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Gurgaon-based Apollo Tyres, set to add eight manufacturing facilities across the world after the completion of its $2.5-billion acquisition of US-based Cooper Tire, will not invest in capital expenditure programmes in India. Instead, it will focus on expanding operations in Serbia, China and Mexico over the next few years.
The company's Vice-Chairman & Managing Director Neeraj Kanwar, said: "There is a very clear growth-capex programme that has been identified. Plants with the opportunity to grow will be the first ones (to get investments). So, you would have Serbia, China and, later, Mexico. India right now does not need any growth capex... we will just be doing maintenance capex here." Apollo Tyres had made operational its fourth facility in India at an estimated cost of around $500 million in February 2010.
The company currently produces 1,400 tonnes of passenger car, truck and bus tyres a day, across its four manufacturing units in India. Once the capacity for truck and bus radials is exhausted at Chennai, the company will consider shifting the technology to its other units in the Americas, Europe and Africa.
An investment plan is being readied for the manufacturing unit owned by Cooper in Serbia. "When Cooper took over, Serbia was one million units. Already, there is capex that has gone in. That is taking the plant to 2.5 million. The plan is to take that plant to five-six million units. So, we will expand Serbia for Russia and for Europe to get a fully global manufacturing footprint," added Kanwar. Neither Apollo nor Cooper has presence in the Commonwealth of Independent States at present.
With Apollo getting access to two production facilities owned by Cooper in China, there would be a rejig in the company's exports out of India. Kanwar said: "India... into some parts of Southeast Asia has huge duty barriers - as high as 40 per cent. Into China, too, it is 40 per cent. So, we need to look at that. Also, there would be a little rejigging." Apollo Tyres, at present, exports its products to about 100 countries in Europe, West Asia and the Asean.
The company, however, is not worried about the possible downsizing of exports out of India. Kanwar said Apollo's philosopohy was that 80 per cent of a plant's produce should be for the near market and 20 per cent for farther ones. "So, the global footprint becomes very important. China will look after China and Southeast Asia; India for India and West Asia, Europe for Europe, and America for America," Kanwar said.
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Apollo Tyres, which currently does not operate in the US, gets two-thirds of its revenue from India, where a weak economy has hurt demand for cars and commercial vehicles. "India is a difficult story... You have to de-risk. That's why, now, if you see the whole pie of Apollo, 43 per cent is North America. India, which was 65 per cent earlier, is down to 22 per cent. China is 18 per cent," Kanwar said.
