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Romania secures EUR 650mn factory investment as Nokian Tyres looks to replace Russian output

| 2022-11-01 2 min read

Romania secures EUR 650mn factory investment as Nokian Tyres looks to replace Russian output

Reading Time: 2 minutes

Nokian Tyres will build a EUR 650mn passenger car tyre factory in Oradea, western Romania, creating around 500 jobs, it announced on Tuesday, 1 November.

The tyre plant will have an annual capacity of six million units, with room for expansion, and will also be home to a logistics centre for storage and distribution. It will mainly focus on larger passenger tyres for the Central European market.

The greenfield development, close to the Hungarian border, will be the industry’s first zero-CO2-emission factory of its type. Production is expected to start by early 2025 and reach full capacity by early 2027, Nokian said.

Nokian divests Russian operations

The Finnish company had been planning to set up a new manufacturing facility since deciding to withdraw from Russia in response to its invasion of Ukraine.

Nokian last week agreed a for EUR 400mn sales price for its Russian operation, which has an annual production capacity of 17 million passenger car tyres, with local oil producer Tatneft.

Nokian head of supply operations Adrian Kaczmarczyk told Reuters that although the company is expanding production in Finland and the US, and also outsourcing manufacturing to Asia, but that will not be enough to cover lost capacity before the new plant is ready.

For the third quarter of 2022, the Finnish company reported operating profits as having fallen 54% year-on-year, to EUR 40.7mn.

“We will focus on certain product families and not produce everything that was produced in Russia,” Kaczmarczyk told the newswire.

Romanian PM: state-aid helped secure deal

Romanian Prime Minister Nicolae Ciuca wrote on Facebook that the Oradea greenfield site had been chosen after “a thorough evaluation of over 40 locations and several factors, such as skilled workforce availability, logistical advantages and stable business environment”. 

Ciuca underlined that “Romania can generate for foreign investors, including for those looking to relocate businesses from the region”, in part thanks to a new national budget allocation.

Romanian Minister of Research, Innovation, and Digitalization Sebastian Burduja wrote that “Nokian Tyres chose Oradea, Romania from 40 possible locations: the lesson for all of us is that Romania can transform the current crises into opportunities.

“The Agency for Investment and Foreign Trade, established last week by a governmental decision, will further energise Romania’s potential to attract large investments,” Burduja added.

Prime Minister Ciuca, who assumed office last November, and Burduja both met a Nokian Tyres delegation in mid-September to discuss state-aid allowances for large investment projects and also the need to relocate industrial production in light of Russia’s invasion of Ukraine.

Nokian seeks to counter uncertainty in wake of Russia exit

Danske Bank analyst Panu Laitinmaki told Reuters that how the company will manage without its presence in Russia is unclear at present. “There is quite a bit of uncertainty about the profitability of the company excluding Russia,” he said.

Last year Nokian Tyre, which is listed on the Nasdaq Helsinki, posted a turnover of around EUR 1.7bn and had a payroll of about 4,900.

However after an initial rise on news of the Romanian plant, Nokian’s shares had fallen by 11.6% by the end of trading on Tuesday.