As part of its commitment to global expansion, Apollo Tyres Ltd. celebrated the opening of its new manufacturing facility in Hungary on April 7. The new plant is located 44 miles outside of Budapest.
An estimated 1,400 guests gathered inside the cavernous new facility for the opening presentations, celebration and factory tours. The formal address was also broadcast live to another 16,000 members of the “Apollo family” watching worldwide.
With the smashing of ceremonial coconuts by Apollo Tire Chairman Onkar S. Kanwar and Hungarian Prime Minister Viktor Orban, followed by the pressing of a giant “on” button, audiences watched on large screens as the first tire – a 16-inch all-season radial – was produced from within the pristine factory.
The plant is an cost an estimated $505 million for the India-based tire company and is the first greenfield facility outside of India and the company’s second production plant in Europe. Situated on a 7,200-acre parcel of land off a main highway, the new facility is highly automated, using robotics and state-of-the-art technology to deliver high quality and automated consistency from compounding to construction to final product.
Once fully operational, the plant is expected to produce 5.5 million passenger and light truck tires and 675,000 commercial vehicle tires under both the Apollo and Vredestein brands. Tires built will serve the replacement market as well as future OE business within Europe.
The new plant marks the sixth global tire manufacturing facility for the company. Construction outside Budapest began in April 2015. The inauguration also marks the 40th anniversary for the tiremaker.
Next Stop: America
While the new Hungary plant is a key component to support the company’s growth in the European OE marketplace, the United States is the “next stop,” according to Neeraj Kanwar, Apollo’s vice chairman and managing director.
“I think the U.S. plays a very important part for us in our growth strategy,” said Kanwar. “Now that we have two domestic markets – India and Europe – our next stop has to be the U.S.”
“As you know Steven [Smidlein] has joined us as senior vice president of North American market, so there’s a lot of emphasis on building the marketing and the brand,” said Kanwar, who hired Smidlein in April 2016. “That’s how we want to grow…. but I think creating a brand in that market itself is challenging.”
Kanwar said he’s especially pleased with both the Apollo and Vredestein products and their performance when benchmarked against top competitors in Europe.
“We believe we have a good story; we believe we have good products, highly technical products,” said Kanwar. “Today I am happy to say that we are clearly the radial leaders in India, whether it’s truck or passenger.”
“Given the confidence we have in technology, we believe we can create a market and a brand in the U.S. Currently we are selling very small amounts in the U.S., but there is a whole R&D journey for the next two years that will take our [product] coverage to 70% of what the U.S. market needs – today we are at 5%,” he adds.
Kanwar said the priority is doing the “hard work” when it comes to getting the right products ready for the U.S.
According to Smidlein, the two-year go-to-market journey has already begun. Market research and focus group feedback between dealers and developers is underway. In the meanwhile, Smidlein is busy building a strong team and putting a structure in place for anticipated market growth as distribution remains a challenge.
Kanwar also confirmed that their next manufacturing facility will be in the U.S., though no specific date or plans are being considered.
“Once we create a market and a brand, obviously freight is expensive so we would have to look at setting up a tire plant [in the U.S.],” said Kanwar. “Now, I’m talking four to five years from now. But the top [priority] is setting up a market for the U.S. customer and that is what Steven and his team is doing.”
When asked about strategy to infiltrate the U.S. market, already thick with competition, Kanwar responded with focused confidence.
“Europe is also an overcrowded market. You’ve got many more brands here than the U.S. and you also have the Chinese. But we’ve clearly now have a 3% market share in Europe. That’s on the back of providing good technology to the customer, benchmarking our tires against the best and achieving those positions as far as testing is concerned,” he said.
Kanwar adds that once the tiremaker is able to prove that its tires are unique and the pricing is good, dealers will see the value of Apollo’s tires.
Kanwar also emphasized the importance of research and development. “My idea is to create a small cell that will only look at U.S. based in the Netherlands in our European R&D center and then have [several] people on the ground in the U.S. working under Steven to give market feedback and detailed analysis to the guys over here so that we can come out with the right product.”
“I’m not in a rush. I want to enter the market properly. I don’t want to make mistakes. You only get one opportunity given that it’s such a crowded market. So we need to go with the right product, the right brand strategy, the right retail strategy and then go in. If we are able to do what we need to achieve the coverage of the market – today we are at 5% we want to get to 70%. It will take us two years. So I see that within five years, I believe that 10% of Apollo revenue [globally] should be from the U.S.”