Apollo contemplating new regional expansion
In a speech at Apollo Tyres’ annual general meeting, company chairman Onkar S Kanwar named several regions the company has identified as potential future “home markets” and sites for manufacturing facilities. He shared that Apollo increased its revenues 37 per cent to US$2.5 billion last year and is currently growing at above local industry rates in its current home market regions of India, Europe and South Africa – and therefore the company feels the time is right to expand this base. He cautioned, however, that such plans may squeeze profit margins in the short-term.
“Currently Apollo is sold in over 118 countries across the world,” said Kanwar. “Your company has been seeding many of these markets through exports for some years now. But over the course of the past year, we have identified the specific geographies of the Middle East, South East Asia, Australia and Brazil as potential future home markets, some with manufacturing bases.” Prior to the annual general meeting, the chairman told journalists that Apollo is also in the process of identifying greenfield projects in Eastern Europe.
“This requires from your company a firm commitment to further expand our product range, sales and service network and a serious commitment to a substantial capital expenditure to create fresh infrastructure of new manufacturing bases and people,” he continued. “Over the short term, the outlay in capital might put further pressure on margins; however, this is a much-needed expenditure to enable your company to build a future of growth. As you are aware, time and again, your company’s investments during difficult and uncertain times have always paid off, clearly manifesting the need not to shy away from planning for the future.”
Right products, right segments
This focus on new markets will occur alongside Apollo’s existing activities; Kanwar said that through a “combination of the right products” and a “focus on specific categories,” the tyre maker intends to further consolidate its position in each of its established home markets. “This would be balanced with a focus on profitable segments of the tyre market,” he added.
“In India, for example, where your company is already the number one tyre manufacturer and a leader in both passenger car and truck-bus radial tyres, the focus would be in increasing the gap between us and our competitors with a larger and more meaningful portfolio for our customers. This would include the entry of the Vredestein brand to take on a leadership position in the ultra high performance tyre and car segment.” Vredestein’s arrival in India is expected before the end of 2012. At a press meeting on the eve of the AGM, a company official also said Apollo intends to invest Rs 3 billion (£35 million) in its Kerala, India plant over the next two years to make it an export unit for industrial tyres.
Kanwar then turned his attention to Apollo’s two adopted home markets: “This would also include a higher penetration of mining and specialty tyres in South Africa,” he said. “In Europe, the focus for the next two years will continue to be on deepening and strengthening our passenger car tyre brands of both Apollo and Vredestein. Currently in Europe, demand outstrips our capability to meet with supplies. And therefore, your company is actively looking at ways in which we can fulfill this increasing European demand in passenger car tyres.”
The Apollo chairman also referred to the recent R&D reorganisation and selection of the Netherlands as home for passenger car tyre development and India as headquarters for commercial vehicle tyre development: “This reorganisation will enable your company to address evolving car and customer requirements more effectively. As hubs, they will work with country level research centres to further customise product ranges to address local needs actively.”
Green manufacture and products
These days no talk of growth plans would be these complete without discussing related green issues. “It is one area where the interest of our customers, the efficiency of our manufacturing processes, the effectiveness of our research and testing and the needs of society, all come together in one place,” Kanwar commented. He shared that Apollo is working on alternative sources of rubber, low noise and fuel efficient tyres, water conservation and the use of renewable sources of energy.
Growth a core duty
“Growth. It’s the magic word today,” observed the Apollo Tyres chairman. “But in your company, we believe that our core duty is to aggressively pursue business growth, tempered with a keen eye on society’s well-being. This is the only way we have to meet the requirements of our people and our customers, making appropriate investments in people, processes and plants for future business needs; alongside timely investments in the education and training of communities around us – empowering them to continue the growth cycle we trigger in our communities.
“On this note, I would like to thank each one of you,” Kanwar stated in conclusion. The support that we receive from our banks, financial institutions and the state governments of Kerala, Gujarat, Haryana, Maharashtra and Tamil Nadu; and the Union Governments of India, South Africa and Netherlands, continues to remain critical to our progress. Apollo Tyres is ready to move to the next level in its journey around the world. And like always, we are grateful for your continued support and for being the inspiration and support for our actions.”