Apollo Tyres plans new unit in Europe to expand its market

Apollo Tyres plans new unit in Europe to expand its market

New Delhi: India’s largest tyre maker by revenue, Apollo Tyres Ltd, plans to build a manufacturing unit in Eastern Europe as it seeks to enter the European market and double its turnover to $2 billion (Rs7,860 crore) by 2010, said a top executive.

“We are looking at project feasibility in the Eastern Europe region in terms of cost of manufacturing and approach to market," said Neeraj Kanwar, joint managing director and chief operating officer of the company.

The study is expected to be completed by the first quarter of 2008, and Kanwar said the manufacturing facility would start off by making radial tyres for passenger cars.

Currently, Apollo has a small presence in Europe through its unit Dunlop Tyres International (Pty) Ltd which it acquired last year. Dunlop has a distribution chain in Europe where it sells its Regal brand of tyres in the lower-end of the premium segment.

Many auto and auto parts makers such as Suzuki Motor Co. and Hyundai Motor Co. are building factories in Eastern European countries as labour costs in these countries are relatively less than those in Western European nations such as Germany and France.

Plants in Eastern Europe are close to large markets in Western Europe and emerging ones in the Commonwealth of Independent States.

The European market is one of the largest tyre markets in the world with annual sales of around 300 million tyres in the four-wheeler segment. This compares with around 70 million tyres sold every year in India, which also includes tyres for two-wheelers.

Kanwar said he wants to position Apollo as a premium brand in Europe with its own distribution chain. Apollo will establish a unit called Apollo Tyres AG, based either in Germany or Switzerland, and will start operations next year. Apollo will kick-start its European entry by exporting tyres from its new factory in Tamil Nadu, which it is building at a cost of Rs500 crore.

“It’s taking time because we want to get the service infrastructure and the back-end (operations) ready," Kanwar said. We see it “eventually as a domestic market".

Currently, the Indian market accounts for 50% of the company’s sales, but the company plans to increase the contribution of overseas sales to as high as 70% by 2012. It plans to carve the world market into three zones—India and SouthEast Asia which would be serviced by the Indian factories; Africa and South America, which will be catered to by Dunlop’s South African factories; and Europe and the rest of the Asia-Pacific region.