Renewed thrust on both local and international operations
The milestone chapter in the annals of any corporate history has a special significance as it captures the peak moments of success in their pursuit of challenging endeavours. All milestones carry fond memories to cherish, but some are indeed special as they immediately strike a chord of the exuberant frozen moments, yet fresh during a memory rewind. One such milestone was crossed by Apollo Tyres on November 9 with the formal inauguration of its Global R&D Centre, Asia, at Oragadam, the auto hub bordering the city of Chennai. It was a proud moment indeed for Mr. Onkar S. Kanwar, Chairman, and Mr. Neeraj Kanwar, Vice Chairman & Managing Director, Apollo Tyres Ltd., when they inaugurated the second R&D Centre in the presence of the company’s Supervisory Board of Directors and members of the Management Board.
Following the second quarter results at the Board meeting in the morning and the inauguration in the afternoon, the senior management team of the company, Mr. Onkar Kanwar, Mr. Neeraj Kanwar, Mr. Satish Sharma, President (Asia Pacific, Middle East and Africa), and Mr. Daniele Lorenzetti, Chief Technology Officer, addressed the media gathering on the performance, vision and role of R&D.
Mr. Onkar Kanwar said: “The company has been at the forefront of launching breakthrough products over the past four decades suiting the Indian context. The Global R&D Centre, Asia, will break new frontiers and accelerate our R&D vision for India and the region. This step also aligns with the honourable Prime Minister Narendra Modi’s vision for Brand India and technology being one of the core sectors for India becoming a global power.”
Mr.Neeraj Kanwar added: “Technology and marketing are the two key pillars of our growth in going forward to achieve our vision. India-made tyres are sold today in global markets and the future-ready products will be developed at this centre. My vision for 2020 is to be a premier tyre company with multinational presence, building a leadership in India and holding the premium segment across Europe.”
Apollo Tyres R&D Centre, Asia, is located adjacent to the company greenfield plant coming up near Chennai for production of truck and bus radial (TBR) tyres. The plant construction is nearing completion, and the company is getting ready to roll out the first tyre. The investment in the plant is Rs. 2,700 crores. Parallelly, the greenfield plant in Hungary at an investment of Euro 475 million is also progressing fast and the same slated to roll out tyres during early 2017.
To support the growth and operations, Apollo has set up the R&D centre, Asia, the second global centre after the Global R&D centre, Europe, in the Netherlands which has been operational since 2013. In addition to the core research, they cater to the product development needs of the region.
Besides the two Global R&D centres, Apollo Tyres has set up two satellite R&D centres, one in Bengaluru and the other at Raunheim, Germany, all of which assist the company generate speed and relevance while entering new markets.
During the presentation which followed, Mr. Neeraj Kanwar indicated: “Our journey in technology has been eventful. Firstly we started collaborating with General Tire and later had a joint venture with Michelin during 2003-04. From 2004, we set ourselves as self-reliant in technology and got the necessary inputs from companies in Europe. We have been furthering the dimension of R&D to usher in contemporary technology to service our customers in the chosen markets. The setting up of two Global R&D centres have been towards this vision of the organisation. All our investments have given us winning products in India and across the globe.”
The team then interacted with the media for a Q&A session (given separately) following which a visit to the various departments of the R&D centre was organised. Enthusiastic young scientists and engineers explained briefly their nature of work and the functioning details of the sophisticated testing facilities and equipment. It was indeed a heartening experience to see them engaged in the creative assignments, addressing the global demands and demonstrating the technical expertise of the Indian centre. Apollo’s endeavour in this regard is laudable, and it will not be surprising if the company leveraging the research facilities makes rapid strides in expanding its local and global operations and achieving with utmost ease its goals set for vision 2020.
‘Radialization in CVs may touch 80% in 4-5 years’
Interactions with Apollo Tyres senior management team
Can you brief us about the employee strength, initial and ongoing investments for this Global R&D centre, Asia?
We have 140-odd technocrats working in the R&D centre, Asia and it will be catering to the needs of the Asia, Africa and Middle East markets. The Global R&D centre, Europe at Enschede, Netherlands, employs 150 plus technical staff and services the requirements of the European and American regions. We have invested around Rs. 900 million in this R&D centre, Asia, and will continue to invest in the same in the coming years. We have been a growing company always investing in R&D, the same going up to 1.91% of the sales revenue in 2016 as against 0.71% in 2011. We will also be investing for increasing the talent pool in future and towards training and providing exposure to the technical team members for working at other locations.
Tell us about your current operations at this centre and focus areas in future.
R&D operations are predominantly driven by OE perspective technology needs. In the PV segment, the team is working towards reducing the rolling resistance to improve the overall mileage. In the CV space, we are moving from BS-IV to BS-VI by 2020. This journey in Europe has been traversed in 15 years and herein the same has to happen in four years, and that’s a huge compression of life cycle. This is going to push all auto component companies to upgrade their technology, and likewise as a tyre manufacturer we have to look around to develop greener, lighter tyres at a competitive price at this centre the meet the future demands.
