U.S. warns Pirelli on possible sale restrictions over Chinese investors, Bloomberg says

The U.S. Commerce Department has warned Pirelli that vehicles using its "Cyber Tyre" data-collecting technology may face sales restrictions in the U.S. due to concerns over the influence of its largest shareholder, Chinese state group Sinochem, which owns a 37% stake. The advisory, outlined in a letter, suggests automakers incorporating the technology may need specific authorization to sell in the U.S., aligning with broader U.S. efforts to restrict Chinese technology in the automotive sector; Pirelli, which derives 25% of its revenue from North America, is already in a governance dispute with Sinochem, claiming its influence hinders U.S. expansion.

Analysis

The United States Commerce Department has issued an informal advisory to Pirelli, warning of potential sales restrictions for vehicles equipped with its "Cyber Tyre" data-collecting technology due to concerns over the influence of its largest shareholder, Chinese state group Sinochem, which holds a 37% stake. This advisory, detailed in an April 25 letter, suggests automakers incorporating this technology would likely need specific U.S. authorization, reflecting a broader U.S. crackdown on Chinese technology in the automotive sector, with software prohibitions set for the 2027 model year and hardware for 2029. This development is significant for Pirelli, as North America contributes approximately 25% of its revenue. Compounding these external pressures, Pirelli is embroiled in a governance dispute with Sinochem, with Pirelli and its second-largest investor Camfin asserting that Sinochem's dominant shareholding obstructs the company's U.S. expansion efforts. Pirelli's CEO Andrea Casaluci recently described the company's situation as "risky" following Sinochem's rejection of a proposal aimed at resolving these governance issues. The market sentiment surrounding Pirelli (PIRC.MI) is strongly negative, with a sentiment score of -0.8, underscoring the perceived severity of these challenges.

Key Decisions for Investors

• Investors in Pirelli (PIRC.MI) should closely monitor potential U.S. regulatory actions and the evolving governance dispute with Sinochem, as these factors pose a significant risk to the company's access to the North American market, which accounts for 25% of its revenue.
• The U.S. warning regarding Pirelli's Cyber Tyre technology, coupled with upcoming broader restrictions on Chinese tech in vehicles (software by 2027, hardware by 2029), could materially impact Pirelli's competitive positioning and future sales of advanced products in a key market.
• Given the strongly negative sentiment and the unresolved internal governance conflicts that Sinochem's influence creates, particularly regarding U.S. expansion, a cautious stance on Pirelli is warranted until there is greater clarity on the resolution of these U.S. regulatory concerns and internal disputes.