DOUBLING OUR SALES IN NORTH AMERICA IN 5 YEARS NOVEMBER 13, 2018 MARK EARL SENIOR VICE PRESIDENT, AMERICAS
OUR AMBITION: DOUBLE OUR SALES IN NORTH AMERICA IN FIVE YEARS STATUS TODAY After 30 years of market presence, a solid position in the Canadian winter tire market Premium winter tire brand known for superior technical performance KEY INITIATIVES Expanding our marketrelevant product offering Extending the geographic footprint by partnering with key retailers/independent distributors in all season markets Consumer segment valuing safety and sustainability Starting in 2020, local manufacturing will improve our service throughout North America 2
WE HAVE DOUBLED UNIT SALES OVER THE LAST 5 YEARS Keys to Success Premium product reputation in Northern areas helped support geographic and product category expansion Worked to be the preferred partner for our key dealers once we are in, we keep working to improve our position with each dealer Committed to selective distribution to maintain dealer profitability 2500 2000 1500 1000 500 Winter All Weather All Season Strong training seminars ensure our partners have a story to tell consumers about Nokian Tyres 0 2013 2014 2015 2016 2017 3
REPLACEMENT TIRE MARKET IS LARGE AND GROWING STEADILY 251 U.S. Retail Tire Sales (in millions of units) 244 249 235 237 238 241 228 223 219 2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 4 Sources: USTMA and TRAC * Estimate
PARTNERING WITH INDEPENDENT TIRE DEALERS WILL HELP US WIN MARKET SHARE Tire company owned stores 6 % Auto dealers 9 % Pure Internet retail (no brick) 4 % Total internet sales estimated to be 7% Independent tire dealers Mass merchandisers Warehouse clubs Warehouse clubs 9 % WHERE CONSUMERS BUY TIRES Auto dealers Tire company owned stores Pure Internet retail (no brick) Mass merchandisers 11 % Independent tire dealers 61 % 5 Source: Modern Tire Dealer, 2018 Facts Section
MOST REPLACEMENT TIRE SALES ARE WHERE THE CARS AND PEOPLE ARE LOCATED Follows the major population centers of the US Percentage of US vehicle population Above 6% 3.1% - 4.1% 2.1% - 2.7% 1.6% - 2.0% 1.0% - 1.5% Below 1% About 25% of US vehicles are in CA, TX, and FL 6
BUT OUR COVERAGE IS PRIMARILY NOT WHERE THE CARS AND PEOPLE ARE Currently primarily in winter tire markets Percentage of retail outlets that stock Nokian Tyres 65% (Vermont) 15% - 20% 10% - 15% 5% - 10% 1% - 5% Below 1% 7
WE ARE STILL PRIMARILY A WINTER TIRE NICHE PLAYER, FUTURE GROWTH DRIVEN BY ALL SEASON 2017 Share by Tire Segment MARKET NOKIAN TYRES Passenger Car Winter and All Weather 4 % Light Truck and SUV Winter 1 % Light Truck Off Road/ Specialty 4 % Light Truck and SUV Winter and All Weather 29 % Light Truck Off Road/ Specialty 1 % Passenger Car All Season 27 % Light Truck and SUV All Season 34 % Passenger Car All Season 57 % Passenger Car Winter and All Weather 30 % Light Truck and SUV All Season 13 % 8
MARKET OPPORTUNITIES HAVE FOCUSED OUR KEY INITIATIVES FOR THE NEXT 5 YEARS Large, growing replacement market with a significant premium segment Growing share with large independent tire dealers Building brand recognition with consumers who value safety and sustainability Many product segments and geographies that we do not yet compete Expanding premium product offering Ramping Dayton factory to full production from 2020 to 2022 9
GROW SHARE WITH LARGE INDEPENDENT DEALERS: EXPAND OUR RETAIL FOOTPRINT AND IMPROVE SELL- OUT PROGRAMS Add retail coverage among top 100 independent retail tire dealers especially in the US South Focus on dealer profitability Focus on selective distribution Expand our NAD (Nokian Tyres Affiliated Dealer) program Create more counter-based incentives to drive sell-out Continue to expand our successful seminar educational programs 10
EXPAND PREMIUM OFFERING: ADD MORE PRODUCTS AND SIZES IN NON- WINTER TIRES Add more sizes to our product offering Especially need larger sizes and premium car sizes Our tires need American names Easier for consumers to emotionally connect with Easier for counter sales associates to remember Develop tires for local, profitable niches Sport Truck Heavy Duty Truck 11
BUILD BRAND RECOGNITION: INCREASE AWARENESS AMONG CONSUMERS WHO VALUE SAFETY AND SUSTAINABILITY Refine messaging for brand and products Help consumers understand who we are and what we stand for a different tire company Focus promotion on targeted consumers and markets Concerned with safety, sustainability, and who value premium products Nokian Tyres should be an aspirational purchase Expand promotional sponsorships with premium partners Expand with new partnerships targeting nonwinter markets and lifestyle consumers 12
RAMPING DAYTON FACTORY: ENSURE YEAR ROUND AVAILABILITY OF TIRES WITH SHORTER DELIVERY WINDOWS Current 120 180 day lead time from our factories to North America is difficult to manage Large inventories are required at both our warehouses and at our customers warehouses In-season winter tire replenishment is difficult Dayton factory completion by 2020 brings many advantages Made in America positive in the US market Local production and frequent deliveries will open up many new retail dealers 13
OUR KEY INITIATIVES WORK TOGETHER TO DOUBLE OUR SALES Expand premium product range and increase dealer margin Improve tire availability and develop programs that drive sell- out Increase dealers who carry Nokian Tyres Increase consumer brand awareness Execute programs that drive sell- out More Nokian Tyres purchased by consumers more market share 14
DOUBLING OUR SALES IN NORTH AMERICA IN 5 YEARS Strategic Initiatives: Grow share with large independent tire dealers Expand premium product offering Build brand recognition with consumers who value safety and sustainability Ramping Dayton factory to full production from 2020 to 2022 Measures of success by the end of 2023: North American total demand matching capacity of Phase 1 Dayton factory Triple US retail footprint (tire stores stocking/promoting Nokian Tyres) Improve average annual price realization each year (price and mix changes) Double consumer brand awareness for Nokian Tyres in US 15
DOUBLING OUR SALES IN NORTH AMERICA IN 5 YEARS NOVEMBER 13, 2018 MARK EARL SENIOR VICE PRESIDENT, AMERICAS 16