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Apollo may choose Chennai for new radial tyre unit

G.K. Nair

KOCHI, Jan. 30

AS part of its expansion programme aimed at achieving a Rs 5,000-crore turnover by the year 2005, Apollo Tyres Ltd, is to set up a new radial tyre manufacturing unit in Tamil Nadu involving an investment of Rs 450 crore in the first phase.

Speaking to Business Line , the company's Vice-Chairman and Managing Director, Mr Onkar S. Kanwar, said: ``Chennai is becoming the Detroit of India, like Bangalore, the country's Silicon Valley. Hence, the company prefers to locate the new unit there wit h an annual production capacity of four lakh radial tyres per annum in the first phase.''

Many international automobile manufacturers such as Volvo and Daewoo had evinced interest in setting up heavy and light commercial vehicle units in Tamil Nadu. Once the industrial and GDP growth stabilised, all these companies would come in, he said.

He said the company had plans to raise the exports to 35 per cent by 2002 from the present 25 per cent. It had already set a turnover target of Rs 5,000 crore and a gross profit of Rs 500 crore by 2005, and to reach that level, the installed capacity had to be raised, he said.

To achieve this, the company was planning to acquire a unit in one of the natural rubber producing countries in South-East Asia where the cost of labour was less compared to India.

Indications were that the company was in the process of acquiring a radial tyre manufacturing unit in Indonesia. Many factories had been closed down in the recent years and they were available now for takeover.

He said negotiations were on, and before 2003, the company would have units in one of these countries in addition to the new unit to be set up in Tamil Nadu. The major plant at Perambra in Kerala's Thrissur district would also be expanded in the next fis cal to manufacture truck radial tyres involving an investment of Rs 150 crore, he said.

In the domestic tyre sector, the capital cost and the working capital cost were higher, squeezing the margin. Added to these were the high shipping cost and increased raw material (petroleum products) cost.

Though, like other companies in the field, Apollo's profit during the current fiscal would be lower, the company expected a total turnover of Rs 1,400 crore in 2000-01 as against 1,300 crore last fiscal, he added.

He said that global players with lot of financial clout were set to storm the Indian market. Already, Bridgestone has its unit in Indore, while Goodyear has units in Faridabad and Aurangabad and Perelli in Orissa. Michellin brought in tyres from its plan t in Malaysia.

To take on the competition from global players, superior technology and high flexibility in manufacturing were needed. Concentrating on high volume and low margin was also essential. To achieve this production level, huge capital investment was needed, and hence, there would be ``consolidation and shake-out in the industry in the near future,'' he said.

Apollo was also exploring the possibility of entering into financial tie-ups with Continental, he said. However, in the case of units to be taken over in the South-East Asian countries, tie-ups would be with local partners, he added.