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ESTONIA
Largest Estonian Retreading Plant Set for Export to Russia
In September, the Estonian company LLP Polwheal opened a new retreading plant with the capacity of 200,000 units per year, which is believed to be the biggest facility for the retreading of passenger tyres in the country. According to the representatives of the project, the construction work was started three years ago in 2012 with the support of the Centre for Environmental Investment (CEI).
The initial agreement provided that LLP Polwheal had to build the facility within two years with the capacity of 100,000 of tyres per year and that it should meet a number of special
requirements of the ecological organisation.
In exchange CEI offered a subsidy of EUR 1.35 million for the construction works and the purchasing of equipment. However, in 2014 it turned out that LLP Polwheal had failed to meet the demands of CEI and had decided to refuse the grant. “In fact, this plant should have been launched a year ago, but we had to refuse the support of structural funds. We were promised it, but finally we got tired of the constant changes in the conditions [of the project implementation] and the requirements for almost daily reports [on the project progress]. As the result of this pressure, the management decided to withdraw from the grant application and apply for a bank loan,” commented the chairman of the board of the company, Sergey Poluyanenkov. “Fortunately, we coped with our own resources, so we will be able to finish the project without a loan. We had to cancel the construction of a large warehouse for finished
production, so the final investment cost of the project decreased by EUR 500,000 to EUR 2.5 million. However, the implementation of the project took more time than we initially planned,” he added.
The plant produced the first retreaded tyres in August. However, to launch the full production cycle products must be assessed for compliance with European standards. For this purpose the company has already invited a number of licensing agents from Poland, the Czech Republic and Germany. It is expected that the process will be finished by mid-October. According to Sergey Poluyanenkov all equipment was purchased in Italy and installed in July. The company also sent four employees to the equipment supplier to undergo special training. The plant will be fully automated – at the initial stage the plnat will have ten
employees, rising to 30 when the plant is operating at full capacity. "We rely on the most modern equipment, which allows us to retread tyres into almost new products. For technical and visual parameters, as well as in terms of mileage there are no differences between our retreads and new tyres. Based on Finnish ideas we have integrated our project, developing more aggressive designs of winter tyres, featuring deep tyre treads with herringbone patterns,” Sergey Poluyanenkov explained. According to official information, today there are seven companies in Estonia involved in the retreading of tyres, including two companies working with passenger tyres. According to the heads of LLP Polwheal, the company is not afraid of competition, even though the local market faces some pressure from the online-trade platforms, which are also offering retreaded tyres from other countries of the European Union. The popularity of these services is steadily growing.
“With regard to e-commerce, many consumers still prefer to touch the product before buying it, especially if they have already met with some disappointments in the past. In every trade the most important factors are credibility and professionalism. In our ten-year experience, the number of customers of Polwheal
has not decreased, so we have some trust,” he added. Poluyanenkov is also confident that the company will sell retreaded tyres not only in Estonia and other Baltic countries, but in Russia too. According to the business plan, only 20 per cent of all production will go to the domestic market, while the rest will be sent for export.
"We have conducted some market research and traveled to a number of exhibitions. As a result we have realised that Russia's demand for such products is much higher. Strained relations between the two countries, which everyone likes to mention now, are in the realm of politics, but they have nothing to do with business relationships which are built on other principles. We intend to offer high-quality and affordable products that would be in demand,” he added.
Casings for the retread plant will be supplied mainly from Germany, but also from Finland. Some casings may be also purchased on the domestic market. However, even despite the fact the company has already entered into negotiations with local suppliers, the management of Polwheal is concerned that it will be hard to find casings of the appropriate quality in the domestic market.