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Two-wheeler segment to contribute 10% to revenue: Apollo Tyres

With the launch of Apollo Acti series for bikes and scooters, Apollo Tyres has now entered into the two-wheeler segment.

Speaking to CNBC-TV18, Neeraj Kanwar, Vice Chairman and Managing Director, Apollo Tyres , says the company’s tyre basket has become complete with this launch.

The launches cyrrently cover 85 percent of the entire two-wheeler market and the rest 15 percent, to be launched in the second phase, will be high end technology tyres, he says.

Kanwar says the company is targeting a capacity of around Rs 1,20,000 tyres per month in next three to six months. “When I look at a two to three year horizon, the capacity that we are looking at is close to 5,00,000 tyres per month,” he adds.

Further, he says the two-wheeler tyre segment wil contribute 10 to Apollo’s total revenue.

Below is the transcript of Neeraj Kanwar’s interview with CNBC-TV18\’s Anuj Singhal and Sonia Shenoy.

Anuj: If you could explain the rationale for making this late entry into the two-wheeler segment?

A: As you know we are leaders in the truck business and in 2000 we launched our passenger car radial journey. Firstly I don\’t think it is late entry point. It is a big historic day for Apollo to come out in the two wheeler segment. A lot of research has been done for the past 18-24 months and what the technology teams have done is far better than what is available in the Indian market with the benchmarks over there. So, we are very confident that this new step into the automotive market is going to make a huge success for us in India.

So, really now Apollo has all types of tyres with this range coming in. We will have a whole complete basket of tyres to be sold to the dealer network and really we are benchmarking ourselves with the best in the world. So, really on the back of good technology and on the back of making good brands we have tried to launch this yesterday. Already the results are very good since yesterday and today there is a lot of hype in the market. Lot of dealers have picked up these tyres. So, there is a lot of hype and so we are seeing very positive response.

Sonia: Can you tell us what exactly the growth could be for Apollo Tyres, from the two wheeler tyre business itself and over the next two to three years, how much could two wheeler tyres contribute as a part of your total business?

A: It is too early in the day, but we are in the first phase. The tyres that we have launched are for 85 percent coverage of the two-wheeler market. The second phase will be 15 percent which is going to be on the high end technology tyres. So, specifically to higher bikes, higher radial tyres for those bikes. So, initially, we are looking at a capacity of around Rs 1,20,000 tyres per month which we believe will be done in the next quarter or in the next six months as I just said that there is a positive response. And when I look at a two to three year horizon, the capacity that we are looking at is close to 5,00,000 tyres per month.

Out of the revenue basket, it will be very small because these tyres are small, the value is very small. So, out of the revenue basket, it will be a very small, it will be around 10 percent of our total revenues, in year-III, year-IV. But in terms of reach, it has a far greater reach than other types of tyres. It lets you get into the rural areas of India. And that is where we are targeting. We are targeting not only urban, but rural more so. It goes into the interiors of India and so, once we reach the 5,00,000 mark, then we will look at manufacturing these tyres on our own. Look at a green field side or a brown field side, what is available in India.

Anuj: It will be small to begin with as you said but going forward over the next 3-4 years period will it have any kind of impact on your blended operating margins?

A: It will have a positive impact on the blended margin because you have to understand a dealer today in India is a composite dealer. He deals in every types of tyres. So, if you are giving him truck you have to give him four wheel and a two wheel tyre. So, till now we were missing that. So, it will also have a rub off effect on how our passenger car tyres story grows and that is a profitable basket, that is a basket which is above greater than 15-18 earnings before interest, taxes, depreciation and amortisation (EBITDA) margin. So, it will have rub off effects on the other side of our brand basket and that is what we are really looking at.

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