The other area of immense interest is in the defence domain. We are already supplying to the sector and have a market share of about 30%. The primary requirement is bias tyres, but the same is changing fast to radials. There is the need to develop bullet-proof tyres and specialised tyres for gun carriers and heavy trucks, most of which are imported as of now. There is the drive to indigenise the above, and herein we see the emerging business opportunities and the active role of our R&D in the exercise.
Comment on the trend of radials replacing the bias tyres in most applications and your collaboration/engagement with educational institutions for the R&D work.
The radials growth rate is rapid and herein we are talking only about the CV space as there is no bias tyre in the PV segment. OEMs are currently taking 70% radials and in the replacement market it’s upwards of 35%. As you may be aware of, we ourselves are drivers of radials because of the TBR plant you see behind this location. Over time, may be in 4 to 5 years, radials may climb up to 80% and it’s the way to go.
Regarding our association with educational institutions, it has been our old philosophy to partner not only with all institutions all across good in rubber sciences and rubber polymers, but also with our suppliers as it’s a win-win situation for all of us. We get educated on various aspects in our engagement with the institutions while they get an opportunity to work with us in projects and getting exposed to technology development at other locations. As regards co-operation with suppliers, we jointly work in developing new raw materials for lighter weight tyres in enhancing performance and staying ahead of the competition.
Against the vision 2020, can you provide us the nos., capacity created, utilisation and about the Andhra Pradesh venture?
We are seeing an upswing coming during Q3. In the PV segment, October and November sales have been good and the manufacturers have reported double-digit growth, and in the CV space too we see the recovery happening. All this should translate into business for tyres. At Apollo, we have 85% capacity utilisation and the plants can typically take up to 92%. The Chennai plant will be producing only TBR, and for vision 2020, we do not want to put any nos. We want to be leaders in the Indian market for the products we manufacture in the PV, CV, OH and farm segments, and now in the two-wheeler area; and still have a long way to go.
In the European market we want to be the leader in the premium segment. As far as the AP plant is concerned, it will be for the manufacture of two-wheeler tyres and we will be providing more details at a later date. We also see a gap in the pick-up/SCV tyres and will be examining the production in this segment to meet the demands.
What are the effects of raw material price fluctuations and the Chinese competition on your prices and margins?
We would not like to comment about profits, but the threat from Chinese imports is real. In raw material prices, there has been some softening and it has given us better margins. It should be noted here that cost reduction on all fronts is a continuous ongoing exercise in our company, including in the R&D, and does not react to raw material price fluctuations. As regards Chinese tyres, there is 30 to 40% price advantage they have due to various reasons, and to mitigate this point, we are talking to our customers about the TCO advantages in going for our tyres. Also we are highlighting the danger of accidents on the highways while going for the cheaper tyres from China. This has also been taken up with the Government through various forums. If someone is selling tyres at predatory prices it causes injury; and once you can establish that injury, we have a case. But, the overall profitability of tyre companies prevents the Government in understanding the injury perspective and imposing anti-dumping duty.
When we can make all the tyres in India, there is no logic in imports. Well, if the import trend seen maximum in the TBR segment continues unabated and rises to say 50% from China, then one of us will have to shut shop. This is not a good sign at all for the Indian tyre industry.
Apollo to set up Rs. 525-crore plant in AP: Pact signed
Apollo Tyres has signed a memorandum of understanding with the Andhra Pradesh Government to set up a state-of-the-art manufacturing facility. The company is looking at investing approximately Rs. 525 crores towards setting up this facility in the State bordering the south-eastern coast of India.
The MoU was signed by Mr. Sunam Sarkar, Director, Apollo Tyres, and Mr. Kartikeya Misra, Director of Industries, Government of Andhra Pradesh, in the presence of Mr. N. Chandrababu Naidu, Sate Chief Minister, and Mr. Onkar S. Kanwar, Chairman, Apollo Tyres.
The Chief Minister said on the occasion: “I am extremely pleased to announce this significant investment by Apollo Tyres to build a world-class facility in Andhra Pradesh. Our endeavour to provide superior infrastructure and ensure full government support to companies has seen the State emerge at the top of the Ease of Doing Business index in the country.”
Mr. Onkar Kanwar observed: “I would like to thank Mr. Chandrababu Naidu for the support offered to Apollo Tyres, and look forward to working with the State Government for the setting up of our state-of-the-art manufacturing facility.”
The proposed manufacturing facility will be the fifth plant for Apollo Tyres in India. It has two plants in Kerala and one plant each in Tamil Nadu and Gujarat. The company has international manufacturing presence with a plant in the Netherlands and another greenfield facility currently being set up in Hungary.