Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Japan's Bridgestone To Open 200 Stores

Japanese tire-maker Bridgestone Corp. has announced that it plans to open 200 stores in Russia despite a plunge in sales amid the nation's financial turmoil, a move analysts said could amount to significant savings.

"It is one step toward expanding and tapping the future potentiality of Russia," Kyota Futami, general manager of Bridgestone CIS LLC, said Wednesday. His firm is a wholly owned Bridgestone subsidiary formed last month to sell the tires in Russia.

Bridgestone, which unveiled the expansion plans Monday, expects to set up two Moscow retail outlets in 1999, the first one in April. Some 20 to 30 shops will also be opened in St. Petersburg and other large cities across Russia. The Moscow stores will be owned by the Bridgestone subsidiary while the other shops will be jointly operated with Russian partners. All 200 outlets are expected to be open by 2003.

The company declined to say how much it plans to invest.

Opening stores is a way for Bridgestone to save money by cutting out the distributors, analysts said.

"They want to take the profit off the middlemen," said Kim Iskyan, a car analyst at MFK Renaissance.

But he cautioned that the direct-sales strategy may backfire. "In practice, it is often incredibly expensive to operate a retail chain," he said.

Bridgestone, which has sold off-road tires to Russia since the 1960s, began expanding sales to include car, bus and truck tires in 1995. Before the financial meltdown in August, Bridgestone had captured 2 percent of the Russian market with annual sales of about 650,000 car tires and 25,000 to 30,000 tires for trucks and buses.

However, Bridgestone's sales fell about 50 percent in the months after the crisis hit, Futami said. He declined to put a dollar figure on company sales.

Still, there are signs that the market is picking up, and Bridgestone expects 1999 sales to reach 80 percent of last year's levels.

"The recovery of demand is not so quick, but you can see the signs of its revival," Futami said.

Russian tire-makers cautiously greeted Bridgestone's expansion plans, saying that while they would keep an eye on what happens, they felt the crisis had given them the edge. "It is always worrying [to see a competitor expanding]," said Anatoly Khlupin, commercial director at the Kirov tire factory, which last year held 8 percent of the tire market. "But we are determined to stay, too."

The stable currency before the crisis allowed foreign producers to gain up to 25 percent of the market, Khlupin said. But with the ruble's devaluation, prices of imported tires have soared, putting domestic manufacturers in the driver's seat.

An imported tire for a Volga or Volvo car sells for $25 to $30, while its Russian counterpart costs 350 rubles to 400 rubles ($15 to $17).

"The only big problem for us now is a shortage of turnover capital, not competition," Khlupin said.

The Kirov plant, located in the town of Kirov, 800 kilometers east of Moscow, is a former defense industry enterprise that in 1994 began producing tires for civilian vehicles. It recorded sales worth 900 million rubles ($39 million) last year.

Tokyo-based Bridgestone is the world's No. 2 tire company, after the recent merger of U.S. firm Goodyear and Japan's Sumikomo, with an 18.6 percent share of the global tire market.