Apollo's Play in Europe
Image: Amit Verma
ack in 1994, Neeraj Kanwar honed his skills in the family’s tyre business on the streets of Piragarhi, on the outskirts of Delhi. Apollo Tyres, which till then mostly sold tyres for trucks and buses, had ventured into serving the two-wheeler segment. Apollo had just introduced a new brand called Black Cat for Bajaj Motors’ ubiquitous scooters. The younger son of Chairman Onkar Kanwar was asked to make the brand known to its customers. Neeraj was up to the task. Every time the traffic signal at Piragarhi turned red, Neeraj would run and change covers of the scooters’ spare tyre. The new cover would have the Black Cat visual on it, of a scooter driver about to skid but saved by two “black cat commandos.”
The initiative did not take off. Old timers believe that the brand could not survive by itself due to “the lack of focus on the mother brand.” The Gurgaon-based company never ventured into the two-wheelers segment again. But it has emerged as the second largest tyre manufacturer in India.
Now, after 16 years, Onkar and Neeraj are taking another risk. The market is new, the customers, unlike in India, are more conscious of the quality than price and the product has to be technology driven. For the father-son duo of India’s first tyre family, this initiative is critical in making their company “truly” global.
Apollo Tyres wants to sell passenger car tyres in Europe, a 250-million-unit -a-year market. It is one of the world’s largest and perhaps the most sophisticated tyre market.
Since September 2010, tyres with Apollo’s stamp have started selling in Germany, the UK, Italy and the Netherlands. “We are already selling around 30,000 units a month now. But we need to breach the 100,000 mark to start getting noticed,” says Neeraj.
Apollo has already spent four years on international roads. In 2006, it bought Dunlop’s operations in Africa and Netherlands-based Vredestein three years later. Apollo’s revenues zoomed from less than $500 million in 2005 to $1.7 billion in 2009. But till now Apollo has depended on these brands to sell locally. Now the Kanwars want the overseas customers to see their homegrown brand Apollo, test it, like it and buy it. And that will be a long, rough ride.
The European market is dominated by the big four tyre players — Bridgestone, Michelin, Goodyear and Continental. And if these giants are not enough, European customers also have their minds clogged by another 300 odd brands. “A customer in the United Kingdom might instantly recall two brands and if pushed, maybe 10. Making a presence in such a market is tough,” says Anthony Christopher, editor of Essex-based industry magazine Tyres & Accessories. Worse, this might not be an ideal time to enter the European tyre market, which is growing at less than two percent annually.
But Neeraj and his father “strongly believe” that selling Apollo overseas is the only way the tyre company can achieve its next five-year target: Revenues of $5 billion and rank among the top 10 tyre makers in the world. The latest rankings released by European Rubber Journal in December have Apollo on the 17th position for the year 2009. But can’t they do the same by selling more tyres in the booming Indian market, especially when Apollo tyres are priced at least three percent more than the nearest rivals? “In India, we face a massive shortage of natural rubber, the basic raw material for making tyres in India. The gap is as big as 2 lakh tonnes. This makes rubber very expensive and impacts the overall margins, which are less in India compared to Europe,” says the senior Kanwar. And success in Europe, adds son Neeraj, will pave the way to enter other markets like Australia, South-East Asia and South America. “A brand successful in Europe can easily enter other markets,” he reasons. Within five years, the Kanwars want to source 70 percent of Apollo’s revenues from overseas operations, from the present 39 percent.
“And we want to do it while remaining the market leaders in India,” adds Onkar. Apollo will commission the second phase of its new plant in Chennai in the first half of 2011, helping it increase volumes. “The new plant will make sure that we retain our market position in India,” he adds.