Providing products for electric vehicles and a focus on high-value products continue to be prime areas of focus for Pirelli North America, according to Pirelli North American President Claudio Zanardo.
How would you describe business thus far in 2024?
Business in 2024 has seen good performances across different segments. The tire market experienced a somewhat sluggish start to the year. However, demand for high-value products, especially those over 19 inches (the segment where we focus our strategy), remains resilient.
Where do you see opportunities for growth the rest of the year?
Emerging segments such as electric vehicles and all-weather tires are continuing to grow, showing promise for future expansion. Emerging segments such as EVs and all-weather tires continue to grow, showing promise for future expansion. Additionally, SUVs are a constantly growing trend, and we are expanding in that market as well.
How has inflation affected business?
Inflation has generally impacted business operations and customer interactions. It has driven some consumers to seek more affordable tire options, resulting in a shift from Tier 2 to Tier 3 or 4 products. However, customers who seek high levels of quality and performance (Tier 1 brands) are showing their resilience. Pirelli's commitment to quality ensures that our segment remains stable, as many customers continue to prioritize high-quality products. We can say that Pirelli North America is managing this challenge effectively, growing its market position, particularly in the 19" and up market.
Are you seeing any volatility in the supply chain?
The supply chain has faced many difficulties lately. The Red Sea and Baltimore bridge are just the latest incidents. These cause instability on both the supply side, where Pirelli collaborates with its suppliers to ensure business continuity, and the demand side, such as OEMs that are adjusting their demand because of parts' shortages. Especially in North America, Pirelli is working to improve the agility and resilience of the whole process by, among other things, enhancing visibility-predictability across the whole supply chain, localizing suppliers and investing to expand local production.
Pirelli's strategy has focused on high-value products. Does that remain a priority?
Yes, Pirelli's strategy continues to prioritize high-value products. This focus is demonstrated for example through our recent product launches in this segment, such as the new Scorpion Zero AS Plus 3. This tire is specifically designed to meet the demands of high-performance SUVs, showcasing our commitment to innovation and quality in the high-value market.
Please provide an update on the Mexican campus.
Last November we inaugurated our first research and development center in Silao, following an investment of $15 million over a period of two years. The Silao plant has grown at an incredible rate, going from a production capacity of around 1.5 million tires (a year) to 7.6 million today and its production capacity is set to reach a total of 8.5 million tires by 2025. This demonstrates how strategic the Silao plant is for Pirelli.
Another step in this direction was the inauguration of Pirelli Mexico's first training center, last January: an area of 9,689 square feet dedicated to courses for the professional development of employees, in matters of safety, quality, productivity, technology, and care for the environment.
How important is the North American market to Pirelli?
The North American market is extremely important to Pirelli, playing a crucial role in the company's global strategy and business growth. (Editor's note: North America represented 25.8 percent of Pirelli & C. S.p.A.'s global sales in fiscal 2023, or $1.85 billion.)
First of all, North America is one of the largest automotive markets in the world, offering substantial opportunities for growth and expansion. In addition, the region's diverse climate conditions and vast road networks create a great need for a wide range of tire products, from high-performance to all-season and winter tires. Pirelli is well-known for its premium and high-performance tires, and the North American market has a strong appetite for these products. Consumers in this region prioritize quality, safety, and performance, aligning perfectly with Pirelli's brand values and product offerings.
How does having three Formula 1 races in the U.S. help the brand?
We are thrilled by the growing interest around F1 in the US. Having three F1 races in this country gives Pirelli increased exposure and brand visibility to a diverse audience, enhancing brand recognition and the association with high-performance motorsports. The longtime relationship with F1 offers benefits such as technological innovation, product development opportunities, and a platform to showcase Pirelli's expertise and performance capabilities in the tire industry.
Pirelli recently made its 50 millionth tire in Mexico. How does that facility help your North American strategy?
