Nokian Tyres’ Passenger Car Tyres unit develops and manufactures high-quality summer and winter tyres for passenger cars, vans, and SUVs. In 2017, the unit’s business grew strongly across all the main markets. Russia was the biggest contributor to growth.
Demand for passenger car tyres remained good in 2017. The tyre market in Russia picked up following a long recession and grew substantially faster than anticipated. Demand grew slightly in North America and Central Europe but weakened in the Nordic Countries. The growth in car sales had a positive impact on the tyre market.
We took advantage of the favorable market developments, and our Passenger Car Tyres business grew strongly all year long across all of our main markets. The growth was mainly driven by Russia and the CIS countries with an increase in net sales of 46.4%. Business also developed favorably in North America where we achieved a new sales record.
Raw material cost pressure and a challenging pricing environment affected margins and forced us to perform price increases across all markets during the year. These increases had a positive effect on profitability. The improved product selection and production efficiency also improved profitability.
In 2017, we continued to invest in the development of our sales and distribution network and the improvement of availability. We responded to the growing tyre demand by increasing production volumes by 15% at our factories in Finland and Russia and by investing in a new production line in Russia. The combined annual nominal capacity of our factories is over 20 million tyres.
In May, we reported that we are investing approximately USD 360 million in a new factory in North America. Construction work started according to schedule in September and the intention is to manufacture the first tyres in 2020. The factory, distribution center, and storage facilities in Tennessee will support our growth goals and commitment to customers in North America. Our goal is to double our sales in North America by 2022.
The new premium products launched by the Passenger Car Tyres unit in 2017 were well received by the market. The products excelled in tests by international tyre magazines, creating positive brand awareness and strengthening the company’s position on the key markets. An enhanced product selection and investments in the sales and distribution network create a strong platform for growth.