MILAN, Italy—Pirelli Tyre S.p.A. will use its new status as Formula 1 racing's designated tire supplier as a cornerstone for its marketing efforts in the developing countries of the world, especially in Latin America and Asia, according to Pirelli Tyre CEO Francesco Gori.
Pirelli was named the contract tire supplier for Formula 1 and F1's companion GP2 Series for the 2011-13 seasons by the Federation Internationale de l'Automobile (FIA), ending a nine-month search by the FIA to replace Bridgestone Corp., which bows out at season's end after four years as sole supplier.
A key to Pirelli's bid for the F1 contract is the potential brand awareness and brand promotion in regions such as China, India, the Middle East and other potential growth areas, Gori said, adding there is less urgency to promote the Pirelli brand in Europe or North America where it already enjoys high recognition.
“Younger people in the population (of these countries) may not know Pirelli as well as our European customers and South American customers,” Gori said.
Formula 1 claims to have attracted 2 billion television viewers during the 2009 season, with half of those in emerging markets, according to Marco Tronchetti-Provera, chairman of Pirelli & C. S.p.A.
The company expects to unveil a three-year strategic plan in November strongly focused on growth, Gori said. Pirelli recently told analysts it was accelerating previously announced capital investments in South America, Russia, China, Egypt and Italy to keep pace with anticipated rising demand in emerging economies.
Pirelli expects its three-year F1 tire supply deal to be cost neutral.
“At the end of the day, the cost for us, taking into account all items, is zero compared to our budget,” Gori said, adding the company will reduce its advertising and sponsorship spending in other venues to compensate for the increase in the F1 area.
Previous estimates of F1 tire supply have ranged from $100 million to $200 million annually.
Gori also said Pirelli's aim will be to move the design of the F1 tire to lower aspect ratios over time, changing the construction potentially to 40 series from the current 50 series rear tire design.
To do so, Pirelli will work with teams and show them how the performance and handling can be improved with lower aspect ratios, which more closely match those of road-going high-performance cars.
He emphasized that any evolution would be progressive and steady.
“You cannot move from F1 13-inch based chassis to an 18 inch (tire) in just one season,” he said, “so probably the evolution will go by steps.”
Pirelli will dedicate a team of engineers to address F1's requirements in terms of reliability, safety and performance, according to Maurizio Boiocchi, head of research and development for the Milan-based tire maker. Pirelli also will shift resources now dedicated to its World Rally Championship and Grand-Am Road Racing efforts.
Pirelli's single-source contracts with both racing series lapse after the 2010 season; Pirelli will continue to compete in the WRC though.
The R&D team will be based at Pirelli's Milan headquarters, Boiocchi said, but race tires will be produced at the firm's dedicated motorsports tire production site at its Izmit, Turkey, factory, where Pirelli has been making race tires since 2006. Race tire production capacity is listed as 240,000 tires per year
Tronchetti Provera said Pirelli does not anticipate having to make any additional investment in Turkey to handle the F1 and GP2 contracts. Earlier this year Pirelli added production there for the GP3 series, a new single-seat, open-wheel racing series that's considered a stepping stone to GP2 and eventually F1.
Bridgestone, which notified the FIA at end of the 2009 season it would bow out after the 2010 season, has not stated what it intends to do with the remaining infrastructure associated with its activities in Formula 1 and GP2 but expects to do so in the near future. The firm did say it intends to end the production of race tires for GP2 at its Rome technical center,
“Bridgestone's future will be in producing market-leading tires for the new breed of cars and trucks currently under development,” a Bridgestone Europe spokesperson said. “Tire technology is shifting with the vehicle makers and the requirements of new legislation.”
Bridgestone's other major initiatives in motorsports are as exclusive supplier to Indy Car and Indy Car's Indy Lights series (with the Firestone brand), MotoGP World Championship (Bridgestone brand), Formula Nippon in Japan and as one of several suppliers to the Super GT series in Japan. Bridgestone also supplies tires to the GP2 series in Asia. The status of that contract for next year or beyond is uncertain.