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Rubber Journal Asia Corporate Profile

Bridgestone takes giant steps in Asia We are also currently moving into full-scale expansion of our Retread tyre sales in the region. In Asia, consumers tend to have the habit of using new products until they cannot be used any further, while at the same time, many countries in Asia also have the impression that Retread Tyres are “cheap and of low quality”. As compared to developed countries like the US, Europe and Australia, the reality is that Retread tyres are currently not as widely used in Asia. To tackle this, we are expanding the number of Bandag Retread production facilities in the region. We are also appealing the durability of Bridgestone’s new tyre casings, and recommending Bandag Retread to consumers when they are buying new tyres. In addition, we also make use of total tyre life data (which includes the life span of new tyres and multiple times of retreading) to prove our cost reduction competitiveness in comparison with other competitors’ products. We are also improving the quality of our family channels by introducing more Bridgestone Select stores across the region. As at the end of 2012, we have approximately 190 direct retail stores and approximately 160 family channel stores in the region, and we are planning further expansion of this in the future.

In this interview with Shinichi Sato, President, Bridgestone Asia Pacific (BSAP), PRA learns more about the company’s environmental mission, plans for new facilities and tyre products, R&D work and its handling of the lack of truck tyre sales in China. Shinichi Sato, who has had the experience of working in Europe and Thailand, and also served as Director of the Middle East, Africa, Russia, Asia, Oceania and China Operations Division in the headquarters in Japan since 1979, says, “I feel that the business environment has become more dynamic. It has changed for the better and living environment of the people has also improved. With the growth in motorisation, the demand for tyres in this region has been especially strong. Asia Pacific is also the fastest growing as compared to other regions across the globe. Considering the rise in manufacturers from emerging countries, it is expected that the business environment will become more competitive. As we continue to carry out our business with Bridgestone’s many years of technological development capabilities and our strong ability to respond in terms of supply, we aim to establish ourselves as an undisputed No. 1 position both in name and reality as a market that supports the Group’s strategy for growth”

PRA: What is Bridgestone’s current capacity and output? Sato: We do not disclose the production capacity but the total production volume that we estimate for 2013 is approximately 1.9 million tonnes. Currently, we operate eight tyre factories in the region. The newest factory, which has just started operations in Pune, India this year, began producing passenger car radial tyres (PSR) in January, and will begin producing truck and bus radial tyres (TBR) in October 2013. We will also set up a new PSR tyre plant in Hai Phong City, Vietnam. It will begin in March 2014, and by the first half of 2016, the plant will be completed with a production capacity of around 24,700 tyres/day. While the new plant will serve as an export base for replacement tyres sold in Europe, North America, and Japan, we will continue to monitor demand trends and review our plans where necessary. A new plant will also be established in Amata City Industrial Estate, Rayong, Thailand, for the production of off-the-road radial tyres for construction and mining vehicles (ORRs). Production will begin in the first half of 2015 and capacity is expected to reach approximately 85 tonnes/day by the first half of 2019, when scheduled capacity increases are completed. The existing plant in Nong Khae, Thailand, will increase in daily production capacity of passenger car radial tyres (PSR) and light truck radial tyres (LTR) by 13,500 units to 50,000 units by the end of 2014. In July 2013, we will also be establishing the first technical centre in the Asia Pacific region. It will be located in Thailand, which we deem to be a strategic location considering that we have production facilities located in the country as well as a proving ground.

PRA: Explain Bridgestone’s environmental mission. Sato: Bridgestone first established its Environmental Mission Statement in 2009 and in May 2011, this statement was further refined, clarifying the long-term direction in three areas: to exist in harmony with nature, to value natural resources and to reduce CO2 emissions. In 2012, Bridgestone set its long-term vision targeting 2050 for these three areas of activities. Particularly in the Asia Pacific region, to value natural resources, we are promoting the sale of Retread tyres (this involves removing used tyre treads and applying freshly vulcanised new treads). We are also working on expanding our Solution Business, a combination of Retread tyres with new tyre sales and maintenance service as a package in the region. At the same time, in our efforts to reduce CO2 emissions, we are also expanding our sales of ECOPIA tyres (eco-tyres with improved rolling resistance) in the region. By developing eco-products like the ECOPIA and Run-Flat technology tyres (a class of tyres that can hold its shape and support the weight of a vehicle, and continue being driven on at a given speed for a certain distance even when it is punctured), we are strengthening our strategy to differentiate ourselves. 8 M AY 2 0 1 3

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Rubber Journal Asia Corporate Profile PRA: How does the ECOPIA tyre differ from other concept tyres that also feature fuel-efficiency?

product quality. We will be waiting for its results. PRA: How will the forecast that China is now shifting to consumer tyres and will start weaning off demand of truck tyres affect Bridgestone’s sales and production of these tyre segments?

