December 15, 2012: Neeraj Kanwar, Managing Director, Apollo Tyres
Apollo Tyres’ managing director on his company’s global vision including the R&D strategy, benefits of FTAs and the global tyre industry. By Brian de Souza.
Apollo Tyres has set itself a target of becoming one of the global Top 10 tyre makers? What is the company’s strategy for this and what plans does it have for the US market, where it isn’t present?
Our vision is to become a significant company in the global tyre industry. To join the elite league of global top 10 tyremakers, we are looking at almost tripling our current turnover of $ 2.5 billion in four years. We will keep all options open and look at a combination of organic and inorganic growth.We undergo a five-year strategic planning process, and this has already thrown up focus areas for Apollo – the products we need to increase, rationalise, as well as incorporate into our portfolio; geographies – existing and new, and we have put in timelines for each of these; manpower and skill needs; capital requirement and so on. All this is work in progress and we will implement them according to timelines and prevailing market conditions. This is the organic side. On the inorganic side, we will continue to focus on opportunities that bring value to the organisation.We do have a small presence in the US market through Vredestein. In addition to that, we are looking at exporting off-highway tyres from India to the US in the near future.
Can we have an update on the facility planned is South East Asia. What are the markets in that region that will be targeted? How will the India-ASEAN FTA that hasn’t yet been ratified by all 10 ASEAN countries be leveraged?
We have been active in the ASEAN region for a while now, albeit more as an export destination. The expansion and setting up of the greenfield facility in Southeast Asia is part of our strategic plan to further penetrate the market, be closer to the customers and, at the same time, be competitive. We will be announcing the exact location soon. In my view, strong and fruitful trade agreements are the way of the future. They facilitate healthy competition. However, in my view, so far Indian FTAs have not really benefited the tyre industry or the raw materials that we use.In terms of exports out of India, there has not been sufficient attention given; for imports into India, the lopsided duty structure allows tyres to come in at a low rate of duty, anyway.
What impact will the slowdown in the EU have on Apollo’s European operations at Vredestein and a planned upcoming unit in Eastern Europe?
The overall slowdown in the European economy is definitely a cause of concern for us. However, as we are focused on the replacement market, the impact of the slowdown on us is minimal. We sell both Apollo and Vredestein brands of summer and winter tyres in the European market. Currently, our plant in Enschede, The Netherlands, is running at a high capacity. We plan to increase its capacity from six million tyres per annum to approximately 7.5 million tyres. Further, we are also exploring opportunities for a greenfield facility in Eastern Europe to help us serve the market once the economy improves.
What is Apollo doing on tyre R&D and how are the Indian operations contributing to this?
We have recently re-organised our entire research and development structure to ensure faster integration with market needs and a higher focus on core research. Earlier we had each manufacturing country operation undertaking local research.Going forward, all our commercial vehicle R&D will be centralised in India, while passenger car tyre R&D will be conducted out of The Netherlands. This is a hub-and-spoke model, where local-country level technical teams will be given the required support.In the next few years, I see our R&D budget moving up substantially with a focus on fuel efficiency, use of green raw materials and recycling of materials.
Apollo Tyres inaugurated its first Super Zone outside India in Dubai? How does it plan to take forward this key retail initiative as well as Apollo Zones and Apollo Points?
The exercise is very simple – our job is to enable customers to make an informed decision. The modern-day customer across the world is an assessing, intelligent person seeking a quality product at the right price which suits his or her needs. This does not differ from a soap to a tyre. We are simply moving in the same direction as the customer, by enabling the customer to make an ‘informed decision’ by ensuring the environment is right, by ensuring we are going to her where she is comfortable, by ensuring that the right people with the appropriate knowledge are available to advice her at these Apollo Zones and Points. We currently have three Apollo Super Zones, two Apollo CV Zones, 29 Apollo Zones and 56 Apollo Points. We are looking at increasing this number by 25-30 percent within a year or so.
Tyre manufacturers are under pressure from rising rubber both here and overseas? How is Apollo coping with this?
Natural rubber, which is a key raw material for the tyre industry, has stabilised in terms of prices, to some extent, in the past few months. Having said that, when the rubber prices peaked a few months ago, our profitability did suffer to a large extent, and we had to opt for price corrections to keep our heads above water. While we continue to work towards improving our internal efficiencies and cost effectiveness, this is possible only to some extent.
What are the key challenges for tyre manufacturers today, given the shift of the global automotive sector towards Asia?
In my opinion, this shift of focus towards Asia for the global automotive industry is more of an opportunity, than being challenging, for India’s tyre industry. We now work with global automotive manufacturers based out of India, with new and advanced technology being introduced quite frequently. This has helped us as well to move towards improved tyre technology in terms of usage of environment-friendly raw materials, reducing the rolling resistance of a tyre, and coming up with lighter tyres as per OEs' requirement.
Finally, on the HR front, how is Apollo handling its HR hiring and talent retention given that this is a continuing challenge?
We have robust HR systems and policies that have helped us in retaining and retraining the talent base to a large extent. Every new joinee goes through a very elaborate induction process, as we believe that this helps the person understand the organisation better. At Apollo, we also encourage employees to go through various skill-building trainings and workshops. For this, we have associated with various management and other technical institutes in India and abroad. ?
After raising USD 15 million from the Al Futtaim Group, River India plans to ramp up its manufacturing facilities and di...
The importance of India as a strong export base for auto parts suppliers is increasing, says Anil Kumar M R, President a...
In an exclusive interview, Radha Krishnan, President and Founder, Detroit Engineered Products (DEP) talks about how the ...