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European Tiremakers Say Russia Expansion Tied to Growth, Tariffs

Continental and Michelin, Europe’s two largest tiremakers, said Friday that their plan to expand in Russia is linked to demand growth as much as to the country’s import restrictions.

Continental will decide on building plants in Russia and India before the year is out, Nikolai Setzer, head of the car-tire division, said in an interview.

Michelin chief executive Michel Rollier said Friday that the French manufacturer would eventually have to expand its Russian facility because of high import costs.

Russia has imposed 20 percent tariffs on imported tires, while India, much like China, is trying to protect local suppliers by requiring foreign companies to certify their products through complex procedures, Setzer said. Italy’s Pirelli is also in talks to expand its presence and buy plants in Russia, Prime Minister Silvio Berlusconi said last month.

“It’s obvious that we need to have local production in Russia if we want to be a strong player there,” Setzer said by telephone. ‘We’re still evaluating different concepts and ideas, but we do want to have a decision this year.”

A decline in car sales in Russia has slowed this year, and deliveries may rebound by as much as 15 percent to 1.6 million vehicles after plummeting 56 percent in 2009, consulting company PricewaterhouseCoopers said in January.

Continental, which is also Europe’s second-biggest vehicle-parts maker behind Robert Bosch, predicts large growth potential for the Russian and Indian tire markets and wants to avoid the cost of shipping from its plants in Europe and Malaysia, Setzer said. The company, which is based in Hanover, Germany, says Asia and Russia are its key growth markets as it tries to reduce 8.2 billion euros ($10.4 billion) in debt.

Setzer declined to comment on investment or production targets.

Continental already has a joint venture to make and market car tires in Omsk, with Sibur-Russian Tires, a unit of petrochemical company Sibur Holding.

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