Continental review strategy and raises stake in Brazil

When he decided to build a tyre factory in Camaçari (BA), in 1996, the German group Continental wanted to create an export to the Nafta region. Supply the Brazilian market was totally out of the plans. But the appreciation of the real reversed the plan. Pretty much dedicated to the domestic market today, the factory on the northern coast of Bahia needs to be expanded because it gives an account of the orders. Already the old export project was finally shelved.
At the beginning of the project a euro was worth $ 3.70. "It was a dream to produce in Brazil and sell to the United States, Mexico and Canada," says Renato Sarzano, Chief Executive Officer and responsible for the operations of Continental tires for Latin America. "But the dream is over," he says.
Less than a third of which is produced in Camaçari is exported today. Still, the sale abroad is largely sustained by the lack of capacity of the company in the United States. So the construction of the future factory in the State of South Carolina is completed in less than two years, the German group will not need more Brazilian factory supply.
Sarzano predicts that from then on the domestic market share in the production of the factory in Bahia will start from the current 70% to 90%. With today's Exchange, says the Executive, makes no more sense to think of export contracts.
Car sales growth in Brazil has allowed the Mainland compete mainly with market makers of tires installed on the country for decades. But it was in spare segment wants the German company managed to go further. Sarzano reminds us that much of the demand in today's replacement is a result of the increase of the fleet in recent years.
According to the latest data from the survey of National Union fleet of Automotive components industry (Sindipeças), in five years, the number of vehicles circulating in Brazil grew by 44%. Rose from 24.2 million in 2006 to 34.8 million in 2011.
But while enjoying this growth, the industry is also affected by competition from imported tires from Asia. Initial industry projections indicate the production of 66.9 million tires in 2012, which represented approximately 7% drop compared with 2011. "Just go to a big supermarket to see Asian tires batteries, sold, every one in ten installments of R $ 15," says Sarzano.
Increase the capacity of the Camaçari plant, which already operates at the limit, in three shifts, would be a form of Continental prepare to face the fight with Asians. Imported tyres are intended mainly to the automotive aftermarket, segment in which Continental has 11% share.
The expansion work of the Camaçari plant suffered, however, an accident. The construction company initially hired went bankrupt. This delayed the work in almost a year. The plan was to start operating with the industrial expansion later this year. But the vols can only increase from 2014. "This delay will hinder us and competitors will gain from lack of our product," says Sarzano.
With the expanded industrial installation, annual production runs from 5.2 million to 7 million tires for passenger cars and 500 thousand to 600 thousand in the truck segment. In relation to the time of the inauguration, in 2006, the expansion will represent additional capacity of 50%.
In the case of the truck segment, Continental will also offer the service of recap. This is a growing market, since, according to Sarzano, fleet owners prefer the recap with tire manufacturer's warranty.
Initially, the tread for the recap is imported from Mexico. If demand justify local production is no possibility of the company to build a line or join a local producer, according to the Executive. After all, we are in times of governmental incentives to local production. And Continental is already convinced that still has a lot to profit in the domestic market before making export plans.