Sato: The ECOPIA tyres combine eco-friendly performance in terms of higher fuel efficiency and safety, as opposed to conventional tyres. The Nano Pro-Tech compound used in ECOPIA tyres lowers the rolling resistance coefficient by reducing energy loss in the top compound during rotation. This means that ECOPIA tyres can travel a longer distance with less fuel in comparison with conventional tyres, and hence contribute to the reduction in CO2 emissions. Apart from that, the tread design features rib-linked blocks, which enhances contact pressure and wet braking performance at the same time. This promises reduced rolling resistance, without compromising on braking performance and safety in wet conditions. In the second half of 2013, we will be launching a new lineup of ECOPIA tyres across several markets in the Asia region, to increase our sales for by five times of the current sales in the next five years. The new line-up will be promoted not only based on its fuel-saving benefits, but also in terms of safety and its longer tyre life.

Sato: Regarding the PSR market in China, we foresee that it will grow continuously in accordance with its motorisation. As for TBR, it seems that the situation is more difficult considering the impact from the economic downturn in Europe and the introduction of the inflation control policy in China. There are many individual business proprietors who regard “cost” as an important factor when purchasing tyres in the market. They prefer reasonable costing tyres rather than premium ones. Our business environment in the TBR market is therefore challenging in this sense. However, as the road situation improves, higher quality tyres will be required. We expect that we will be able to strengthen our presence in China in line with the development of the Chinese market. Here is how we see tyre demand growth in China from 2012 to 2017: • PSR Replacement – About 80% growth • PSR new vehicle (Original Equipment) – About 20% growth • TBR Replacement – About 40% growth • TBR new vehicle – About 30% growth As for our sales estimation, we expect that our sales will exceed the demand mentioned above.

PRA: How are the Bandag Retread tyres and Airless tyres faring in the Asia Pacific markets? Sato: With respect to Retread tyes, since the merger of Bridgestone and Bandag in December 2006, we have been actively enhancing sales and marketing activities of Bandag retread tyres, and increasing new Bandag retread shops in the Asia Pacific region. Compared to new tyres, retread tyres require only 32% of the petroleum resources for production. Combining retread tyres with new tyre sales and maintenance service as a package to the customers, we, Bridgestone, are aiming to provide additional value to our customers. As for the Airless tyre, we are currently still advancing the R&D for our non-pneumatic (airless) concept tyre in order to put it to practical use on vehicles in the future. However, at this stage, we do not have a specific timing for its actual market launch.

PRA: Is Bridgestone shifting its focus on Asia, production and sales wise? Sato: According to the mid-term management plan 2012, which we had announced last October, we estimate that net sales will increase more than 5% in 2017 compared to 2012. As we expect that half of this growth will take place in the developed countries, such as the Americas, Europe and Japan, the sales in the developing countries will not increase dramatically in these five years in terms of global sales composition. On the other hand, production volume in the Asian region will definitely increase in these five years to cover tyre demand growth in the world. In 2012, production volume in the Asian region made up 20% of our global tyre production and we estimate this to increase to 30% in 2017. However, as we regard the Asian region as our export base, this increase in production does not necessarily mean that sales in this region will increase in proportion to its production volume increase. In the Asia Pacific region, India, Indonesia, Thailand, Malaysia, Vietnam and the Philippines are showing demand growth. On the other hand, Australia, New Zealand, Taiwan, South Korea, and Singapore show flat growth. In order to address this, Bridgestone Asia Pacific will be providing a better product line-up to satisfy our customers’ needs. In the future, we also intend to enhance our brand strategy across the entire Asia Pacific region.

PRA: What are the latest developments on the Para rubber tree, following Bridgestone’s success in decoding the Hevea Brasiliensis genome in 2012 and what is the progress of the dandelion-based rubber tyre? Sato: We will need to continue on our R&D in the Para rubber tree and accumulate our know-how and technology having decoded genome data at first. We are now working on the development of the DNA marker that can detect “prior tree”. However, it will still take time to establish the DNA marker technology. As for dandelion rubber tyres, the project has just started and we are currently still in an early stage. In 2014, PENRA (The Program of Excellence in Natural Rubber Alternatives) will be testing a tyre made from Russian dandelion to identify its potential as a material for producing tyres in terms of 9 M AY 2 0 1 3

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RJA May 2013 Bridgestone President Shinichi Sato  

RJA May 2013 Bridgestone President Shinichi Sato

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