GURGAON, India — Apollo Tyres Ltd.´s vision is anything but timid: It wants to rank among the world´s largest tire makers and break $2 billion in sales by 2010.
The path to such success is self-reliance, according to two of the top executives of India´s second-largest tire maker.
After a series of tie-ins with General Tire, Continental A.G. and Michelin-the last a radial truck tire joint venture that didn´t pan out-Apollo management came to a conclusion, said Neeraj R.S. Kanwar, joint managing director and chief operating officer.
"We all decided internally that technology was our greatest need, and we had to rely on ourselves," Kanwar said. "Starting in 2003 we put a lot of investment and resources into technology, especially in radials."
Four years, a major acquisition and numerous expansions later, Apollo is on its way to achieving its long-term goals. Sales of $2 billion by 2010 might seem a bit optimistic considering the company just broke the $1 billion sales mark for 2006, but Kanwar and Sunam Sarkar, chief of corporate strategy and marketing, believe it is achievable via organic growth and further acquisitions.
In a recent interview at Apollo House, the company´s very modern headquarters in Gurgaon, outside of New Delhi, the executives talked about Apollo´s position and plans for the domestic market, the impact of the purchase of Dunlop Tyres International (Pty) Ltd. in South Africa, and the firm´s efforts to grow in Europe and in other export markets.
Kanwar-whose father, Onkar S. Kanwar, is Apollo´s chairman and managing director, and whose grandfather, Raunaq Singh, founded the business-said Apollo is helping drive radialization of India´s biggest tire market, heavy and medium truck tires.
"The way we define the market, it is about 70 percent commercial tires, which is heavy truck, light truck and medium truck," he said. In that division, 3 percent of the tires are radials.
That scenario is changing, for the good of all, Kanwar said. India´s push to improve its infrastructure includes building roads that meet international standards, which creates a radial-friendly environment.
Additionally, the government is clamping down on the dangerous and widespread practice of overloading. "Radials do not work well in overloading," he said, and sometimes a truck will be loaded four or five times the prescribed limit.
Apollo´s job is to convince the customer of the efficacy of switching to radials.
"In India, 70 percent of the trucks are owner-driven, not like the West, where more are fleet managed. Here they own one or two lorries, so money is very important," he said. Because radials cost more than bias-ply tires, Apollo emphasizes the cost-per-mile. "We really drive home the total savings for the life of the tire," in terms of mileage life and fuel usage.
The Indian truck tire market is about 11 million units a year. "It´s a very, very large market," Kanwar said. "In India, 95 percent of goods are transported by trucks."
Which means Apollo is in a good position domestically because it is the nation´s largest truck tire maker. It owns about 27 percent of India´s truck and bus tire market and 24 percent of the light truck tire segment.
Truck tires lead the way
Apollo´s great leap forward in the truck tire business came in 1981, after the company came out of receivership and Onkar Kanwar was given the job of turning around the business. "It was all truck, truck, truck," Neeraj said. "His vision was we needed to be No. 1 in truck, and then we will look at the other avenues."
Apollo, which had made tires under a technology agreement with General Tire, then began to engineer tires specifically for Indian roads. That meant tires designed to handle overloading common in northern India, and different products for the south where mileage and retreadability were the main issues.
The plan worked. One that didn´t was the joint venture with Michelin to build a radial truck and bus tire plant in Ranjanguaon, with an annual capacity of as much as 350,000 units.
Michelin especially liked Apollo´s huge network of exclusive dealers in India, besides its presence in multibrand distributorships. Ultimately, though, the pace of radialization of the market proceeded slower than originally expected. Michelin bought full control of the venture and the companies went their separate ways.
"We still have a very good relationship with them. And Michelin has a minority holding of around 12 percent in Apollo," Kanwar said.
Onto passenger radials
In 2000 the firm branched into passenger radials, spending as much as $60 million to install high-tech equipment at its Baroda, India, plant. Radials today account for 97 percent of the Indian automobile market, and Apollo has about 15 percent of that market.
Passenger radial expansion is in the works at a greenfield plant in the state of Tamil Nadu, a two-phase project with a price tag totaling $112 million. Kanwar said the facility, which also will make light and medium truck tires, already is producing a small amount of tires, about 5,000 a month.
The passenger radials from the plant are aimed at the European market, Sarkar said. "Originally it is export driven, but as the Indian market matures, we will shift more to the domestic market," the executive said.
To serve the European market properly, Sarkar said Apollo established tie-ins with universities and professors in Europe so the firm´s personnel could get exposure and training to develop the high-tech tires it wanted to sell in that region.
About eight months ago Apollo launched two new-generation high performance tires for the European market-a V-rated asymmetric radial, and a W-rated directional model.
"The success of those technologies gives us the confidence that we do not need a technical partner," he said.
The big acquisition
The $220 million tire maker Apollo purchased last year-Dunlop Tyres International-also serves Europe. The company operates plants in Durban and Ladysmith, South Africa, and another in Bulawayo, Zimbabwe.
Sarkar said Dunlop Tyres International shares a lot of similarities with Apollo. For example, the firm is a big player in the truck tire market in South Africa, holding a 23-percent share of truck and bus and 20-percent share of light truck tires in the nation.
The company has reasonably good distribution in Europe, Germany, the United Kingdom and Holland. Overall, the firm was a good fit for a couple of other reasons, too.
"We realized that we could sell tires across Africa, where the operating conditions are not that different from ours," he said. Additionally, the manufacturer was privately owned by financial investors and management, and amenable to sale.
About 75 percent of Dunlop Tyres´ sales are in South Africa and neighboring countries.
The acquisition was the first foreign purchase by any Indian tire maker, but likely won´t be the last for Apollo. The company, which has the best margins of all the Indian tire makers, expects to meet its ambitious goals via organic growth and further acquisitions with sights set on China, Eastern Europe and Southeast Asia.