PT Astra Otoparts Tbk (AUTO), a spare part maker that is controlled by PT Astra International Tbk (ASII), has entered into agreement with Italian tire producer Pirelli to set up a new tire production facility with a total investment of US$90 million.
The new facility, which will be constructed next year, is estimated to commence a commercial production by 2013 and reach a full capacity of 7 million motorbike tires a year by 2016.
Director Robby Sani at Astra Otoparts, in a press statement yesterday, said the motorbike tires will be designated to cater strong demand for tires in Asean and export markets.
With the investment of US$90 million, Pirelli will control 60% stake in a joint venture company and the remaining belongs to Astra Otoparts.
Astra Otoparts will use internally cash flow and loan facility to fulfill its commitment for the business alliance with Pirelli. "So far, we have produced Aspira tires for motorbike with an annual capacity of 2 million units."
The strategic business alliance with Pirelli is reasonable as the largest contributor for Astra Otoparts's consolidated revenue remains the local spare part markets.
With the new production catering Asean and export markers, contribution from export markets is expected to enlarge. As of September 2011, the local market contributed Rp2.93 trillion and the export market made Rp556.79 billion revenue.
Disclosure: No position at the stock mentioned above.
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