Pirelli signs agreement for radial moto JV factory in Indonesia

ERJ staff report (LMH)

London -- Pirelli has signed an agreement with Astra Otoparts, an Indonesian automotive components maker, for the construction of a new factory in Indonesia, Pirelli's first in the country, for the production of conventional motorcycle tyres.

Pirelli first announced its intention to develop the plant in November 2011. Uberto Thun, senior vice president of Pirelli's Moto business, and Siswanto Prawiroatmodjo, CEO of Astra Otoparts, signed the agreement.

The agreement entails the creation of a joint venture in which Pirelli will hold the majority position with 60 percent of the capital and Astra will hold the remaining 40 percent. The joint venture will invest a total of $120 million (Euro 90 million) between 2012 and 2014 for the construction of a new factory.

Construction of the new factory, located a short distance from Jakarta, is expected to begin in the fourth quarter of 2012. The site will cover 25 hectares and when fully operated, in 2016, will employ 750 people, Pirelli said in a 24 April news release.

The new factory is expected to become operational from the second half of 2013, with estimated production of around 2 million conventional moto tyres in 2014. Production could reach 7 million pieces by 2016 when the plant is fully operational.

Of these, 3 million will be sold as Astra brands, while the remaining 4 million - equal to about 25 percet of all Pirelli's moto production in the world - will carry Pirelli brands (Pirelli or Metzeler).

In the context of the group's 'local for local' strategy, 20-25 percent of the Pirelli brand production made in the Indonesian plant will serve the original equipment and replacement markets of the Asia Pacific area, where the moto market is forecast to grow at an average annual rate of 3.5 percent from 2011 to 2014, the company said.

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Press release from Pirelli