Nokian Tyres has signed an agreement to sell its Russian operations to Tatneft for approximately €400m (US$397.9m). The tire maker stated in June 2022 that it would initiate a controlled exit from the country.
The transaction is subject to approval by relevant regulatory authorities in Russia and other conditions, which creates uncertainties related to the timing, terms and conditions and the closing of the transaction between the two companies.
Once the sale is closed, Nokian will end all operations within Russia, and all of the employees working within the company’s operations will transfer to Tatneft.
The tire manufacturer began operating in Russia in 2005, and in 2021 an estimated 80% of its passenger car tires were produced there. The business area of Russia and Asia represented an estimated 20% of Nokian Tyres’ net sales.
Nokian stated that the exit from Russia will affect its tire sales within Central Europe for the next two to three years. Furthermore, to secure the supply of its products, Nokian has increased production capacity at its factories in Finland and the USA. The manufacturer is also investing in new supply capability in Europe.
As a key part of this new Europe-based supply capability, Nokian has unveiled plans to invest €650m (U$645.8m) in a new zero CO2 emission passenger car tire factory in Oradea, Northwest Romania.
The greenfield factory will focus on the manufacture of larger diameter passenger and SUV tires for the Central European market and is expected to have a yearly capacity of six million tires with the option for capacity expansion in the future. A distribution facility will also be built at the site.
Building work is expected to start in early 2023, ahead of the first tires being produced at the site in the second half of 2024. Commercial tire production is scheduled to begin in early 2025.
“This investment is a significant strategic decision enabling our future growth,” said Jukka Moisio, president and CEO, Nokian Tyres. “A world-class manufacturing facility in Europe is a key step in getting additional capacity and creating a balanced manufacturing platform as we start building the new Nokian Tyres without Russia.”
“Central Europe is an important market for us, and the investment shows our commitment to the market,” said Adrian Kaczmarczyk, senior vice president, supply operations, Nokian. “The new site will be strategically located close to our customers. After a thorough evaluation of over 40 locations and several factors, such as skilled workforce availability, logistical advantages and stable business environment, it was clear that Oradea was the best choice for our new factory.
“We are committed to building a zero CO2 emission factory – the first in our industry. The site location in Romania supports this target as we can utilize green energy produced near the site. In addition, we are critically evaluating the production processes to find the most sustainable ways to produce tires.”