The Executive Interview: Philippe Verneuil, President, Michelin China Zone

Philippe VerneuilMichelin entered Greater China in 1988 through a sales office in Hong Kong, with a representative office being created in Beijing a year later; their first manufacturing presence was established in 1995 in Shenyang. Today Michelin employs over 8,000 people and operates four plants with support from a Research Development andInnovation (RDI) platform in Shanghai and eight regional sales offices. Philippe Verneuil has been the President of Michelin China Investment Co Ltd since August 2012, having originally joined the Michelin group in 1978.

Can you tell us about your company culture?

The development of the Michelin Group is based on the following five values:

Respect for Customers: The very core of our mission is the long-term satisfaction of our customers. The development of the company has been founded on high quality products and services and customer-focused innovation, with 4,000 R&D staff employed worldwide.

Respect for People: Michelin intends to continue its global expansion through the development of mutually beneficial relations with its employees, its industrial and commercial partners, public authorities, non-governmental organisations, the media or local communities where the Group operates.

Respect for Shareholders: This means fully recognising their role and the investment risks they take by ensuring a sufficient level of operating profits and delivering proper and reliable information on the company.

Respect for the Environment: This involves the development of increasingly environmentally-friendly products and services, the implementation of an environmental management system at all production sites and the promotion of efficient, end-of-life tyre recycling solutions.

Respect for Facts: This value demands objectivity and intellectual honesty, above and beyond opinions and preconceived ideas. For example, when Michelin develops its tyres, it puts them to the test in real-world conditions. This pragmatic attitude is applied to all companyactivities.

These values have been formed during the Group’s long history of more than one century and are practiced every day by all the employees of the Group worldwide. In 2011, Michelin published a series of communication documents that consolidate the Group’s corporate culture, values and practices, which serve as a common reference for all the employees of Michelin Group.

What are some of the challenges Michelin faces on a daily basis in China?

Since Chinese consumers are different from those in Europe, one of the biggest challenges is how to meet their varied needs.

Since entry into the Chinese market, wehave been dedicated to meeting the various needs of our consumers by sustainable innovation on Total Performance products, reliable services, as well as a series of green- and safety-themed campaigns.

We also know that there are a lot young consumers who work and live with the internet, and it plays an increasingly important role in the consumer process. In response to this, we need to change the way we communicate with them. We are trying to do it in a more interactive way through the internet, not limiting ourselves to the more traditional ways, such as television.

How important a market is China?

With rapid growth of its auto and transportation industry, China has become one of our most important strategic markets.

We continue to research and develop innovative and high quality products to meet the various needs of Chinese consumers. Our distribution channel network is dedicated to providing better and more personalised services to Chinese car owners. Looking to the future, we are full of confidence in achieving continued success in China.

The Group has a long-term commitment to China and we have invested in a new, state-of-the-art factory and development of local talent. Our products are tailored to the market by taking Chinese road and weather conditions into account. We have also developed and strengthened top-level services to Chinese users and we continue to communicate with the Chinese authorities about social responsibilities such as road safety and environmental protection.

What do you feel is Michelin’s biggest achievement in China?

We have achieved several milestones since opening the sales office in Hong Kong in 1988, such as the production of the first passenger car tyre in China in 1996, creating a joint venture (MSTC) with STGF in Shenyang in 1995, and setting up a joint stock company with STRC called Shanghai Michelin Warrior Tyre Co Ltd in 2001.

Among all our achievements in China, I would like to focus on the opening of our new factory in Shenyang in 2013, which represents Michelin’s largest investment in China at around USD 1.47 billion. Boosted by the rapid growth of auto sales, the Chinese tyre industry has maintained great momentum in recent years, and this has given us confidence in the Chinese market. The production expansion in Shenyang is to meet our customers’ increasing demands for tyres, especially high-performance tyres.

With a total production of more than 10 million passenger car and light truck tyres, and 1.8 million truck and bus tyres, this will be the largest Michelin factory in the world.

How much has your business evolved over the years due to advances in ICT?

