Apollo Tyres to invest Rs 1,500 crore in Chennai plant

Apollo Tyres is planning to invest around Rs 1,500 crore to expand its truck bus radial tyres capacity at its Chennai plant.

Satish Sharma, president - APMENA Region, Apollo Tyres said that the company is planning to increase the truck bus radial capacity to 9,000 units a day from 6,000 units a day currently.

"We have reached a stage where capacity is going to be a concern, since capacity utilisation would reach 100% by June. To cater future demand it was decided to expand the capacity," said Sharma.

The plant also has the capacity to manufacture 16,000 tyres for passengers cars in a month. The current capacity utilisation for the same is around 80%. 

So far the plant attracted investment to the tune of Rs 2,100 crore. 

The Chennai facility along with the Baroda plant exports around one lakh tyres in a month. The bus truck radial exports currently stand at 15,000 units a month. Currently, the Chennai plant contributes nearly 30% to Apollo Tyres' demand.

The company is also planning to invest around Rs 400-500 crore over the next five years to expand its off-highway tyres manufacturing capacity in Kerala. 

Currently, the Kalamassery plant in Kerala manufactures 30 tonnes of off-highway tyres. This will be increased to 110 tonne in the next 18-24 months. During the first phase, which was completed recently, the company invested Rs 50 crore.

Sharma said at the industry level there is pressure on the revenue side, while margins are good. Weak economy, low demand, import of Chinese tyres, which grew nearly 60% year-on-year is putting pressure on the industry, he said.

"The industry has taken up the issue with the government since it is not only affecting the manufacturers, but also customers as quality is a concern. We are yet to see any concrete response from the government," said Sharma. 

Chinese imports contribute nearly 20-22% of the replacement market now.

Overseas strategy

Apollo Tyres is looking to raise export revenues from its Indian operations to 15% in 2015-16 from the current 11%. 

The company has set up legal entities, mainly for sales, in Bangkok for ASEAN markets, Dubai for Middle East, North, East and West Africa, while the South African entity focusses on South African Markets. All SAARC countries are catered from India. Apollo Tyres is now planning to set up a legal entity in Malaysia.

The company's strategy is to first prepare a distribution foot print and seed the market ahead of potentially manufacturing there.

Thailand now caters to both local domestic and ASEAN markets. Sharma said Apollo Tyres would look at manufacturing in other ASEAN countries too.