Apollo steps on the gas

Here's how Apollo Tyres plans to crack the two-wheeler market

With plans to roll out facilities in Andhra Pradesh and Hungary in the near future, Apollo Tyres is stepping up manufacturing as it looks to grow globally and newly compete in the domestic two-wheeler space as part of its ambition to overtake MRF for the top slot by 2020. The 30-year-old manufacturer entered the two-wheeler tyre segment in March this year. After starting with selling 100,000 two-wheeler tyres per month, it is aiming to close the year with 250,000 a month.

Satish Sharma, President, APMEA, Apollo Tyres

Satish Sharma, president (Asia Pacific, Middle East and Africa), Apollo Tyres Ltd, says, “Our vision in India is to build leadership by 2020 and through the range. Towards that end we launched the two-wheeler tyre, which was a missing link. In fact, with the investment that we are planning in Andhra Pradesh the beginning story of that is to target two-wheeler tyres and pick-up vehicles. Andhra Pradesh is an interesting investment for us to allow us entry seriously into the two-wheeler tyres and to insulate our future.”

 

He points out that the company remains the domestic market leader in commercial vehicle tyres, a segment which Apollo Tyres was identified with from the beginning. With two passenger vehicle-centric acquisitions (Dunlop in South Africa, 2006, and Vredestein Banden in the Netherlands, 2009) the tyre maker increased its capacities. It strengthened itself in car tyres at a time the passenger vehicle market exploded in the country. Sharma stresses the firm’s Indian and European units are strong in terms of covering commercial vehicles, passenger vehicles and off-highway segment. “We have built capabilities across the three verticals and we very strongly believe in the Make in India story, the market and growth potential that it offers.”

With manufacturing in India maturing to world-class standards, he argues, it is changing to compress lifecycles on prototyping or using more data and analytics, and moving up the chain on statistical methodologies to bring in quality evolution. “All of that is very much there in our manufacturing game plan. And with respect to automation, our Chennai plant is probably having productivity levels in excess of twice that of our previous plant of Baroda because we’ve put in a fair degree of automation, technology, etc.” Compared to the Chennai facility, the Hungary plant which is expected to open early next year would likely see 30 per cent higher productivity.

The company has two research and development (R&D) centres — in Chennai and the Netherlands — as well as two satellite units (Bengaluru and Frankfurt). The Bengaluru unit is being tasked with advancing R&D for tyre pressure monitoring system or putting more sensors in the tyre and “making it talk to give real-time data”. The company aims to start commercialising some of the technologies in two-three years.

“Our European operations have been replacement-centric. Now, we want to start engaging with OEMs (original equipment manufacturers). The Frankfurt R&D unit is centred towards that cause,” says Sharma.

The company’s plans to open a unit in Hungary is also in keeping with a general shift in manufacturing to “low-cost” Eastern Europe.

“We could expand our plant in the Netherlands only till a particular point. If we have to compare our cost structure with those of other European companies, we would have to similarly explore Eastern Europe. So, that was a driver. The other driver was a demand for our tyres. So to fuel our revenue growth strategy in the region, we needed more capacity and a new facility,” says Sharma.

Numbers Game

The availability of cheaper Chinese tyres in India has posed a threat to domestic manufacturers. Sharma says the Chinese practice is in the domain of unfair competition and calls for the government to take anti-dumping steps so as to allow a level playing field for all.

Abdul Majeed, partner, PwC India, also agrees that the biggest threat to manufacturers comes from Chinese companies which enjoy big scale of operations and are looking aggressively at markets like India as the Chinese economy and automotive market are slowing down.

“In tyres, the biggest point is rubber prices, which keep fluctuating and are 70-80 per cent of the cost. So getting the cost structure right is going to be significant to compete with Chinese OEMs for Indian companies. Secondly, Indian OEMs need to do a lot more in terms of innovation because global players are spending quite a bit to ensure value addition from safety and comfort points of view.”

He says OEMs are looking at tyre makers as partners, as tyre is one of the critical components of a vehicle. Besides, global players are looking at India as an opportunity because of its big after-sales market too, where competition would grow. “You need to also look at your leaders, your pipeline, and retaining people besides making sure you acquire niche companies. Acquiring the right kind of technology companies is important to help add value,” he adds.