Apollo Tyres to consolidate, de-risk by expanding into new geographies: Vice-Chairman Neeraj Kanwar

V Rishi Kumar Hyderabad | Updated on August 03, 2020 Published on August 03, 2020

Neeraj Kanwar, VC & MD, Apollo Tyres Ltd

Having set up two manufacturing facilities in the past few weeks during the Covid pandemic times, Apollo Tyres is looking at consolidation of business while de-risking and stepping up presence in new geographies during these challenging times.

Neeraj Kanwar, Vice-Chairman and MD, Apollo Tyres, in an exclusive interaction with BusinessLine, over a video call from the UK, provided an overview of the tyre sector and how as a leading tyre manufacturer Apollo is strategising for the future.

He feels the government policies, which have not been pro-OEMs, need to be considered in addition to taking up the scrappage policy under consideration for past 3-4 years.

Over the past few weeks, the tyre major has commissioned two new manufacturing facilities — one in Andhra Pradesh and another in Gujarat, with each plant seeking to focus on select business segments.

Both in India, and in other markets, it has become difficult to function normally during the pandemic times. However, during the recent times, the after-market has done extremely well, but the Original Equipment Manufacturer (OEM) supplies are subdued.

Each segment, be it passenger cars, commercial vehicles, the two-wheelers, tractors and agri sector and OEMs and after-market on the other have been behaving in different patterns. In some markets in Europe, the business is at about 70-80 per cent of the normal times. While we are in essentials, there is a threat of another wave of pandemic. Excerpts:

Apollo Tyres has recently commissioned its seventh plant in AP. What has been the investment? And how does the plant contribute to the company business in India and to exports?

As per the plans, we will be investing close to ₹3,800 crore in the first phase of AP greenfield facility. While the capacity will be ramped up gradually in the next 12-18 months, as the demand improves, by 2022, this plant will have a capacity to produce 15,000 passenger car tyres and 3,000 truck-bus radials per day.

The deployment of latest technologies at this facility will enable the company to target premium OEMs and after-market customers in India, and will consolidate the company’s vision of providing world quality products to global markets. To start with passenger car tyres are being made, this will be followed by tyres for trucks.

The tyre industry and the automotive sector have been subdued for the past couple of years and the Covid-19 has taken a toll on the sector. How do you see business shaping up as you go along in the near term and the long term?

The demand, even before the pandemic, was subdued for couple of quarters. Post the relaxation in lockdown restrictions and the markets opening up, we have seen a healthy recovery in demand, especially in the commercial vehicle replacement segment. In fact, June month was a record for us in the replacement market, wherein we achieved the highest ever sales. The Europe business has been good.

Due to the current pandemic, and concerns related to ride-sharing cabs/public transport, the demand for personal vehicles is expected to go up, and the tyre industry would also ride on that demand wave.

Overall how much capacity does Apollo Tyres have in India and abroad. What is the utilisation level?

All our plants put together have a capacity of 2,200 tonnes per day. Different plants, depending on the products being manufactured, are running at different utilisation levels. While some plants may be running at 80 per cent utilisation levels, some are in the 50-60 per cent.

The AP plant will be ramped up gradually as the demand improves. By 2022, the AP plant will have a capacity to produce 15,000 passenger car tyres and 3,000 truck-bus radials per day, which would be 20-25 per cent of the capacity in India that we have in these product categories. The AP plant mirrors the hopes and aspirations of the new self-reliant India.

How much of your business comes from exports and outside India of the company’s overall business. Do you see this going up in future?

While exports account for around 10 per cent of our Indian revenues, considering our sales and manufacturing operations in different geographies, the business from outside India account for nearly 40 per cent of the consolidated revenues. As per our growth plans, we are looking at market expansion across geographies, which would result in higher revenue from markets outside India. However, India being our primary market, we are also looking at increasing our revenue base here. So, more or less, the revenue break-up between India and outside is likely to remain in the same ratio going ahead.

We are keen to expand to other markets and de-risk business. The US will be a new focus area. The changed focus could mean change in overall business mix. Therefore, we set up plants in Europe, a high profit business.

How big is the tyre industry and how has it been growing in the country in the past few years. What is the outlook given the pandemic impact on the sector?

Indian tyre industry has a turnover of around ₹65,000 crore, and (before the pandemic) it has been growing in double digits in the past few years riding on the increase in demand from the automotive sector. It is too early to predict the kind of impact that the industry would have due to the pandemic.

What is your market share? Which is bigger the OEM business or after-market?

As per our internal estimates, we would have a market share upwards of 30 per cent in the commercial vehicle segment, while in the passenger vehicle segment, it would be around 16-17 per cent. For us, after-market is nearly three times that of OEM business.

Will the current border concern with China help gain market?

The Indian government did impose anti-dumping duty on the imports of certain category of tyres from China well before the border concern. The imposition of anti-dumping duty and the restrictions on imports will definitely help some of the Indian players, including us. This will also pave way for increased domestic production and accelerate exports, in addition to creation of jobs for many.

The company recently commissioned a plant to manufacture two-wheeler tyres and is aiming for a strong foothold in the high‐value, highly profitable premium motorcycle tyre market, which caters to the top 20 per cent of motorcycle market in India, and the entire Europe and Americas market. We now have a global portfolio of high‐end bias and steel radial tyres for the two‐wheeler segment, which will be produced at our highly advanced and futuristic facility in Vadodara, Gujarat.

Spread over 10,000 square metres area, this two‐wheeler tyre manufacturing unit is housed within Apollo Tyres’ Limda plant in Vadodara. It has an initial capacity to produce 30,000 motorcycle radials and 60,000 motorcycle cross ply tyres per month. It will cater to the premium segment of the two‐wheeler industry. With a modular layout of the facility, the capacity can be replicated easily, as the demand increases.

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Published on August 03, 2020
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