BKT USA Inc. is on track to build its first manufacturing plant in the U.S., according to Minoo Mehta, president of the U.S. subsidiary of India's Balkrishna Industries Ltd. (BKT). Mehta discussed his company's successes as well as the challenges ahead in an interview with Tire Business.
How would you describe business thus far in 2019?
BKT deals with only off the road tires. Hence, our business is divided into various off-road segments.
Farm: The ag industry has been hit the most in the Midwest due to severe weather conditions. Millions of acres have not been tilled this year. The deteriorating trade relationship with China has put severe pressure on exports of ag products.
Prices have slumped, and farmers are hurting. All these, ultimately, affect the demand of ag tires.
Industrial and construction: Although the infrastructure bill was supposed to be a pre-election promise of President Trump, it has not materialized, yet. The demand for tires has managed to stay stable in spite of this. The necessary spurt and impetus needed is still awaited from the government. It is unfortunate that government policies affect the economy and the demand of tires.
Large OTR tires: The demand for BKT tires has increased substantially in this segment, because earlier our range was small, and a reputation for good quality was yet to be established. Now that both are coming in play, repeat demand is on a very healthy pace.
Can you provide an update on your announced plans to build a plant in the U.S.? How soon will a site be selected?
The sites that we had selected did not go through, and we are still looking for the ideal location with all our expectations being met. Looking at the political climate in the U.S., we are in no hurry to finalize. The right timing is everything, and when the timing gets right, BKT is known to take swift action.
Please review the expected square footage/capacity/number of employees at the plant? Is the expected cost $100 million?
The projections have not changed. We will begin low, start slow, rise higher and catch fire. We are projected to start with $120 million initial investment and with around 120 people and grow further.
Has the capacity upgrade for tires and carbon black been initiated at your plants in India? How far along is the process? What is the timeline for completion?
The carbon black plant is up and running and scheduled for a second expansion by February of next year. The new tire plant at Bhuj (India) is continuously adding capacity and the growth in production will be primarily in ag radials, OTR radials, industrial and construction tires.
What are some of the pleasant surprises you are seeing in the industry?
Government policies to restrict China flooding the U.S.A. tire market with Chinese government-induced lower prices is the biggest surprise. It certainly has helped in stopping third and fourth tier, low-quality products coming to U.S. markets. It will help end-users in the long run both in terms of longer life and for a safer and greener environment.
How have tariffs and/or antidumping and countervailing duties affected your company? How are you reacting to them?
With tariffs, AD and CVD on Chinese goods, the Chinese have set up factories in neighboring countries, thereby continuing the availability but at slightly higher prices. More tires will come from the new factories as they ramp up production.
The lower-priced products always affect upper-price tiers of the market by creating upward pressure on price point. We are in the upper tier and we must continually work toward our value offerings and distance ourselves from the lower-price segment.
Where do you see the industry markets heading during the last half of 2019?
The farm industry will be affected severely this year. Other segments will continue to be stable. The government will need to intervene to stop the bleeding for the farmers, and with it being close to an election year, things should change for the better.
What kind of trends are you seeing in the marketplace? How is your company reacting to them?
The trend is for vehicles to carry more load, run faster, be maintenance-free and cost-effective. Equipment and tire companies will need to keep up with the pace.