In January 2012, Anant Goenka, son of RPG Group chairman Harsh Goenka, ran the punishing 21-km Mumbai half-marathon for the first time. That was along with 60 colleagues in Ceat, including fellow board members of the city-based tyre making company.
Apart from completing that race in two hours and 18 minutes, Anant had other reasons to cheer. The MBA graduate from America’s Kellogg School was preparing for the transition towards managing director from deputy managing director — a post specifically created for the younger Goenka in late 2009.
Last month, Anant replaced Paras Chowdhary as managing director, and officially assumed office on April 1. Chowdhary will continue as advisor to the 1958-founded company, while also being a whole-time director.
For Anant, the mandate is laid out very well. The 31-year-old legatee wants to break new ground in the passenger vehicle space, muscling against two of the world’s biggest tyre companies, in addition to home-grown market leaders, making Ceat one of the biggest tyre producers in Asia.
So far, Ceat has made a successful headway into the commercial vehicle segment comprising truck and bus radials. Tyres to this segment account for 65 per cent of the company’s production, as 25 per cent comes from passenger cars and about 10 per cent from two-wheelers.
Bridgestone and Michelin, two of the world’s biggest manufacturers of tyres, command a lion’s share in personal vehicle category such as car and sports utility vehicle in addition to Apollo, MRF and JK Tyres. With demand for cars expected to jump multifold in the near term, competition in this space is set to rise.
Anant knows the competition will be more amongst factors like technology, cost and durability. He has thus planned for a major push in brand exposure starting this year, through multiple investments and marketing strategies.
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The company plans to aggressively promote multiple sub-brands already existing under Ceat, which will remain an umbrella brand. It will launch a new brand of tyres targeted at segments such as utility vehicles.
Apart from passenger vehicles, Ceat wants to tap into the two-wheeler segment, where competition is not scarce. Chennai-based TVS Tyres is the largest two-wheeler tyre supplier in the country, followed by MRF.
Anant Goenka said he would like the company to shift focus from a commercial vehicles (tyre) manufacturing company towards passenger vehicle (tyres). “Therefore, the importance of the brand becomes more and more important,” he noted. “In commercial vehicles, the brand is not as critical as passenger vehicle. So, we will be investing more in the brand in the coming year.”
Ceat is the fourth largest tyre maker in India in terms of tonnage, with MRF and Apollo leading the pack. With the Kanwar family-led Apollo, which is absent in the two-wheeler space, pushing for an equally aggressive relaunch of its brand, aided by a renewed marketing and sales push, Bridgestone and Michelin have robust growth plans in India, too.
Apart from searing competition, Ceat’s other concerns are its older plants and substantially higher operating costs led by expensive manpower weighing on profitability. Anant hopes to arrest this by introducing more frugal production patterns at its facilities based at Halol (Gujarat), besides Bhiwandi and Nashik (Maharashtra).
“There would be things like increasing the throughput of plants with minimal or no investments, so that we can utilise the machines better. We can also increase the operational efficiency of the machine, but utilising it better. This is one of the ways of doing it,” he noted. “The other way, of course, is getting rid of high-cost manpower. But, we will be focussing more on the former. Manpower cost is almost half of the cost of operations of our plant. We have inherent concerns of having older plants and higher cost manpower.”
Halol is where Ceat has its third plant, opened last year. With investment of Rs 1,000 crore, the plant produces trucks and buses, along with other passenger vehicles and off-road radials. The company has already ramped the Halol plant capacity to 80 per cent.
In addition, Ceat wants to replicate its Sri Lankan success in Bangladesh. There, it is setting up a factory at a cost of Rs 250 crore. Ceat is the market leader in Sri Lanka.
“Michelin, Bridgestone, Goodyear and others are setting up bases in India. That will lead to increased competition in a year or the next 18 months. It will be a challenge for us,” says Anant. “Besides, we want to grow our market share in the new segment. We plan to get into motorcycles. It is easier to enter a segment, but it’s difficult to grow in it.”