NEWS

Apollo Tyres to expand its business further to US; plans to invest $400 mn

Friday, Oct 16, 2015

India's Apollo Tyres is mulling hiring a sales team to grow its business in the United States, a top company executive told Reuters, having failed two years ago to buy US Cooper Tire & Rubber for $2.5 billion.

Apollo's global push is aimed at reducing dependence on the domestic market, where passenger and commercial vehicle sales are recovering slowly after a slump and where it plans to invest $400 million over the next three to four years.

The company, the number 2 tyremaker in India, also faces growing competition from cheap replacement tyre imports from China that rose 60 percent in the fiscal year that ended on March 31 from a year ago, industry data showed.

Apollo's bid for Cooper collapsed after legal battles, scuppering its plans to break into one of the world's biggest tyre markets.

"We are now looking at the US market through organic growth," Chief Financial Officer Gaurav Kumar said in an interview on Thursday.

By 2020, Apollo's revenues outside of India are expected to rise to 40 percent from about 35 percent today, as it expects to double its sales from Europe and ASEAN (Association of South East Asian Nations) over the period, said Kumar.

In 2014, the year after the Cooper bid collapsed, Apollo said it would invest 475 million euros ($540 million) to build a new manufacturing plant in Hungary. That plant will begin production in 2017.

"Once Hungary comes on stream we will have much more cost competitiveness to sell in the US. We would begin with hiring a small team... and grow from there," he said, adding that the company is still studying how big the team will be.

Kumar said the company also hopes to supply to carmakers in Europe such as Volkswagen AG, Daimler AG and Suzuki Motor Corp that build cars close to its upcoming plant in Hungary.

The company will next year start raising, in tranches, up to $250 million of debt towards its planned $400 million investment in India.

With the Indian government working to kickstart stalled road infrastructure projects, Apollo, which mainly manufactures tyres for trucks and buses, is planning to double capacity at its plant in Chennai in southern India.

Apollo, which aims to become one of the world's top 10 tyremakers in a few years, could set up a third plant in an ASEAN country if demand rises and revenues in the region more than double from less than $100 million now, said Kumar.

 

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