Interview with the head of Cordinat Vadim Volodin about the loading of the Gislaved site in Kaluga

Over the past year, through the purchase of assets, S8 Capital has formed, under the management of the Russian Cordiant, the second largest player in the tire market. The general director of Cordiant spoke about the restoration of production at the former Continental plant (now Gislaved) and the future of the tire cluster. Vadim Volodin.

— How do you assess the situation in the tire market?

— Let’s start with the positive: after a decline in 2022, the market in 2023 grew by 16% in the passenger segment – mainly growth due to segments C and B. In the premium segment, the decline still remains, but not because consumers do not want or cannot purchase premium products. The fact is that many Western companies that imported and produced in Russia, as part of the sanctions, either sharply reduced their business or stopped production altogether.

On the negative side: our supply of original equipment has practically collapsed, because all international car factories have stopped production. Exports have also practically stopped, since traditionally deliveries were to the European part, and this direction was closed. In general, the market has set a course for a confident recovery, and positive dynamics will remain a trend for the near future.

— How would you assess competition from imports?

— If previously Western companies imported premium products to Russia, today we see an influx of a huge number of Chinese brands; last year alone, more than 80 of them arrived. In this case, there are huge risks for the consumer: firstly, receiving low-quality products, and secondly secondly, the impossibility of replacing it quickly if something happens to the tire, including due to the lack of developed distribution, which we have. Well, in general, what is the point of buying Chinese tires of an unknown brand, when local production is now being launched in Russia, which previously produced premium products. For example, our Cordiant tire cluster united five factories in Yaroslavl, Omsk, Kaluga region (formerly Continental AG) and Ulyanovsk (formerly Bridgestone), becoming the second largest domestic tire manufacturer. The last two enterprises are among the most modern not only in Russia, but also in the world.

— Are Chinese manufacturers dumping?

— At some point, a certain vacuum formed in the market, which was quickly filled by Chinese manufacturers. And now, as Russian production begins to fill this vacuum, their share will begin to decline.

— What is the current production dynamics at the Gislaved plant?

— According to the business plan for 2024, the production volume is planned at 2.1 million tires. This is approximately 12% more than last year’s release. Based on the results of the first three months, we can state that we are even ahead of schedule. In the next two years we will load this production at 100%.

— The maximum capacity of the plant is around 3.5 million units?

— Yes, but the plant produced a maximum of 3.1 million.

— Do you expect other plants to be fully loaded in two years?

— Cordiant has historically been 100% loaded. Now the main task is to load Ulyanovsk and Kaluga to 100%. I am confident that in the near future the enterprises will reach their designed capacity.

— You mentioned that you currently do not supply the original equipment from the Gislaved factory. Are there any such plans?

— Yes, we specially developed the Meteor brand for this. These products will be supplied to OEM facilities. And now we are negotiating with automakers.

— Why do we need a separate brand for the initial equipment?

— The initial configuration is still a different story, and different manufacturers require different approaches and requirements. We decided for ourselves that we would create a brand for the equipment, which we would build on the domestic market.

— What was Gislaved’s share of primary supplies?

— Previously, Continental had a single contract that covered all their production facilities and all the sites with which they had contracts: for example, Renault, Nissan and so on. And as part of this global contract, they supplied tires for the complete set. Now these contracts do not exist, just as there are no manufacturers of these cars. The landscape has completely changed and we are changing with the market situation.

— If AGR (formerly VW) restarts the site in Kaluga, do you plan to continue working with them?

— We are open to all car assembly enterprises that need tire production. The question here is the sizes and requirements for the tire that they will set.

— What does the Gislaved line look like now?

— At the moment, the line includes new models that were once launched by Continental (the Gislaved brand was transferred as part of the deal along with the Russian assets of Continental AG). The product line of winter tires includes Soft Frost 200, Nord Frost 200, Nord Frost Van. This summer season we are releasing Gislaved PremiumControl, UltraControl, TerraControl, TerraControl ATR. Also, at the Gislaved plant in Kaluga, we will also produce the Torero brand – from the point of view of the product portfolio, it will replace the product line of the Matador brand that has left the market.

— Do you plan to use Cordiant’s own developments in the product line of the Kaluga plant?

— We haven’t changed anything from a technological process point of view. In terms of consumer qualities, these are exactly the same products that were produced until 2022. Of course, from the point of view of the development of our lines, we look at the experience of all sites that were part of the tire cluster formed on the basis of Cordiant. At the moment, our R&D Scientific and Technical Center “Intyre”, with the support of the engineering and technical team of the Kaluga Tire Plant, is actively working on creating a new premium brand, the assortment matrix of which will start from 16 inches.

— Will the products of Gislaved and the former Bridgestone be positioned in the premium segment?

– Yes. The tire cluster should take a leading position in all segments, starting from the economy segment C, which we, for example, produce in Omsk, and ending with the premium segment, which is produced in Kaluga and is planned for production in Ulyanovsk. We set ourselves the task of no less than achieving a 26 percent share of the Russian market within two years.

— Are there any difficulties now with access to raw materials or chemicals, for example natural rubber?

— We have been in a turbulent situation for quite a long time, starting in 2020. Even then, we decided for ourselves that we needed to have a diversified portfolio of suppliers, and we began to look for them not only in the European part, but also on other continents, because the approaches from the point of view of covid in all countries were somewhat different. Actually, this helped us a lot in 2022. Despite the imposition of sanctions and stoppages of supplies, we did not sag, but used raw materials that had already been homologated at our sites and put into operation.

At the moment, of course, there are certain difficulties with supplies. But basically the products, in terms of their technical and quality characteristics, are no different from the products that were previously produced at the plant in Kaluga. Now there are no restrictions in terms of raw materials.

— Are there any plans to restore exports? Sanctions do not allow supplies to the EU, but there are, for example, CIS markets.

— For us, the base market is Russia. Over the past year, we have successfully sold the volume that was previously exported to Europe within Russia and the CIS. Now, in terms of supplies, we are actively developing cooperation with the countries of Latin America, Africa, and the Middle East.

— Will it be cost-effective?

— If we supply, then production will be cost-effective for us. Because if it’s ineffective, what’s the point of putting it there? Plans must be difficult to implement, but feasible and, most importantly, economically feasible.

— What approximately export volumes do you expect?

— The export volume is a variable value depending on demand in the Russian market; in our country it varies from 10% to 20% of production in the tire cluster as a whole.

— If all local producers concentrate on the domestic market, doesn’t this increase competition? Or is this not yet felt, since production has not resumed at all factories?

— We believe that we currently have the best distribution system on the Russian market. We have about 300 distributors from Kaliningrad to Vladivostok, a unified system and conditions. Yes, of course, all companies will start operating at full capacity. On the other hand, our car assembly enterprises must begin to increase production volumes. And I believe that people who buy, for example, Chinese tires should return to us soon. There will be competition, of course, but it is not a disaster.

— Are there plans to produce large standard sizes in the Russian Federation, which are now in short supply?

— Already starting from the winter season.

— Previously, as I understand it, large diameters were not produced, because this is a relatively small segment. What has changed?

— All companies on the market produce large diameters. The fact is that the business of, for example, Continental was built on the principle that different sites produce different products. Some are produced domestically, some are imported. Accordingly, our current task is to begin domestic production of assortments that were not produced at the site.

Interview conducted by Olga Nikitina