The Italian government is looking to help Pirelli push out its largest shareholder, a major chemical company from China. If it can’t, it could become a big problem for the tiremaker. It could even force Pirelli out of the US market, where it currently generates around 20% of its revenues and a massive chunk of its profits.
Connected Car Tech From China Apparently Includes Tires
Last January, the US government finalized a ban on connected car tech from Chinese and Russian companies from being used in cars sold in the US. Since then, the feds have further tightened restrictions on tech from China used in vehicles in the US.
What does that have to do with the very Italian Pirelli brand? The tire company’s largest shareholder is Chinese megacorp Sinochem. Sinochem currently owns just over a third of Pirelli, and it has held a controlling interest in the company since 2015.
The main issue seems to be with Pirelli’s CyberTyre. This high-end tire has built-in pressure and temperature sensors, allowing it to communicate with the vehicle and making it connected-car tech. Last April, the US Department of Commerce told Pirelli that the tires would likely fall under the ban. Any automaker wanting to use them would need to apply for authorization, and that could push those car companies over to one of its competitors.
Connected tires are not exactly a high-volume product, at least not yet. But the Financial Times reports that US officials have pressured the Italian government to limit Sinochem’s power at the tire company anyway. Something the Italians started trying to do in 2023.
According to the report, Pirelli and the Italian government have presented a few options to Sinochem. The options include reducing its stake in the company or selling it completely. FT reports that Sinochem has appointed an advisor for a potential sale, suggesting that the issue should be resolvable.
Italian Government Could Force Sinochem Out
If Pirelli and Sinochem can’t make the US happy, the Italian government could. That country’s officials have what are called “golden powers” to protect companies that they feel are of critical importance. The laws let government officials impose restrictions and take other measures to protect those companies and their presence in Italy.
Under those golden powers laws, the Italian government could suspend Sinochem’s voting rights with Pirelli. The relationship between the tire company and the two countries is already strained after Pirelli’s board stripped Sinochem of its control over the company.
“The goal is to find solutions that can guarantee Pirelli to operate in all markets of the world, particularly the US, without constraints and restrictions, thinking only of the company’s industrial development,” Pirelli CEO Andrea Casaluci said last year in an interview with Italian paper Corriere della Sera.
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While Pirelli generates around a quarter of its revenues in the US, it’s an especially important market for high-value tires like the CyberTyre. North America represents around 40% of sales of its premium tires. Casaluci said that “without a solution, the development of Pirelli’s relevant technologies would be compromised and consequently future growth would also be at great risk, in all markets and especially in Italy.”
Sources: Financial Times, Reuters
