Nokian flattened a tire

The Russian authorities approved the sale of the Russian business of Nokian Tires to Tatneft for 23 billion rubles, which is slightly lower than originally expected. The question remains where Tatneft plans to sell tires from its originally export-oriented plant in Vsevolozhsk, given the absence of a shortage in the domestic market. Analysts believe that the most logical step for Tatneft would be to enter the premium segment close to Nokian, and not compete with the products of its former tire assets Kama and Viatti.

The government commission approved a deal to sell the Russian assets of Nokian Tires to Tatneft with an allowable transaction price of 23 billion rubles, the Finnish company said. At the exchange rate as of March 14, this is about €286 million, which is about a third less than originally expected by Nokian, about €400 million. sale agreements at the end of October 2022. Nokian notes that there is still a high degree of uncertainty about the closing of the transaction and its timing, as well as the amount, taking into account the dynamics of the exchange rate.

The Federal Antimonopoly Service has already approved three requests from Tatneft to acquire from Nokian Tires a 100% stake in the authorized capitals of Nokian Tiers LLC, Hakka Invest LLC and Nokian Tire LLC (see. “Kommersant” from February 9).

Tatneft did not receive Nokian brands – Nokian Tiers has already announced that the Vianor tire center network will rebrand and continue to work under the Ivanor brand.

The main asset of Nokian Tires in the Russian Federation is a plant in Vsevolozhsk (Leningrad region) with a capacity of 17 million tires per year. The entire passenger car tire market of the Russian Federation in recent years has been about 30–40 million units per year. In 2021, Russia accounted for 20% of Nokian sales and 80% of output. Tire exports from Russia to Europe and North America ended in July last year when the EU imposed an embargo on such shipments. Now the plant has resumed work after a technical stop for additional production of summer tires – still under the Nokian brands.

Tatneft has experience in the segment: the company produced tires under the Kama Tires and Viatti brands in Nizhnekamsk, but the assets fell under EU sanctions in the summer of 2022.

After that, Tatneft sold them to Tatneftekhiminvest-holding, in which the authorities of Tatarstan own 49%. In 2021, the Tatneft tire block produced 12.3 million tires, most of them for passenger cars. In addition to the capacities of the former tire business of Tatneft and the Nokian plant, the Russian Cordiant site with a capacity of about 12 million tires, as well as Pirelli (capacity of 10 million tires) continue to operate in the Russian Federation.

The interlocutors of Kommersant among tire manufacturers noted that buying up capacities does not make sense without understanding how to replace the software, from what mixtures and according to what recipe to produce tires, and also where to sell them, given the limited capacity of the domestic market. The interlocutor of Kommersant noted that Tatneft, taking into account past experience, is likely to be able to close the issue with software, but the problem of product composition and its positioning remains. Tatneft has a production of synthetic rubber, but Russian Nokian said that it was impossible to replace natural rubber, especially in winter tires. In addition to natural rubber, there are no materials for cord and vulcanization accelerators in the Russian Federation (see. “Kommersant” dated March 16, 2022).

One of Kommersant’s sources notes that there is no shortage of tires in the Russian Federation, with the exception of the need for large sizes, which are traditionally not produced in the Russian Federation due to the limited market capacity. And the potential for exports to neighboring countries is limited.

In 2021, Tatneft began building a plant for the production of tires of KamaTyresKz LLP (a joint venture with Kazakhstan’s Allur) in Kazakhstan, which was launched at the end of 2022 and expects to reach a capacity of 3.5 million tires in 2024. In addition, in early December, Tatneft signed an agreement with Uzkimyosanoat to buy out the Uzbek Birinchi Rezinotekhnika Zavodi LLC – in 2021, the plant produced 244.9 thousand tires for cars with a capacity of 3 million pieces. In theory, the company could start exporting to the EU from these enterprises, closing deliveries to the markets of Central Asia with the help of Russian assets.

Before the crisis, Kama Tires and Viatti tires were supplied to 48 countries, of which 35 were non-CIS countries, including Israel, Laos, Sweden and others. Automotive expert Vladimir Bespalov notes that, in theory, Tatneft can continue to interact with the previously developed base of counterparties abroad, with whom Nizhnekamskshina cannot work now due to sanctions. However, he believes that it would be strange to start producing budget tires, which the company previously dealt with, given the past positioning of Nokian products and the registration of consonant trademarks.

Olga Nikitina