Economies of Scale Benefitting Foreign Tyre Manufacturers in Russia Says TechSci Research

Cheaper raw material, low energy cost and availability of economical labor to boost the Russian tyre manufacturing in coming years.

Burnaby, Canada, March 01, 2012 --( In many advanced economies, including Russia, the percentage of tyre manufacturers in reality has risen sharply in recent years. Many of them are for specialized tyre businesses. Despite the increasing numbers of tyre sales in the country, the exploitation of economies of scale still plays an important role in modern economies. Demand is directly proportional to consumer income and the price being asked for the product. The profitability of individual companies is linked to volume and price at large.

The most important factor for any tyre manufacturer is the availability of raw material at cheaper prices, which is easily available in Russia when compared with any other European country. Similarly, energy cost in Russia has a huge noticeable gap which in some cases compared to the home countries is even 40%. With the increasing number of automobiles on Russian roads the market for premium tyres has also developed which is encouraging major tyre manufacturers to produce tyres in the host country for domestic supply which saves 20% of the cost, as customs duty is not to be paid. In last couple of years Russia has emerged as a huge labor intensive market which has made availability of economical labor when compared with any other European country. According to Karan Chechi, Research Director at TechSci Research, “Economies of scale would benefit the major global tyre manufacturers in Russia by limiting their restraints. The exponentially increasing demand from OEM and aftermarket will continue to drive the Russian tyre industry landscape in coming years.”

Companies such as Nokian, Continental, Michelin, Pirelli, Yokohama, etc have either entered Russian soil or are in the process to set up their manufacturing units in the country due to several reasons at large. With the benefits generated from Economies of scale the companies such as Nokian, Pirelli, etc. are manufacturing tyres in Russia which helps them in managing with the cost difference as profits. The tyres are manufactured in Russia and then exported to all over the world. It is forecasted that Russia will emerge as one of the single largest automobile and tyre demand generating country in coming years.

TechSci Research
Karan Chechi
+1 646 360 1656