Moneycontrol
Last Updated : May 24, 2018 06:15 PM IST | Source: Moneycontrol.com

Not after volume, but after profitable growth, says Neeraj Kanwar of Apollo Tyres

The Vice Chairman and Managing Director talks about Vision 2020, and his continued focus on the US market, despite the Cooper Tire setback

Prince Mathews Thomas @prince0879

Neeraj Kanwar, Vice Chairman and Managing Director, Apollo Tyres believes that “we are in a global village.” His monthly schedule reflects that belief. For the past six years, Kanwar has worked out of his “traveling office” in London. He divides his time between Netherlands, where Apollo unit Vredestein is based, and Hungary, where the tyre maker inaugurated a plant last year. Kanwar heads to Delhi once a month and spends a week at Apollo’s largest market.

The Managing Director’s calendar reflects the evolution of Apollo in the last one decade. About 40 per cent of its revenue now come from overseas operations.  That is set to increase in the next two years, as Kanwar seeds operations in the US, Dubai and Thailand. Little wonder that the senior leadership of Apollo is also now spread across the world, in Amsterdam, Singapore, London and Delhi.

“We meet once a month, but each time in a different location depending on the geography we want to focus on. Last we met in London, and in June we are meeting in Hungary,” Kanwar told Moneycontrol over a video conference from his London office.

At the same time, the 46-year-old is as focused on the Indian market. Apollo’s Vision 2020 targets the pole position in every tyre segment in India. And Kanwar wants to do it not by playing the volume game. “Am not after volume, but after profitable growth. That is my mantra… whatever we do, we look at profitable growth,” he said.

Excerpts:

How do you assess the present market situation in India?

India’s automotive market is on a strong growth path. Today we sell 4 million consumer vehicles, and this is projected to double in next four years. It’s huge growth opportunity for Apollo.

We are the leaders in truck tyres. And the radialisation of truck tyres has become 45 per cent of the market. We control 28 per cent of this.

Our Chennai plant is doubling its capacity to 12,000 tyres a day, and should come on line within a month or two.

How about cars?

Apollo has made a huge headway. From number five, we are number two and close to 1. We do 35,000 tyres a day and are running at full capacity. In fact, we are losing sales.

In other categories like farm and two-wheelers, we have grown by double digits last year.

What is your strategy for two-wheelers segment?

We launched two-wheeler tyres two years ago. We want to be a niche player. We don’t want to play with big players, as we are late entrants. We are looking at high-end motorcycles, which is 20 per cent of the whole market.

You are setting up a new facility in Andhra Pradesh. Have you decided on the capacity?

We have not taken a call. The minimum capacity would be 16,000 tyres and 3,000 radials a day.

You talked about closing in on the gap with the number one player in passenger vehicles. What are you doing to bridge that gap?

I would say that the gap is bare minimum. Basically it’s Bridgestone Vs us and MRF. All three are up and down by 0.5 to 1 per cent, according to our estimate.

Our weak area is the high-end segment of cars. It’s more of a mindset as consumers prefer the foreign brands. We are changing that through brand building and showcasing the kind of technology we have. We will first get into the base models of luxury cars and then start going up.

This segment will be assisted by our focus on high-end motorcycles as the same guy will also have a high-end car.

In other initiatives, we have created a network of 1,500 dealers in rural India in the last three years. This dealer is a composite dealer and likes to stock all kinds of tyres. We have been able to give a whole composite basket.

That is the next big growth story from India, the rural areas, and B and C-class cities.

Our vision 2020, is to be number one is each category in India.

How serious is the Chinese dumping now?

It was a concern 1.5 years ago. Chinese tyres had garnered 30 per cent share of the truck radial market, selling at 50 per cent of the prevailing market prices. But demonetization and GST has had an impact on them, as most were cash transactions. And later last year, the anti-dumping duty came in. Now they are down to 15 per cent of the truck radial market.

The rise in crude prices has been a concern. How much does this impact you?

We are constrained by oil prices. Natural rubber gets impacted. The impact is lagged and we will feel it within two months. We need to get ready and see how we can correct selling prices. We operate on thin margins of about 13-14 per cent. At a time when we are spending on brand building, R&D and new facilities, we need cash flows and healthy EBIDTA margins.

How has Vredestein performed in India?

It has not been successful. One, it’s difficult to pronounce. And when it comes to buying a foreign brand, customers have other brands. Also, our strategy of bringing the product from outside to sell in India was not right. We have to see how we can make it in India and sell.

And in Europe?

It is doing very well. We have gained market share. And we have a new distribution system. (Apollo had bought German tyre distribution firm Reifencom GmbH in 2015). We now sell 30 per cent of our tyres through Reifencom, from the earlier 20 per cent. While Netherlands and Germany are main markets for us, we are also looking at UK, Italy, France, Austria and the Nordic countries.

After the termination of Cooper Tire deal in the US, what has been your interest in the market?

The US is a large car market, and is my next focus area.

Currently we only have 5-10 per cent of the market covered in our products. There is a lot of R&D work needed to cover the 80 per cent. We need to put a lot of investment in R&D.  I have 10 engineers in Netherlands working on only the US market. In two years, we will have a product range that will cover 75-80 per cent of market. Then you will see acceleration coming in, and then we will take a call on a local facility, or will produce in Hungary and sell in US.

Which are the other international markets that interest you?

We have set up marketing and sales offices in Thailand and Dubai, for Apollo and Vredestein brands. While Dubai will cover Middle-East and North Africa, the Thailand office will look at the ASEAN region We want to see which one fructifies as a good market for Apollo. Once we reach a sustainable level of demand – USD 150 million revenue annually- then we will see how we want to go to the next phase.
First Published on May 24, 2018 06:15 pm
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