Wherever
wheels are turning No matter where the road, the name that's
known Is Firestone... Where the rubber hits the road....
The popular jingle by Kenya's sole tyre manufacturing firm,
Firestone East Africa (1969) Ltd, has long since become
little more than a memory somewhat following the flooding
of the local market by an estimated Sh6 billion worth of
imports. The invasion has not only ended the giant firm's
local domination, but sent its profits sliding to an all-time
low. The firm's main competitors include French giant, Michellin
Tyres and Italy's Pirelli Tyres, both of whom have made
significant inroads and stabilised prices. Pirelli is locally
represented by Nyanza Petroleum Dealers Ltd, who also deal
in Firestone tyres and are importers of Alliance tyres for
agriculture machinery and earth-moving equipment.
Then
there is Tanzania's General Tyres, a subsidiary of Continental
Company of Germany, which since 1994 has marketed its products
locally through Highlife Tyres & Services of Nakuru.
Apart from the new radial tyres, also in the market are
large quantities of imported second-hand products. Although
there is no accurate data available, the private multinationals
appear to have ended the virtual monopoly Firestone enjoyed
before deregulation in 1993.
In a recent interview the company's managing
director, Yasuhiro Itoh, said though the company once
had a nearly 100 per cent market share, things have changed.
The company's pre-tax profits have been declining over
the recent years. Firestone, which at one time controlled
72 per cent of the Kenyan market, and now claims approximately
40 per cent export niche in Uganda, employs 700 workers.
Some estimates put the Firestone market share for new
tyres at just over 60 per cent, while Michellin, Continental
and Pirelli, who claim to control 10 per cent of the market,
have taken up the remaining 40 per cent.
Last year, despite a 14 per cent decrease
in industrial raw material costs owing to lower volumes
of new vehicles bought, Firestone produced 545,000 tyre
units, or 95 per cent of the previous year's production,
20 per cent of which was exported. Critics of the company
say some of the tyre makes are about 20 years old, while
rivals (read importers) are capable of supplying the same
at almost similar or even lower prices. The company has
also been affected by global patterns where vehicle manufacturers
are making vehicles which use particular tyre brands.
Players
in the tyre business worldwide are not renowned
for fair trade practices and Kenya is no exception. In
1995, all tyre
companies operating in the United States were
summoned by the Federal Bureau of Investigation (FBI)
after accusations that the multi-million dollar firms
were engaged in cartel-like cost-fixing in the country.
In Kenya, Itoh says, a significant bulk of uncustomed
products have entered the local market. Firestone, which
also imports tyres from the parent company, Bridgestone
Corporation of Japan, say they have been in touch with
the treasury over the issue, but the practice continues.
"We are not worried about fair competition,"
said Itoh, who believes control has been tightened at
the port of Mombasa. Tyres attract a duty of 35 per cent
which, according to Itoh, should place the prices of imported
and locally manufactured tyres roughly at par, with only
marginal price variations on some brands. But both Pirelli
and Firestone say retail and wholesale prices of some
foreign products in the market are well below the expected
minimum if costs of production, transport, insurance and
duty are considered, an indication that there is illegal
dumping. Itoh says Firestone does regular cost analyses
worldwide and is in a position to tell when rival companies
are contravening legalised trade practices. Tyres from
the Preferential Trade Area (PTA) are rated at eight per
cent, but the managing director of Highlife, Rajesh Taka,
says they are no longer dealing in General tyres due to
bureaucracy at the border, and a "time-wasting"
inspection by SGS at the Namanga border point. SGS, which
operates in 140 countries, was contracted to do pre-shipment
inspection by the Tanzania government last December. Highlife
used to sell one to two trucks of tyres, but have switched
to the distribution of Firestone goods. Rajesh says the
Tanzanian tyres, which also came with a guarantee, were
hampered by low consumer interest in the Kenyan market.
Apart from lack of infrastructure, most
illegally imported tyres, have a quality problem emanating
from storage; some are poorly stored in godowns in hot
places like Dubai
for months, which seriously compromises quality. Before
Firestone established its manufacturing plant in Kenya
nearly two decades ago, all tyres were imported. The government,
eager to promote import-substitution, imposed quotas and
tariffs to protect the local industry, which gave the
company a virtual monopoly. However, some imports were
allowed since there were vehicles in the market which
could not use the company's products.
Fifteen
percent of Firestone, a member of the Sameer group of
companies, is controlled by Bridgestone Firestone Inc
of the US, which, in turn, is a subsidiary of Japan's
Bridgestone Corporation. In 1987, the Japanese company
bought Firestone Tyre and Rubber Corporation of the US,
which also owns much of war-ravaged Liberia's rubber plantations.
Before 1995, buoyed by a weak Japanese yen, Bridgestone
was the world's foremost tyre
producer. But as the value of the yen against
major hard currencies shot up, and dollar-based sales
plummeted, it was overtaken by Michellin.
In recent times, the tyre companies in
Kenya have carried their rivalry to the airwaves, each
claiming superior products. While Pirelli and 
Michellin
needed introduction since they were new in the market,
a Firestone survey showed that the Michellin campaign
was having a significant impact on sales and Firestone
was forced to embark on their own campaign. Michellin
is exclusively marketed by Kingsway Tyres who, however,
declined to comment. Pirelli, which is sold locally by
Nyanza Petroleum Company, has confined its marketing strategy
to advertisements painted on Stage Coach buses, which,
ironically, use Michellin tyres! Although the most popular
Michellin adverts target matatu and small cars, Firestone
claims there has been no major impact by their rivals
in this area. Then there is the issue of warranty. While
Firestone products boast that they "come with a written
guarantee", Michellin advertisements proclaim "the
name is the guarantee". But Firestone is not daunted,
offering replacement for any tyre damaged due to errors
arising from manufacturing, stressing the fact that its
tyres are tailor-made for Kenyan roads.
Besides
new tyres, there are also low-quality second-hand ones
which soon wear out on the country's rough roads. The
managing director of Pirelli (Europe), Valter Donati,
says that most used tyres are dumped into the African
market after exceeding the legal use limit in European
and other developed countries. The thread of the tyres
is so shallow that it makes nonsense of the cheap prices,
and they also have a poor surface grip.
EVENT ANNOUNCEMENT
The Autoparts South Africa Exhibition is being held in Durban between 24-26 July, 2008 at the Durban Exhibition Centre, South Africa. The event will attract buyers, importers, distributors from all across Africa. Global suppliers of automobile parts and accessories can book a stall at theis premier exhibition.
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