As part of its radialisation strategy for the commercial vehicle segment, tyre major Apollo Tyres may consider relocating its cross-ply truck and bus tyre plants at Kerala to the industry friendly environs of Gujarat. The existing units are likely to be converted into a radial facility over the next three to four years as radialisation becomes significant in the commercial vehicle segment.
Vehicle manufacturers like Hyundai and Ford had earlier shown a keen interest in establishing new plants in Gujarat on the back of the proactive policies of the State government towards the sector. Other advantages in Gujarat include strong power supply, favourable labour policies and port facilities. Tata Motors has already established its Nano small car project in Sanand.
At present, the Gurgaon-based Apollo Tyres has two plants at Kerala, with its first manufacturing facility at Perambra set up as the mother plant. Operational since 1976, it has a production capacity of 340 metric tonnes per day while another plant at Kalamassery, that had been leased by Apollo in 1975, produces a significant bulk of cross-ply tyres at 100 metric tonnes per day.
With a manpower strength of 3,700 employees, the two Kerala plants have been riddled with problems not the least of which has been high worker absenteeism, an offshoot of the existing work ethos and the inability of the local government to woo industry.
In FY ’11, Apollo lost out in revenue growth and market share in the commercial vehicle (CV) segment during the first five months of the last fiscal, due to a lockout in its Perambra plant.
“The second half of the year was spent in regaining what was lost so there has not been big growth for us in the last fiscal. In FY ’12, we are looking to undo what we were not able to do last year,” Satish Sharma, chief – India Operations, told Autocar Professional.
Gujarat on the go
Apollo’s Gujarat plant at Limda, its second greenfield facility has, on the other hand, been a feather in the company’s cap, being the largest of its kind in the South East Asian region. “The Limda plant has been upgraded to house the latest technological innovations at regular intervals. The most recent addition has been an off-the-road tyre production unit,” said Sharma.
With 2,750 employees, the Limda plant produces passenger car radials, bias tyres for the CV segment, as also radials for farm vehicles. It has a production capacity of 520 metric tonnes per day.
Pushing truck radials
“The company’s strategy is to increase its presence in truck radials,” confirmed Sharma. Apollo’s latest plant at Chennai for car radials is also its first to produce truck radials. The facility has already witnessed 80 percent investment out of the Rs 2,100 crore earmarked for it.
“The balance will be invested during this year,” Sharma added. “The Chennai plant has positioned us as the largest manufacturer of car radials in the country.”
Commissioned in March 2010, the Chennai plant has a terminal capacity of 16,000 tyres per day for cars and 6,000 for truck radials. The company has so far reached a capacity of 2,000 truck radials per day and 8,000 car radials daily with full capacity expected to be reached within a year.
Recently, Apollo undertook brownfield expansion at its three other plants including car radials at the Vadodara plant. Expansion was also undertaken of bias tyres in the light truck and farm segment in the Kerala plants besides OTR tyres as part of a multi-pronged thrust towards growth.
“Rs 2,500 crore has been sucked up by the brownfield expansions as well as the Chennai plant during the last two years,” elaborated Sharma. “We are already producing 22,000 tyres per day which is a decent gap between us and the number two player (JK Tyres).”
Focus on radialisation of truck and bus tyres
Apollo has discontinued all investments in production capacities for CV bias tyres as a company policy and is targeting an overall growth of 60 percent in FY ’12 over the last fiscal. In FY ’10, it clocked a turnover of Rs 81.2 billion and has a topline CAGR of 33 percent.
With radialisation of commercial vehicle tyres pegged to grow at 25-30 percent from the existing 13 percent in India, during the next three years, due to growth in road infrastructure and improvement in radial technology, Apollo is gearing up to become the leader in the segment. Radial tyres possess a generic property to save five to six percent of fuel for fleet operators. Hence, the push by OE and tyre manufacturers for the technology in the higher horsepower vehicles.
Apollo has harnessed its radial tyre technology from its South African acquisition of Apollo Tyres South Africa (originally Dunlop Tyres International) for the Chennai plant. It has three tyre making units and a retreading unit in South Africa and Zimbabwe. With its South African and Netherlands plants, Apollo’s total production capacity has been raised to 1,550 metric tonnes per day.