Tyre Manufacturers and the Ukraine Invasion

In writing this article, we’re not trivialising or ignoring the enormous human tragedy unfolding in front of us in the Ukraine. But reporting or discussing global events is well beyond our scope — all we can reasonably do is comment on how they might impact on our specialist area.

As the economic effects of the Russian invasion of Ukraine ripple outwards across the world, countless thousands of manufacturers will feel the impact, and these will inevitably affect millions of their customers. The tyre industry is far from exempt from this and looks likely to be hit both directly, through disruption of manufacturing, and indirectly through rising costs.

Let’s take a look at the situation.

Which major manufacturers produce tyres in Russia?

A number of tyre manufacturers have responded to the Ukraine invasion by suspending activity within Russia:

  • Continental. Continental has ceased production at its Kaluga factory in Russia and cut all imports and exports to the country. Although sales from Russia make up less than 1% of its global revenue, the company said that there could be lasting consequences for supply chains and production.
  • Michelin. The French giant suspended their activity in Russia from March 17th. They also warned of disruption to logistics and supply, leading them to stop production at some European factories.
  • Bridgestone. The Japanese company is due to suspend operations at its Ulyanovsk factory in Russia later this week, as well as stopping tyre exports to the country immediately and freezing capital investment. Russia makes up 2% of the group’s total revenue.
  • Pirelli. Pirelli has stopped its investments in Russia, except those  linked to security. However, its two Russian plants, which supply 10% of its global output, remain open.
  • Yokohama. According to Tire Business, the company has stopped production at its passenger tyre plant in Lipetsk, Russia.
  • Nokian. The Finnish manufacturer is likely to experience the biggest impact and has withdrawn this year’s financial targets. The company is the largest russian exporter of tyres from its substantial Vsevolozhsk plant near Saint Petersburg, which exports 70% of its tyres to the West. Nokian is transferring some key product lines to plants in Finland and the US.

Update on Nokian: Since we published this item, Nokian has announced its intention to keep its Russian plant open. The Finnish company said that this would prevent its facilities being used to maintain the Russian military.

What about tyre manufacture in the Ukraine?

According to Tire Business, although there are four tyre plants in the Ukraine, none of them is ranked in the top 25 global manufacturers.

What about indirect effects?

The effects of Ukraine conflict, including Russia’s economic isolation, go well beyond tyre manufacturers’ activities within the country.

Firstly, as mentioned above, manufacturers face new difficulties with distribution, adding to existing difficulties in the global supply chain. On top of this, transport costs have risen with skyrocketing global fuel prices — and that means the cost of moving anything, everything, from raw materials to finished products, has increased.

Secondly, manuifacturers’ raw material costs are likely to rise. Russia is an important supplier of synthetic rubber, a principal component of tyres. It’s also a major exporter of oil from which synthetic rubber is manufactured. Even if these raw materials aren’t themselves sanctioned, the companies producing them will be facing increased economic stress and potential difficulties in meeting export demands.

What will all this mean for the customer?

You don’t need to be an economic analyst to see the probable effect for the UK consumer. It’s fairly inevitable that at some stage tyre manufacturers will pass on their increased costs to consumers.

How significant the impact will be remains to be seen. In one positive move, Pirelli has announced that it’s taking steps to offset its rising costs. No doubt other manufacturers will follow.

In a rapidly changing situation, all we can do is wait and see. Rest assured that BK Tyres will continue to offer our customers the most competitive prices that we can.

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