Continental Kaluga LLC: Export is one of our key directions
Many automotive manufacturers consider exports to be the key driver for the industry’s growth. How important are exports for your company?
In 2017, exports remain a key direction and currently account for around 25-30% of the plant’s total production output. Maximum utilization of the existing production capacity allows us to manufacture tires at minimal cost. Diversification of sales markets gives us more flexibility, which is very important in conditions of instability. Foreign market demand for our products allowed us to advance in issues of internal process efficiency and increase our production volumes despite the situation in the Russian market. Tires manufactured by the Continental plant in Kaluga are currently supplied to 23 countries, including Europe, Scandinavia, Asia and North America.
You said in the past that the Kaluga plant was targeted, primarily, on the internal market. Will the plant’s capacity be enough to satisfy demands of both Russian and foreign manufacturers?
Indeed, production was initially targeted at our country’s internal market. However, this focus turned out to be incompatible with the new reality, and we had to review our development strategy. Of course, supplies to clients with production facilities in Russia remain our priority: products manufactured by the Kaluga tire plant are supplied to Ford, AvtoVAZ, Nissan, Renault, Volkswagen and GAZ production lines. In the first half of 2017, we saw the beginning of a revival on the local market and are hoping that this trend will continue and demand will continue to grow. The plant's design capacity is 4 million tires per year with the possibility of its expansion to 16 million depending on market conditions.
Localization is currently a veryrelevant subject. Where do you source your materials? Do you cooperate with enterprises of the Kaluga automotive cluster? And do you plan to expand partnerships with local companies?
The level of localization in procurement of materials for tire production is around 50%. The plant purchases Russian technical carbon, artificial rubber, zinc, metal cord, bead wire, oil, etc. We purchase metal products from Kaluga plants and closely cooperate with local providers of services, e.g. repairs of press forms are provided to us by Kaluga Press Form Service LLC.
How do you evaluate the current Russian conditions for exporters?
The level of competition is very high on export markets. Therefore, advantages are in details. This implies not just the product and price, but also compliance with standards of markets where we supply our products. Regular audits and certifications have become routine for us. Thus, we successfully passed the CCC certification under the Chinese system of mandatory product certification. We also received the highest grade (“A”) from Volkswagen, based on an audit for compliance with the German quality process standard VDA6.3. The “A” rating assigned after the audit allows the Continental tire plant in Kaluga to be nominated for Volkswagen projects worldwide. Naturally, the speed of delivery, efficient financing, state support, logistics, infrastructure also play a decisive role. We managed to combine all these factors into a winning combination.
The tire plant in Kaluga was Continental concern’s first manufacturing facility in Russia. Production was officially launched in October 2013. Continental invested € 240 million in construction of the Kaluga plant, which currently operates at full production capacity. Since its launch, the plant manufactured over 8 million tires. It produces three brands of tires: Continental, Gislaved and Matador, ranging from 13 to 20”. The company’s product portfolio currently includes over 300 types of tires that are supplied to the Russian and foreign markets. The geography of exports covers 23 counties.