Apollo in off-take deal for ‘high-end’ farm tires following Dutch closure

Gurugram, India – Apollo Tyres is using an off-take partner to maintain supplies of high-end agricultural tires following the closure of its Enschede plant in the Netherlands.

In the company’s first-quarter earnings call on 6 Aug, finance chief Gaurav Kumar said Apollo was still considering its medium-term strategy for the products, which were previously manufactured at Enschede.

However, he said establishing a new plant in India would not currently be economically viable.

“One of the constraints is that our [domestic] OHT capacity was only there in Kalamassery, which is now in the part of the city in Kochi. So that capacity has limitations in terms of how much it can be expanded,” he said.

Setting up a new facility would also present challenges, Kumar added, as the former Enschede agricultural tire operation had capacity of around 20 tonnes per day.

“Setting up a small 10-tonne capacity in a new location in India would not have economic scale and then would not make sense,” he said.

Apollo has therefore identified an off-take partner to supply the products, with Kumar saying the company expects to continue with the arrangement in the medium term.

“Even selecting and certifying that partner took time because we are talking about a high-end production,” he said.

Asked whether the partner was based in India or Europe, Kumar said it was “at the cusp of Asia and Europe”.

Apollo stopped production at its Dutch factory earlier in June and is set to complete closure in September. 

The plant, mainly produced passenger car, agricultural and speciality Spacemaster tires, was closed down due to higher energy and labour costs, weaker demand and pricing pressure from low-cost competitors.

According to Kumar, Apollo has also transferred production of its Spacemaster spare tire to its Baroda plant in India, with the facility already having secured OEM approvals.

The company expects the financial and operational benefits of the Enschede restructuring to begin materialising from the second half of the current financial year.