“We aim to increase our market share in EU” March 2018 issue

“We aim to increase our market share in EU”

Apollo Tyres has been aggressively expanding its global footprint for quite some time now. The company recently made headlines when production began at its first greenfield facility outside India. The Dollar Business caught up with the man behind this internationalisation strategy, Neeraj Kanwar, Vice Chairman & Managing Director of Apollo Tyres Ltd., to understand the company’s international market gameplan.

Interview by Niladri S. Nath | August 2017 Issue | The Dollar Business

TDB: Apollo Tyres has been increasingly focussing on international growth. Where did the journey start?

Neeraj Kanwar (NK): In 2006, Apollo Tyres became the first Indian tyre major to successfully conclude an international acquisition – Dunlop Tyres International, South Africa. This was followed by the acquisition of Vredestein Banden BV, Netherlands, in 2009. The company was also the first to start selling India-made tyres in the European market, which is considered to be the most advanced automotive market. The inauguration of the greenfield facility in Hungary was again a first for an Indian tyre company. With our significant investments in R&D, manufacturing and brand-building activities, we are now poised to be a major force in key international markets.

TDB: Why did you choose Hungary as the location for your new plant. What are your revenue expectations?

NK: Hungary was chosen over some of the neighbouring central and east European countries after considering various factors. The factors that we considered before shortlisting and finalising the location are the ease of doing business, manufacturing costs, availability of the skilled manpower, government policies, logistics cost, proximity to highways and a variety of softer factors. We have just inaugurated the facility in Hungary and it would be too early to comment on the revenue contribution of that facility. We are hoping that in a couple of years, when the plant reaches its phase 1 terminal capacity, the revenue distribution ratio would be 45% from offshore facilities and 55% from India.

TDB: Was derisking the Indian business a major factor behind this aggressive internationalisation strategy?

NK: To be a global player, one needs to be present in the biggest and the most challenging markets across geographies. Our growth journey at the global level has indeed helped us derisk our reliance on our Indian business, but more importantly has helped us become a significant industry player with a global presence. In 2006, 100% of our revenue was from domestic operations. Now, 40% of the revenue comes from outside India.

TDB: In 2015, Apollo Tyres acquired Reifencom GmbH to expand its retail network in Europe and sell tyres online in key markets outside Europe. How beneficial has that acquisition been?

NK: Our acquisition of Reifencom GmbH, one of the largest tyre distributors in Germany, has helped us stay one step ahead of our competitors in Germany, which also happens to be the largest tyre market in Europe, and get closer to the end-consumers. The acquisition has helped drive Apollo’s entry into the car tyre space as a brand and complements Vredestein’s distribution through both B2B and B2C channels.

TDB: In FY2016, the company’s annual revenue from South Africa and Europe saw a decline. Are you considering any change in strategy for these markets?

NK: Considering the potential of the market, we are continuing with our trading operations in South Africa, selling our two global brands, Apollo and Vredestein. But, we don’t manufacture there anymore due to factors related to the economic viability and the dumping of Chinese tyres into the country. But in the case of Europe, the revenue saw a dip because we faced some teething issues with the implementation of SAP. But the issues were solved a few quarters back.

TDB: Apollo Tyres made an unsuccessful bid to acquire Ohio-based Cooper Tire & Rubber Company. Are you still looking to enter the US market?

NK: Now that our greenfield facility in Hungary is up and running, the next target for us is the US market. While we already have a small presence there through Apollo Vredestein, we are looking at expanding our presence in the world’s biggest automotive market. Our R&D team is now working towards developing products specific to that market.

TDB: What’s your growth outlook for ASEAN and Asian markets?

NK: Our sales offices in Thailand, Dubai, South Africa and Australia are doing well. We are hoping to see an increased demand from these markets in the future.

TDB: Tyres for trucks and passenger vehicles contributed about 47.3% and 34.8%, respectively, to your topline in FY2016. Are you looking at entering any new segment?

NK: These are the two major revenue generators for us – the rest coming from farm, industrial, off-highway and two-wheeler segments – and this pattern will continue even in the future. With that said, our R&D team is always working towards creating better and technologically advanced products for our customers worldwide. In fact, several research projects are underway in collaboration with many raw material suppliers and universities. These focused efforts have allowed us to secure a leading position in radial tyre technology in India, across categories.

Gaining a majority share in the original equipment manufacturers (OEMs) market, in terms of new products, would be the key goal for our R&D efforts, going forward. To support the OEMs and achieve competitiveness in passenger car tyres, new technological developments are underway, specifically focused on offering extended mobility and fuel saving. Parallelly, our Advanced Engineering Department is working towards developing new systems, technologies and tyre sensors to enhance tyre management and facilitate integration between tyre and vehicle electronic systems.

TDB: What is your take on low-cost Chinese truck tyres imports into India and its impact on the Indian tyre manufacturing industry?

NK: In India, Truck & Bus Radials (TBR) has been the fastest growing segment in the tyre industry. Radialisation in heavy commercial vehicles in India started late, but has now gained momentum. The Indian tyre manufacturing industry however had started enhancing manufacturing capacities to be ahead of the demand curve for TBR.

These capacity enhancement involved huge investments. And, as the capacities reached the production stage, Chinese TBRs started landing in India in hordes. From imports of 40,000 units per month three years ago, imports have now reached approximately 1.5 lakh units per month, occupying around 30% of the replacement market for these type of tyres. So, if the government decides to levy anti-dumping duty on these low-cost truck tyres, the decision will definitely help the industry’s topline.

TDB: Will the radialisation trend in the truck-bus segment hurt companies with higher nylon capacity?

NK: The TBR segment has been growing at a fast pace and has impacted the bias (nylon) tyre capacities. We did anticipate this slackness in demand for truck bias capacities well in advance and started converting them gradually to off-highway tyres in one of our plants and to 4x4 tyres in another plant.

"We are now well positioned as a major force in key tyre markets"


TDB: Reports suggest that the OEM tyre demand is expected to outstrip the replacement tyre demand during 2016-2021. How will this impact business?

NK: Being the leader, in terms of supplies to the OEMs in India, and having been supplying to 16 of the top 20 passenger car OEMs in India, we would be more than happy if this comes true.

In my opinion, this could be true in the passenger vehicle segment where tyre replacement happens, on an average, after three or more years. The same is unlikely in the commercial vehicle segment, where tyres are usually replaced within a year.