Pirelli to invest $415m in China as car sales surge

BEIJING, Feb 26 (Bloomberg): Pirelli & C SpA, Europe's third-largest tiremaker, will invest about 300 million euros ($415 million) in China over the next three years to tap rising demand in the world's biggest vehicle market. The company will double capacity at its factory in Jining, Shandong province, to 10 million tires a year within the next two years, Chairman Marco Tronchetti Provera said in an interview with the reporter in the Chinese city yesterday. Pirelli expects Asia sales to grow 20 per cent this year, up from a previous estimate of 15 per cent, helped by rising demand for more expensive vehicles in China, Tronchetti Provera said. China's overall vehicle sales surged 32 per cent last year, helped by economic growth and government stimulus measures. "For us, what's important is the high-end, expensive cars," he said. "We are not looking for the mass market." The Milan-based tiremaker may get 10 per cent of sales from China within two years from 7 per cent how, he said. The company also plans to invest $210 million by the end of 2012 to build a new plant in Mexico. The tiremaker in November said earnings before interest, taxes and restructuring costs will climb to as much as 11.5 per cent of revenue in 2013, from about 8.8 per cent last year. The price of rubber, used to make tires, will peak this year, Tronchetti Provera said. Pirelli is working to reduce its use of natural rubber to offset costs that hit a record this month. Pirelli fell 1.1 per cent to 5.66 euros yesterday in Milan. The shares rose 40 per cent last year, the sixth-best performance on Italy's benchmark FTSE MIB. The company completed the spinoff of its real-estate unit, now called Prelios SpA, in October and it also sold Pirelli Broadband Solutions to concentrate on tires.