coke: These OE projects start two to three years before. Some of them are a little bit shorter, especially with the start-ups, which have a different rhythm of tire development. But you need to have the technology. So it’s an opportunity for a tier-one… that has a strategy to attack this market. 

We’ve seen a lot of people fail. We’ve seen a lot of people have success. You never know who’s going to come through it. But the volume is coming. SUVs and trucks are now electrified. All the major guys are bringing out models. Rivian has a truck out, as well. So I think when you see that, there’s going to be a very rapid acceleration in the electrification of the market  - as long as the infrastructure keeps up. 

MTD: How many U.S.- based OE fitments do you have now?

Zanardo: At the moment, we have 30% of new homologations that are for electric (vehicles). When we look to the U.S. market, almost 80% of (our) new homologations are on eclectic vehicles.

Coke: We can see the wave coming and it’s how you take advantage of that wave.

Zanardo: We continue to invest in traditional tires, but the electric part is something that is growing. We need to be ready with OE, as well as replacement. That pull-through is very important on electric cars, in particular. If you don't put the right tire on your car, it’s not the same. This is where we need dealers. They need to explain to the consumer the differences in the products.

MTD: What sort of educational support and materials are you providing to your dealers so they can effectively talk to customers about Pielli’s EV tires?

Zanardo: We are developing new training systems to be launched in the next month for dealers. It’s important to know and understand which cars (where) we are present.

MTD: How would you describe PTNA’s presence among tire dealers? Are you still actively growing your dealer network or are you at the point where you have enough dealers who are strategically placed and can handle the volume that’s coming through?

Zanardo: We are not covering (enough of the) market. We want to grow. We are developing new programs in order to involve more and more dealers. The easier you can speak with dealers and end consumers, the easier you can put your product into the market. 

(Dealers) are fundamental. I come from this experience in Europe and in the U.S., as well, dealers are at the center of our experience and our presence in the market. We want to present our product to the end user and we cannot do that alone.

MTD: There have been some changes at PTNA over the last couple of years. Marco Crola was in your shoes from 2018 to 2020 and then Pietro Berardi for slightly less than two years. You were appointed CEO this past November. Some dealers have told us, too, that programs have changed during those years. What are you planning to do in order to stabilize things and then take it to the next level?

Zanardo: At the end, we have a strong team, so it’s not just me. It’s the entire company that’s behind our product. We are developing new projects and new programs - things that can put us near the end consumer, together, with dealers. We want to make things very easy because this is the key, in my opinion.

MTD: The North American market is experiencing big changes. There are macroeconomic factors beyond our control, like shipping. As a tire dealer, it’s probably more difficult to forecast than ever before - and probably as a manufacturer, too. What’s the biggest challenge facing PTNA at the moment?

Zanardo: It's a combination of all different factors. What you have to do to be successful in this environment is to be able to adapt to the situation. We have incredible algorithms to help us understand what demand will be for the next year and years. We know the cars that OEMs are producing and the fitments that are there. The biggest challenge at the moment is the supply chain. Raw material prices (also) are going up. Energy prices are going up. The combination of those factors is creating sort of a perfect storm in the market and you have to adapt.

MTD:  Like other manufacturers, Pirelli has had to raise tire prices. (Editor’s note: PTNA increased consumer tire prices three times during the first half of 2022 - most recently a hike of up to 10% that went into effect on June 15.) How are your dealers reacting as their costs continue to go up?

Zanardo: It’s not easy because we are coming from years and years where we were not seeing an inflation rate like now. The cost of everything is (increasing) - raw material costs, energy costs and transportation costs. The price increase is really mandatory to (maintain) quality levels. We don’t want to have any compromise. It’s a big challenge for dealers … being able to put this increase into the market, as well. They need to be profitable. 

MTD: Demand for consumer tires fell off the cliff at the start of the pandemic and then came roaring back within a few months. And it’s been that way ever since. Do you think this is going to continue throughout the rest of the year and into 2023? Will there be a leveling off in demand?

Zanardo: I think personally, we will keep seeing a market that will grow. In particular, I’m referring to the segment where we play - the 18- and 19-inch market. This market is more specialized. Double-digit growth will continue this year and next year, as well.

MTD: What can tire dealers expect to see from PTNA during the rest of the year?

Zanardo: There are two things we are working on. One is programs to support dealers and the other is training. We are developing these things. Everything will be easy to use and understand. We want to grow and we want our partners to grow. We need to grow together. That’s the only way.

About the Author

Mike Manges | Editor

Mike Manges is Modern Tire Dealer’s editor. A 25-year tire industry veteran, he is a three-time International Automotive Media Association award winner and holds a Gold Award from the Association of Automotive Publication Editors. Mike has traveled the world in pursuit of stories that will help independent tire dealers move their businesses forward. Before rejoining MTD in September 2019, he held corporate communications positions at two Fortune 500 companies and served as MTD’s senior editor from 2000 to 2010.