The alliance, which was struck earlier this month, comes at a juncture when Ceat has posted a financial turnaround after having traversed a bumpy road with its profits moving into the red. This move will enable Ceat to enhance its car radial capacity substantially without incurring any incremental capex. This falls in line with the companys strategy to boost topline growth, without any substantial investment.
Currently, Ceat has a radial manufacturing facility at Nashik in Maharashtra, which produces 30,000 car radials per month.
We are improving our productivity at this plant and by end of this month we should be able to produce 40,000 radial tyres from this unit alone, says a senior company official.
By October, Ceat will have 50,000 radial tyres to market and will enable Ceat to cut a slice of the radial pie.
So far, Pirellis presence in India had been restricted as a technical collaborator to the BK Birla group company, Birla Tyres.
In 1996, Pirelli had chalked out plans to enter the Indian market by picking up a strategic stake in MRC Rubber, a Gujarat-based proposed greenfield tyre venture promoted by Manu Chhabria. However, this proved to be a futile move as the venture failed to take off.
Ceat had missed out on the radialisation boom in the passenger cars segment earlier, primarily because it had pinned all its hopes on its beleaguered joint venture (JV) with Goodyear, South Asia Tyres.
The JV fell through and Ceat was left with no radial facility till December 2000. As a result, Ceat lost out on the original equipment manufacturing contracts at a time when auto companies across the world was tapping the Indian markets.
For the past three years, there have also been talks of Pirellis intentions of picking up a strategic stake in Birla Tyres, but nothing has materialised so far.