Apollo looks to grow in North American market

ESSEN, Germany—After Apollo Tyres Ltd.'s planned merger with Cooper Tire & Rubber Co. imploded in late 2013, the Indian tire maker quickly readjusted its sights on Europe, eventually opting to invest more than $600 million in Hungary to support its growth aspirations in Europe.

With the opening of that plant, in central Hungary north of Budapest, expected before year-end, the Indian tire maker's management is starting cautiously to consider growth plans for markets where it's under-represented — such as North America — or not represented at all.

That's the upshot of a wide-ranging conversation Tire Business had with Neeraj Kanwar, Apollo's vice chairman and managing director, at the recent Reifen trade show in Essen.

Kanwar said he considers both India and Europe domestic markets, noting, “since we have manufacturing there, we'll keep developing there first.”

More recently, though, Apollo has established sales companies in Thailand and Malaysia in order to start building the Apollo brand throughout ASEAN and the Pacific Rim, as well as in Dubai for the Middle East and South Africa for southern Africa.

“The next step will be into the U.S.,” he said, noting that China is completely out of the conversation owing to the vast number of domestic companies there.

“Our DNA is more growing toward (established markets),” he said. “We came into Europe during a recession in 2009, but we've never looked back.”

Today, Europe represents 24 percent of Apollo's global business — or roughly $500 million for the year ended March 31 — a share that is set to grow measurably as the Hungary plant ramps up.

“Similarly America is important for us,” Kanwar said. “The U.S. economy will always come back. It's growing at 2 to 3 percent and is a huge market, …the No. 1 automotive market.”

In North America — which represents only a few percentage points of Apollo's global sales — Apollo's primary business is with the Vredestein brand, “especially in Canada and northern U.S. with winter tires.” The unit, Apollo Vredestein Tires Inc. in Metuchen, N.J., started selling some small Apollo-branded OTR/industrial tires in the past couple of years.

Building the brand

Apollo recently signaled its growing interest in the American market by hiring former Goodyear and DaimlerChrysler sales executive Steven Smidlein to be senior vice president for North America.

Mr. Smidlein, sales director, commercial OE for Goodyear from 2012-15, will be responsible for building the brand and sales in North America for both the Apollo and Vredestein brands, Apollo said at the time of his hiring.

He will be based in Metuchen and report directly to Mr. Kanwar. Working with him is Emil Herbak, hired in 2012 to succeed the then-retiring Al Smoke as sales manager.

“With North America almost being an uncharted territory for us, Steven's 30-plus years of sales management and retail experience, especially in the automotive sector, will help establish both Apollo and Vredestein brands in this continent,” Kanwar said in March.

“We would be relying on his proven ability to grow market share, with a focus on delivery of aggressive sales targets,” he added.

To develop the American market, Kanwar said in the Essen interview, Apollo will operate in a “similar fashion to what we're doing in Thailand, or South Africa.

“That is,” he continued, “come to a level of self-sustaining sales volume, which may take three years, five years…. Until then Hungary will feed (the U.S. market), India will feed them…. Once they create a brand, say $100 million to $150 million turnover, then comes a plant, or a domestic sourcing facility of some kind.

“What that looks like, I don't know yet,” Apollo's No. 2 executive said. “Could be greenfield, could be a brownfield,…but we need to reach that level of self-sustaining capacity.”

Asked whether Apollo might again consider the growth-by-acquisition strategy, Kanwar said: “We've never shied away from partnering, … but we've learned lessons from (the Cooper experience).

“If there's a partner that fits us culturally, with good synergies, we'll take a look.”

For now, though, the Gurgaon, India-based company is focused on getting passenger tire production running at the $615 million plant in Gyöngyöshalász, Hungary, and then making sure radial truck tire production comes on stream by late 2017/early 2018, Mr. Kanwar said.

To that end, Apollo has hired 150 employees from three Hungarian universities and has been training them at its plants in Chennai, India, and Enschede, Netherlands. They represent the first wave of what eventually will be 900 employees at the factory, according to Kanwar.

Phase one capacities at the plant will be 5.5 million car and 765,000 truck radials a year.

Apollo expects OE supply to take up a portion of the new plant's output, according to Marco Paracciani, chief marketing officer since 2013.

“Our OE journey started about two to three years ago,” Paracciani said. “It takes two to three years to get from approach to technical OK to contracts.

“Expect to see our first European OE fitments in 2017,” he added, noting that Vredestein is and will continue to be the company's premium brand in Europe. The first Apollo brand OE fitment likely will be with Ford Motor Co. and later with one or more of the German car makers.

To support its OE efforts, Apollo opened a dedicated OE research and development facility in the Frankfurt, Germany, area in April, Paracciani said.

Kanwar noted Apollo also is leveraging “OE relationships and credibility we've built in India,” with Toyota Motor Co. Ltd., for example, in anticipation of garnering more OE business worldwide.

Kanwar also took time to recognize the experience and market knowledge that former Pirelli Tyre executive Francesco Gori is bringing to Apollo in his role as a strategy adviser.

“His knowledge, specifically (related to) building brands at Pirelli, is something commendable,” Kanwar said. “That experience, … we're clearly looking at that.

“From Day One, he's been a sounding board for us,” he said, addding, “[Gori] thanked us for the opportunity to get engaged again.”

Trying to build Apollo as a consumer brand in India “is a challenge,” the Apollo executive acknowledged. “Historically, Apollo is a truck-led company/brand.

“But the consumer mind-set has changed and is changing…. The Internet is changing the market dynamics, especially among the younger generation population.”