Tatneft inflates tires – Newspaper Kommersant No. 232 (7433) dated 12/14/2022

Tatneft has started negotiating a deal to buy the tire business of Nokian Tires in the Russian Federation: the FAS has received a corresponding petition. The plant of the Finnish concern in the Leningrad region now continues to produce Nokian tires, but Russian subsidiaries have already applied for registration of new trademarks Ikonan, Ikon, Ivanor and Torsten. Regional authorities are already talking about the prospects of its reaching “at least” the design capacity of 17 million tires per year in the second quarter of 2023.

The FAS received petitions from Tatneft PJSC to acquire 100% of Nokian Tiers LLC, Hakka Invest LLC and Nokian Tire LLC from Nokian Tires, Kommersant was told in the antimonopoly service. Nokian Tyers is the production part of the Nokian business in the Russian Federation, Nokian Tire is a trading company. The Finnish company itself announced the signing of an agreement on the sale of its Russian business to Tatneft. The expected price of the deal is around €400 million, the statement said.

The Nokian Tires plant in Vsevolozhsk (Leningrad region) has been operating since 2005, and in 2021 Russia accounted for 20% of brand sales and 80% of output. Now the company continues to produce products. The level of loading of the site in the Russian office of the company is not called.

On December 13, Governor of the Leningrad Region Alexander Drozdenko, speaking about the future change of ownership, said: “It is very important for us that the enterprise should operate at least at its design capacity in the second quarter of next year.” The production capacity of the plant is 17 million tires per year, the entire market of passenger tires in the Russian Federation in recent years has been about 30–40 million units per year. In 2021, the share of Nokian Tires in Russia reached 16.6%.

Tatneft has experience in the segment – it has already produced tires under the Kama Tires brand. This year, the assets fell under EU sanctions, and the company was forced to sell the business to Tatneftekhiminvest-holding (49% from Tatarstan). Whether Tatneft will retain the rights to Nokian technologies is unknown (see “Kommersant” dated October 29).

Nokian Tiers was entitled to use the trademarks of Nokian Tires in the production of car tires. But it is likely that the products will be renamed in the future: in recent months, the company has applied for several trademarks – on December 9 for the name Torsten and Torsten, and on October 24 for the names Ikonan, Ikon and Ikon Tires. The trading company Nokian Tire on August 24 filed an application for the trademarks Ivanor Service & Market, Ivanor and Ivanor.

Loading the plant in Vsevolozhsk “at least at design capacity” while maintaining the production of a similar line of tires will be complicated both by the need to enter other markets and the supply of raw materials. Tatneft has a production of synthetic rubber, but Russian Nokian said that it was impossible to replace natural rubber, especially in winter tires. “Therefore, we import large volumes of natural rubber mainly from Southeast Asian countries,” the company noted (see “Kommersant” dated December 16, 2019).

Automotive expert Vladimir Bespalov doubts the possibility of maintaining production at the same level. He says that while maintaining the production of the premium segment from the nearest markets, the export of winter tires can potentially go only to Kazakhstan. But without technology transfer, he notes, it is unlikely that the company will be able to reach the premium. The analyst emphasizes that in the Russian Federation there are many tire factories of foreign brands that were previously export-oriented, while it is prohibited in the EU, and new markets need to be sought. In China, local players can also cover the needs, he continues, so it is worth concentrating on import-dependent “friendly countries” and increasing the share in the Russian market.

But the markets of Uzbekistan and Kazakhstan with a developed auto industry will probably be covered by Tatneft’s local projects anyway. So, on December 13, production began at KamaTyresKz LLP (JV Tatneft and Kazakhstan’s Allur) in Kazakhstan, which in 2024 will produce 3.5 million tires per year. 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 and 4.63 thousand tires for agricultural machinery under the BARS brand. Tatneft did not answer the question about export prospects and the workload of the plant in Vsevolozhsk.

Olga Nikitina, Dmitry Kozlov