Pirelli's 50 millionth tire in Mexico is a milestone that underscores the critical role of this facility in advancing our North American strategy. By strategically locating manufacturing in Mexico, we are bolstering our ability to serve U.S. dealers more efficiently and promptly. This facility enables us to streamline logistics, reduce lead times, and enhance our responsiveness to market demands.
How is the associate dealer program going?
The associate dealer program rollout is progressing well, and we're very pleased with its expansion. Feedback from dealers has been very positive, with many expressing appreciation for the enhanced support, resources, and opportunities the program provides. We're continuously gathering insights and fine-tuning our approach to ensure it meets the evolving needs of our valued partners across the country.
How are EV sales in North America?
EV sales in North America have been experiencing significant growth over the past few years. The long-term forecast for EV demand remains strong, at the global level we see EV penetration of the premium and prestige segments at 40 percent in 2025 and rising to 80 percent by 2030.
Pirelli remains deeply committed to the electric vehicle segment, recognizing its critical importance to the future of the automotive industry. Worldwide, we have around 550 homologations for our EV tires. Pirelli's Elect technology is gaining significant traction in the U.S. market in both the original equipment (OE) and replacement channels.
Do you expect to debut any additional products in 2024?
Over the past few years, Pirelli North America has concentrated on developing products specifically tailored to the North American market. Our latest product lines, such as the Plus 3 line — designed for extended mileage — and the Weather Active tires, engineered for optimal performance in all weather conditions, exemplify our commitment to meeting the unique needs of U.S. drivers. As we move into 2024, we will be sharing more exciting updates and product launches. Stay tuned for further announcements and detailed information about our new offerings.
Has artificial intelligence (AI) begun to impact business?
Advanced algorithms and cutting-edge automation systems are now intertwined with human expertise, enhancing skills and supporting the development of increasingly efficient and sustainable models. Artificial intelligence is now widely employed throughout Pirelli. In a broader sense, digitalization affects all of the company's activities as well as our products.
An example of this is the Pirelli Cyber Tyre, a system based on sensor-equipped tires capable of collecting information about the tire itself or the road surface and sharing it with the vehicle's electronics. There are already cars on the market equipped with this system, and projects with various car makers are underway. Pirelli has developed an algorithm to use the data from the embedded sensor to estimate each tire's tread wear and total mileage, as well as the vertical load.
Another example is predictive maintenance, where algorithms detect patterns and anomalies in machinery, enabling proactive intervention to prevent failures. These models indicate the optimal time for replacing critical components, positively impacting resource utilization and minimizing waste.
How do you get your customers to embrace sustainability?
Our customers care about certain very practical things, such as low rolling resistance tires for better gas mileage or EV range, lower abrasion, and of course safety above all else. And of course customers care about our tires being compliant with regulations, which increasingly protect them from potential environmental and social risks. Sustainability is a driver for continuous innovation.
Our customers also share our concerns about end-of-life tires, which is why here in the U.S. tire manufacturers and retailers have banded together to launch the Tire Recycling Foundation. We want to get to a place where scrap tires are a valuable raw material for other products- whether new tires, rubberized asphalt, civil engineering materials or other end uses. So the foundation will work with stakeholders and researchers to access these markets. Already, we are using a small amount of recovered carbon black. And the foundation is working on research that will help to scale up the use of rubberized asphalt across the country.
What are some of the challenges of the industry?
One major focus is the sustainable transition. The industry is committed to lowering carbon emissions throughout production and supply chains. There is also significant innovation in developing and integrating bio-based materials into tire manufacturing, which reduces reliance on non-renewable resources and enhances sustainability. Additionally, advances in technology and systems for recycling and reusing tire materials are making tire disposal more efficient and environmentally friendly.
Last but not least, educating consumers is a priority. It is important for them to understand the importance of focusing on the quality and performance of tires, as well as on the sustainability, as the right tires can provide significant benefits in terms of durability, mileage, safety, and driving enjoyment.
What do you want tire dealers to know about the company that they may not know?
Pirelli is the answer to their customers' needs and the best partner to further develop their business, particularly if they are attentive to market changes and want to seize all the opportunities on the horizon.
