Article published in the September/October edition of European Rubber Journal magazine
In an interview with ERJ, vice chairman and managing director Neeraj Kanwar speaks of the tire maker’s ambitious European project now nearing completion in Hungary:
Having put behind its unsuccessful merger with Cooper Tire & Rubber Co. in late 2013, Apollo has now readjusted its focus elsewhere in the global market, particularly in more established markets such as Europe and possibly the US.
For now, the €450-million European project to set up a greenfield tire production plant in Gyöngyöshalász, Hungary, is going ahead on schedule, according to vice chairman and managing director Neeraj Kanwar.
And, despite all the challenges of getting into a new market and a new environment, Kanwar says his company has made big strides forward in Hungary.
“It’s been a big challenge for us as you can imagine, coming from India and starting a whole new greenfield project in a different-language environment.
“And I think the challenge has been very positive and encouraging, giving us experience on how to handle [things] in another country,” Kanwar told ERJ on the sidelines of Reifen tire trade show in Essen, Germany in May.
The hiring process is underway with technicians having already gone through their theoretical training process in nearby Gyöngyös prior to 10 weeks of practical training at Apollo facilities in Chennai, India and Enschede, The Netherlands.
It a recent recruitment drive, Apollo employed 120 technicians, adding to the 190 hired from the two previous rounds. These employees make up almost third of the total number of workforce that will be operating the plant eventually.
Once completed, phase 1 of the project will have a capacity of 5.5 million car and 765,000 truck radial tires a year, according to Kanwar.
OE supply
Apollo expects OE supply to take up a portion of the new plant’s output, according to Marco Paracciani, chief marketing officer of Apollo.
“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.
“We 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 will likely 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.
Globalisation strategy
As part of its “globalisation strategy and regional growth agenda”, the company also relocated its European HQ from Enschede to Amsterdam, to bring it closer to the Dutch capital’s Schipol airport.
The Indian tire maker’s management has also cautiously signaled possible growth plans for markets where it’s under-represented, including North America.
“The next step will be into the US,” said Kanwar, 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],” the Apollo boss said. “We came into Europe during a recession in 2009, but we’ve never looked back.”
“Similarly America is important for us,” Kanwar said. “The US 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 Apollo’s primary business is with the Vredestein brand, “especially in Canada and northern US with winter tires.”
The unit, Apollo Vredestein Tires Inc. in Metuchen, New Jersey started selling some Apollo-branded OTR/industrial tires in the past couple of years.
To develop the American market, Kanwar said Apollo will operate in a “similar fashion to what we’re doing in Thailand, or South Africa.”
That means coming to “a level of self-sustaining sales volume”, explained the company boss, adding that the process might take three to five years.
Until then, Apollo’s plants in Hungary and India will feed the market.
“Once they create a brand, say $100 million to $150 million turnover, then comes a plant, or a domestic sourcing facility of some kind,” he explained.
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.”
European tire landmark
Apollo’s new plant in Gyöngyöshalász, Hungary could become a significant landmark for tire manufacturing in Europe, according to Francesco Gori, strategy advisor, Apollo Tyres – and a former boss of Pirelli.
Speaking at this year’s Future Tire Conference in Essen, Gori said the Indian tire maker had “decided to go big” in Hungary: investing around €450 million in the plant for the production of passenger car and truck & bus radial tires.
The site, located about 100 km from Budapest, offers Apollo the advantages of low energy costs and labour costs, along with access to the European tire market, he said.
The Hungarian site, added Gori, has the “potential scalability to be one of the largest [tire] factories in Europe”: moving up from an initial 5.5 million to a potential 20 million tires on the car side and a “couple of million” units of tires on the truck side.
“So this is a very important expansion plan, which depends more on the competitive framework in Europe, than demand,” he said. “Because demand, we see, is there to grow in Europe, and the region is still a good export base, especially for ‘green‘ products.”
There is, he added, an “intensive focus on automation where it counts” at the plant, as well as a keen awareness of the importance of skilled labour.
“There is a mix of [skills and capabilities] in this factory because the name of the game is flexibility in this business,” commented Apollo’s strategy advisor.
Gori went on to describe Gyöngyöshalász as “a very interesting and very competitive and modern project, with skilled people at the most important part.”
This has led to agreements with local bodies and with Hungarian universities and large-scale investment in people to prepare for future growth.
Another focus, he said, is on initiatives to improve the processes to meet the demands of the customers, both OEMs and in replacement markets in Europe and some export markets.
In conclusion, Gori said that “as a European guy, I would like to have more of these projects in Europe: whether it is by an Indian shareholding company or a Chinese company, or a European company renewing its capacity.”
Bruce Davis of Tire Business, an ERJ sister publication, contributed to this report.