1H Tire Production Down 2.6%.

Ukrainian tire producers decreased output in 1H06 by 2.6% yoy, or by about 90 ths tyres. The largest producer, Rosava, decreased output by 1%, to 2725.7 ths tires. Dniproshyna’s (DNSH) output was down 8% to 721.9 ths tires. Vladimir Nesterenko: The decrease was due mainly to a fall of about 7% in output of automobile tires, which account for about two-thirds of the industry’s output. Local plants are gradually losing market share in the automobile tire segment to imports. We expect output in this segment to decrease further as local producers put more emphasis to other segments: tires for trucks, minibuses and agriculture machinery. Dniproshyna plans to maintain its leadership in these segments, but we think Rosava could catch up relatively quickly if it focuses more on tires for trucks and minibuses. Russian producers, such as Nizhnekamsk Tire Plant, are also a threat. Production capacity (i.e., readiness to invest and expand), product price and quality will remain the major success factors.