Michelin China is the first country in the Group to fully deploy all available enterprise resource planning (ERP) project components. For the past 20 months, the marketing and sales, information systems, finance, procurement and supply chain teams, including many external partners, have been working hard to define the business processes and develop the tools to manage supplier inventory, order-taking, credit checking, invoicing, accounting and travel expenses.

You will see us working closely with our distribution network of wholesalers and dealers to promote e-ordering integration in order to progressively improve the overall supply chain. We aim to serve the consumers faster with the right products.

We worked on our Chinese website to make it immediately relevant to users by enabling fast access to the right choice of tyres for their needs. They can find a dealer who can provide services close to where they live.

We went beyond that with an application available on smartphones for people on the move. We also share free content and advice around car and tyre maintenance on This programme is getting significant traction from the community members and we will continue in that direction. Not to mention that we are active with our many friends on Weibo.

In 2013, we tested the concept of bringing our travel guides to the iPad through the China appstore. We will definitely explore more possibilities in this area in the future.

In a nutshell, we want to use digital technologies to improve the experience that Chinese consumers can have with our brand and our products: so bear with us because 2014 will be a key digital year for Michelin.

Do you operate R&D centres here?

We are a company driven by sustained innovation, thus we attach great importance to R&D. The Michelin Group invests EUR 592 million each year in R&D. As the world’s leading innovator in tyre technology, Michelin has contributedto two-thirds of all tyre-related inventions in the history of the industry.

In 2001, Michelin set up a R&D company in Shanghai, the first one among the foreign tyre companies operating in China. In 2013, we have invested in a new RDI centre, which now has over 100 personnel, to develop products responding to the specific needs of the Chinese market.

What do you see as the main differences between the European and Chinese markets?

The China market, especially the high-performance tyre sector, is fast emerging and holds enormous potential. Seventy per cent of Chinese car owners are first-time buyers. This makes us believe that tyre demand will maintain double-digit growth in the coming years.

Chinese consumers have their own unique preference for tyres. On the whole, our studies show they prioritise safety, longevity and fuel saving as the key needs. Meanwhile, consumers from different segments have different preferences. For example, China’s mid-range and premium car owners have a preference for tyres which are safe and silent, as opposed to European or North American consumers who are less sensitive to tyre noise and ultimately prefer tyres which improve handling and performance at high speed. That is why we launched the Michelin Primacy 3 ST for the Chinese market last year, featuring safety, silence and comfort.

Are Michelin’s other services taking off in China, for example the maps and guides that you produce?

The main activities of ourMaps & Guide business in China is the publication of our Green Guide, the Michelin Guide (known as the Red Guide), maps, iPad applications and the Michelin China Driving Tours Guide.

Michelin Lifestyle’s mission is to develop and sell consumer products and services, in order to increase the awareness and preference of Michelin as a tyre brand worldwide, and support the ‘Better Mobility’ platform while strengthening the relationship of the brand with targeted consumers. The business covers three main categories of products: automotive and cycle accessories, sports and gifts for promoting Michelin’s heritage and brand associations.

What are Michelin’s future ambitions in China?

Over the next decade, China will see the greatest potential for mobility growth and it will continue growing. Forty per cent of worldwide truck production takes place in China. In 2013, China was the world’s largest tyre market for original equipment (OE) passenger cars, and in ten years the OE market and replacement market will be as big as North America and Europe combined.

The Chinese market is one of our most important and our strategy is quite aggressive. It is supported by five pillars:

1) ‘Close to our consumer and customer’ allows us to be me responsive to the specific demands of the Chinese market; 2) ‘Product’ is the continuation of our customer-orientated R&D strategy to meet the diverse needs of our Chinese customers; 3) ‘Manufacturing’ means we will continue to invest to keep pace with our sales growth—production volume is set to double over the next few years; 4) ‘Distribution’ means we will continue to provide our consumers with professional services and double the size of the TYREPLUS network; and 5) ‘People’ is underpinned by the programmes we are developing to attract, develop and retain people in order to promote more and more Chinese people to leadership positions, within China and also within the wider Group. We also play an active role in corporate social responsibilities (CSR), such as the 2014 Michelin Challenge Bibendum held in China.

Our strategy is to deploy a programme to create a better life through sustainable mobility. Michelin’s purpose worldwide and in China is to give people “A better way forward”.