Mid-year report: Pirelli takes digital focus with tire-buying platform

ROME, Ga.—As the COVID-19 pandemic ravaged Italy—who will forget the videos of quarantined Italians signing to each other perched from their balconies—the country's top tire maker embarked on a journey of its own.

Pirelli & C. S.p.A., the world's No. 6 tire maker with sales of $5.9 billion in 2019, began a digital journey that a few months later culminated in the release of its Click-to-Buy platform.

For the first time, Pirelli now features a digital platform that buyers can access via the company's website, select a set of Pirelli tires and be directed to a dealer partner for service.

Pirelli Tire North America Inc. CEO Pietro Berardi calls it a "tremendous step" in the digitization of the company.

"It's the future, it's the segment that is growing the most in the industry, and we want to be there as we are a pioneer and leader in this revolution," Berardi told Tire Business in an exclusive interview.

Berardi said Pirelli's market research shows that two out of every three people who look to buy tires online begin the process without a specific brand in mind. He said the idea behind Click-to-Buy is to capture those surfers who may know Pirelli as the Formula 1 tire supplier—or in any of its other sports sponsorships—and entice them to purchase a set of Pirelli tires.

Part of the goal, he said, is to drive business to the "best dealers we have," who then will install and service the tires. The dealer is going to be "quintessential for a very, very long time," Berardi said.

"I can't stress this enough. The digitalization journey to us is to further strengthen the dealer in his distribution role. Nothing is going to happen without the dealer. The more the dealer is qualified and provides superior service, the better is the fit with Pirelli."

Berardi, named CEO in March 2020, said Pirelli not only used the slowdown caused by the pandemic to refine and roll out its platform, but also to invest in two main areas.

"How did we use the time?" he asked. "Not to get depressed. Not to get scared. Not to get fired. Not to cut on cost. The opposite. We invested. We invested in the two most important things to get that done: Customers and product.

Among those products is the Scorpion AS Plus 3, an all-season product for light trucks, SUVs and CUVs. The product, which Pirelli rolled out with a virtual launch in May, is available in 37 sizes covering 17- to 22-inch rim diameters.

The tire has a 70,000-mile treadwear warranty. Berardi emphasized to stakeholders that the tire was designed specifically for the needs of the North American market.

The Scorpion AS Plus 3 is a result of Pirelli's renewed "focus on the needs of the American customers," Berardi said. "The Plus product lines are there to demonstrate the difference. We have products for the needs of the American customers."

He said the focus on North America is not so much a change for the company as much as a sustained effort.

"We always develop a product for the market we are participating in," he said. "Probably, we were a little bit shy in the past to say it loud. What we have decided, with the team, is to communicate this, say, 'Hey listen, we have this great product. We have studied the American needs, the American customer and the American dealers, let's say it.' We are proud to have said it."

Berardi, an automotive industry veteran who formerly was a regional vice president for the Renault-Nissan Group, said Pirelli will unveil several products for the burgeoning light truck, SUV and CUV markets in North America, including an all-terrain offering.

"Look for more mileage, more performance," Berardi said, "without giving up any of the characteristic we have as a premium product. We are just enhancing our products and more features and trying to cover all the segments."

He promised that there will be plenty "of activity in our product portfolio" in the near future.

Pirelli, meanwhile, remains focused on two other areas important to the company: electric/hybrid vehicles and sustainability.

Berardi said it's important for Pirelli to develop premium products for EVs and hybrids in order to remain on the "forefront" of technology.

"How are we doing this? By being pioneers in developing the best product for this type of vehicle, their specific needs, and by working with the companies and customers that are pioneering and leading these revolutions," Berardi said.

"I think we're doing a good job. We're partnering with the right partners, and to work side by side to develop together with our customers the right solutions."

Sustainability, he said, is not just a buzzword. He said the notion is embedded in the company's DNA and remains one of its core principals.

In mid-May, Pirelli disclosed it would be the first company to produce a range of tires certified under Forest Stewardship Council (FSC) guidelines covering sustainable production methods.

The FSC-certified tires, versions of the Pirelli P Zero high-performance range, will be used as a fitment for the plug-in hybrid version of the BMW X5 xDrive 45e sport-activity vehicle. The tires contain FSC-certified natural rubber and rayon.

FSC certification confirms NR plantations are managed to preserve biological diversity while benefiting the lives of local people and workers, while ensuring economic viability, Pirelli said.

BMW North America will use the FSC-certified P Zeros in size 275/35 R22 for the front axle and 315/30 R22 size for the rear.

Berardi said he recently witnessed the tires being manufactured at Pirelli's U.S. factory in Rome.

"When you believe in something so strongly, then it becomes easier to translate to the customers," Berardi said. "Customers still aren't that open to sustainability, but it is changing as we speak. Sustainability is gaining ground as a topic of conversation, buying decisions, purchasing decisions."

In early April, Pirelli unveiled a two-phase plan that calls for investments of nearly $2.4 billion in capacity and digitalization through 2025. The company expects it to generate sales growth of nearly 9 percent a year.

During Phase 1, Pirelli intends to invest up to $870 million, equal to roughly 7.5 percent of total revenues, focusing on technological upgrade, mix improvement, productivity and optimization of industrial efficiencies.

In the second phase, it will invest $1.4 billion to $1.5 billion for both "constant technological upgrade" as well as capacity upgrade for "high value" tires, in particular in countries with lower production costs.

Berardi said sales have rebounded in the first quarter, above pre-pandemic 2019 levels. He said supply remains steady, buoyed not only by the tire maker's facility in Georgia but also its plant in Silao, Mexico.

Still, he said, the current market presents a significant challenge.

"We went with very, very low demand, and all of a sudden the market recovered very, very fast," Berardi said. "These swings, in an industry like ours, are very difficult to control and manage. On top of that, raw material (prices) increased, transportation and logistics increased, container problems … it's the perfect storm: More costs, less availability of product, more demanding customers.

"It has not been an easy journey, but we are trying to manage our best."

Pirelli North America, he said, wants dealers to know that Pirelli continues to make "great products for great cars."

He said the knowledge the company has gained as partners with premium vehicle manufacturers such as Ferrari, Lamborghini and Maserati extends to its work for other vehicles.

"We have products for all needs, and we have products for all types of customers," Berardi said. "We want Pirelli to become not just a high-value Italian brand, but we want Pirelli to become a solid brand in the U.S., a brand that is investing in the future."