As the United States’ deadline for the automotive hardware and software ban on companies with Chinese background approaches, the Italian government is closely collaborating with the smart tire giant Pirelli, in an attempt to end the control that the Chinese state-owned enterprise Sinochem exerts over the Milan-based company, to safeguard its lucrative profits in the American market.
The U.S. Department of Commerce is set to officially implement the new regulations in March of this year, which will prohibit the sale of connected vehicles in the U.S. using key hardware and software manufactured in China. Although Pirelli is an Italian brand, its developed “Cyber Tyre” technology – which enables real-time data transmission between embedded sensors and vehicle systems – is viewed by Washington as a potential security risk. With Sinochem holding approximately 34% of Pirelli’s shares and being the largest shareholder, this tire giant faces the risk of being shut out of the American market.
According to sources familiar with the matter speaking to the Financial Times, U.S. officials have been pressuring the Italian side for the past few months, requesting limitations on Sinochem’s influence. The American market accounts for around one-fifth of Pirelli’s annual revenue. Losing this market would severely impact the global presence of this century-old brand.
To alleviate the crisis, the Italian government is weighing the adoption of more stringent legal measures. Reuters, citing sources, reported that Italy is considering utilizing the “Golden Power” legislation and taking the following actions:
Passive Shareholding:
Downgrading Sinochem to a “passive shareholder,” retaining its economic rights to dividends but stripping away its voting rights.
Technology Lockdown:
Freezing Sinochem’s influence on company strategic decisions and strictly prohibiting its access to core specialized technologies such as “smart tires.”
Italian Minister of Industry Adolfo Urso emphasized that the government will do “everything possible to ensure Pirelli is not excluded from the international market.”
Under the strong intervention of the Italian government, Sinochem, which was previously displaying a passive stance, is beginning to show signs of flexibility. Both the Financial Times and Reuters have obtained the latest information indicating that Sinochem has hired BNP Paribas of France as a consultant and is exploring options for selling its stake.
If the two parties can reach a agreement on the transfer of shares, Pirelli could potentially break free from its Chinese background constraints, allowing it to resume its expansion plans in the United States.