Neeraj Kanwar, the flamboyant Vice Chairman and Managing Director of Apollo Tyres Ltd, is planning to enter the US, the world's most competitive market, as the company eyes acquisition opportunities across the globe to be at the top of the pecking order. Here is a close look at his strategies and vision for the company. Edited excerpts.
What is the outcome of your European foray? Will your new manufacturing unit complement your strategy there?
Our formal entry into Europe came with the acquisition of Vredestein in 2009, followed by the launch of Apollo brand of tyres two years later, and it has been very successful. Both the brands, Apollo and Vredestein, are doing well in the challenging European market. The increased demand for our products first led to the capacity expansion of the Netherlands facility by more than 20-25 per cent. Then we set up a greenfield facility in Hungary to complement that. With the Hungary capacity coming on stream, we are moving ahead. From being a replacement market-focused company, we are now looking at supplying our tyres to the leading original equipment manufacturers (OEMs) in Europe. We have also entered the truck tyres segment in Europe, which will be produced in Hungary at a later stage.
What's the locational advantage of your greenfield unit in Hungary?
Hungary was chosen over some of the neighbouring Central and Eastern European countries after considering several factors. We always consider multiple factors before shortlisting and finalising a greenfield location. These largely include ease of doing business, manufacturing costs, availability of skilled manpower, government policies, including incentive for manufacturing, logistics costs, proximity to highways and a variety of soft factors.
How relevant is your online platform when it comes to competing in the highly organised European market?
Just a few days ago, we forayed into the European commercial vehicle tyre segment through a unique online approach. This digital go-to-market business model is transparent and flexible in terms of pricing and services for the products on offer. In the fiercely competitive European market, this innovative approach to selling will help us gain customers.
We have now acquired Reifencom GmbH, one of the largest tyre distributors in Germany with physical stores and global business-to-consumer (B2C) portals. That has definitely helped us stay one step ahead of our competitors in the largest tyre market in Europe, which is Germany, and get closer to end customers. It further drives Apollo's entry into the car tyre space and strengthens Vredestein's distribution through business-to-business (B2B) and B2C channels.
After two acquisitions in 2006 (Dunlop Tyres International in South Africa) and 2009, are you still craving for more, going by the stupendous rise in profits and cash reserves?
In addition to those, we also acquired Reifencom GmbH in 2015, which operates 37 physical stores across Germany and seven international B2C portals, and also sells tyres via B2B channels across Europe. We are ambitious about growth, but do not have a fixed mindset that it has to be through acquisitions. But growth strategy is pursued, whether organic or inorganic.
As you emerge on the global scene, what are your plans to enter the US?
Now that our Hungary greenfield is up and running, the next target that I have given to my team is to look at the U.S. market. We already have a small presence there through Apollo Vredestein, and we are now looking at expanding our presence in the world's biggest automotive market. We have spruced up our team there by hiring senior industry resources. Our research and development (R&D) team is also working on products specific to that market.
What about the Cooper fallout? Are you still keen on acquisitions?
Cooper is a four-year-old story. As mentioned earlier, we follow a growth-oriented strategy, which can be organic or inorganic. In recent times, we have made substantial investments to pursue organic growth. Having said that, we are always open if the right strategic fit comes along as an acquisition opportunity and it also makes financial sense. As of now, there is nothing on the table.
How will renewed focus on R&D impact long-term growth? Do you plan to bring more of niche, high-end passenger car and specialty tyres to India?
Our R&D team is always working towards creating better and technologically advanced products for our customers worldwide. Similarly, several research projects are also under way in collaboration with several of our raw materials suppliers and universities. These efforts have secured us a leading position in the radial tyre technology in India, across categories. Gaining the majority share in the OEM market in terms of new products will be the key for R&D going forward. To support the OEM journey and competitive edge in passenger car tyres, new technologies are under development, specifically focused on extended mobility and fuel saving. On the other hand, an advanced engineering department is also working towards developing new systems, technologies and tyre sensors to enhance tyre management and the integration between tyre and vehicle electronic systems.