The Hindu Business Line : Continental brand in SAARC: Metro hopeful of pact soon

THE Rs 300-crore Metro group may soon acquire rights from German tyre company, Continental AG, to sell automotive tubes for the SAARC region under the `Continental' brand name.

The automotive tubes, including four-wheeler tubes, would be produced for the SAARC market from the Metro group's recently commissioned export-oriented unit (EOU) at Gurgaon in Haryana.

"Continental AG has in principle agreed to give us the rights to procure orders, produce, and sell automotive tubes under the `Continental' brand name in the SAARC region. They are looking into the legal issues and we hope to soon sign an agreement with them for this purpose," Mr Rummy Chhabra, Managing Director of Metro Tyres Ltd, told Business Line.

The Metro group had set up the EOU at an investment of Rs 40 crore in technical collaboration with Continental AG, which is sourcing its entire global requirement of automotive tubes from the facility.

Commercial production in this EOU commenced in July.

The plant has a capacity to manufacture 5,000 tonnes of automotive tubes a year against the initially planned 3,000 tonnes, Mr Chhabra said.

The EOU at Gurgaon is likely to generate a turnover of Rs 60 crore for the Metro group in the current fiscal.

The group had actually purchased a running plant from the Slovenia-based Sawa Tech, which was earlier a supplier of automotive tubes to tyre companies such as Continental and Goodyear. This has been relocated to Gurgaon.

According to the outsourcing agreement inked last year between the Metro group and Continental AG, 50 per cent of the capacity of the plant (1,500 tonnes) would be exported to Continental AG under the `Continental' brand name. Continental AG would sell these tubes in Europe and the Americas. The remaining 50 per cent was to be sold in the domestic market under the `Metro-Continental' brand name.

Considering the surge in demand in international markets and better realisation from exports, the Metro group has now decided that 80 per cent of the current capacity of 5,000 tonnes would be exported to Continental and other companies too.

The remaining 20 per cent would be sold in the domestic market under the `Metro-Continental' brand name.

"Our gameplan is exports. The focus area is exports as there is better realisation. That is the reason we have decided to increase the percentage share of exports from 50 per cent of capacity to 80 per cent. The sourcing agreement with Continental does not prevent us from exporting to other companies as well," Mr Chhabra said.

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