Looking back at FY2018, I see it as a year of continuous efforts around our strategy, with a focus on capacity expansion and building the brands. We inaugurated our sixth manufacturing plant in Hungary, added capacities in our plants in India and announced another Greenfield in India. The latter part of FY2018 saw the Company announcing a deeper connect with football in India, the UK and Hungary. From an industry perspective, the big heartening news was that the Government of India acted upon the industry’s plea to impose custom duties on the low-cost Chinese imports.
Looking at FY2019, I continue to be bullish on our key markets – India, Europe and ASEAN. The economies have displayed strong growth and with fundamentals in place, I see them moving northward.
Apollo Tyres’ Vision 2020 – ‘To be a premier tyre company with a diversified and multinational presence’ is the driving force towards integrated thinking. The organisation has identified key priorities to realise Vision 2020 – ‘build leadership in India’, ‘premiumisation in Europe’, and ‘explore strategically attractive markets where we are currently not represented.’
In the CV tyre segment, the Company is a market leader in the TBR segment and closed the FY2018 with an estimated 24% market share and a ~1.5% gain over the last FY. The Company’s replacement market for TBR outpaced the industry growth by a wide margin to post a 19% increase as against the industry’s 11%. Cutting- edge R&D, highly-efficient factory processes and wide tyre range ensured that the OE business grew at a healthy clip and the tyres became the preferred choice of Indian and global Original Equipment Manufacturers (OEMs), including Tata Motors, Ashok Leyland, Eicher Motors and Bharat Benz.
In the other key segment, Truck Bus Bias (TBB), the Government’s introduction of anti-dumping duty and pan-India GST resulted in the decline of the low-cost Chinese TBR imports during the year. Improved product portfolio across sub-segments such as steel, mining and intermediate CVs helped the Company inch up its market share in the TBB segment and cement its pole position with an estimated 27% share.
In the Passenger Car Radial (PCR) segment, the Company grew at a healthy clip. The robust passenger car sales, along with GST, has had a direct effect on both key markets in the PCR segment – OE and replacement. Like the CV segment, the Company had multiple product launches in the PCR category. In the general car segment, the Company launched the Altrust brand with a promise of unmatched performance and best-in-class durability meant for long hauls along with excellent comfort and safety. In the fast-growing SUV segment, the Apterra HT2 was introduced, which was specially designed by Apollo Tyres’ R&D to offer excellent comfort and a super silent ride. The Alnac 4G continued to grow by double digits in the premium range tyres category for hatchbacks and sedans. To become a full range player within the PCR segment, the Company launched the Aspire 4G tyre for the luxury vehicles. This tyre provides excellent comfort backed with exceptional handling at high speeds, along with the necessary power and grip to the vehicle. Working closely with the OE customers and aligning the Company’s R&D to develop products to meet their stringent requirements, the Company is now the dominant supplier to Indian OE customers with the Company’s tyres being OE fitted in 10 of the top 15 cars in the country. Key wins during the year included Innova Crysta from the Toyota stable and Maruti Suzuki’s new Swift and Desire cars for domestic and global markets.
In the segment, the Company focussed on three key sub-segments – Industrial, Earthmovers and Agricultural. Strengthened product range, targeted distribution network and new customer acquisition saw the Industrial business segment growing by 25% and the Earthmover business by 15%. The Industrial and Earthmover segments were also strengthened by the introduction of all-new 25-inch range of 14 new products targeting three different segments – Underground Mining, PORT and Wheeled Loader. New products such as VIRAT 23 for hard soil application and VIRAT Harvest, a combine harvester product, ensured a 1% market growth for the Agricultural business.
The big news for the region was the capacity addition as the manufacturing plant in Hungary went live in the beginning of FY2018. This boosted the Company’s efforts to engage with premium European OEMs. During the year, the Company gained success and its Vredestein brand was selected as a fitment on the Volkswagen Polo, SEAT Ibiza and Ford EcoSport. For FY2018, the sales volumes for the PCR business for Europe remained flat, but an improvement in the product mix helped the region post a 3% growth for the year. Launch of new products and start of a relationship with the OE segment were the reasons for an improvement in turnover and market share in an overall declining market.
The year under review saw the raw material cost increase by ~ 10% over the last fiscal. The major contribution in this cost push was from Carbon Black, Synthetic Rubber, Nylon Fabric, Chemicals and Natural Rubber. Oil prices during the year continued to climb upwards. The brent oil prices crossed the psychological mark of USD 70 per barrel in the month of January 2018. Increased compliance by OPEC members to agreed production cuts supported by other large oil exporters has kept the oil prices high during the financial year. The present OPEC production cuts are likely to extend till the end of 2018. The oil prices have now found a new normal in the band of USD 60 – 65 /bbl as against USD 50 – 55 /bbl in the last year
Natural Rubber in India continued to attract 25% Customs Duty. The port restrictions on NR and also the pre import condition on NR imports under advance licences continued during the year. India’s requirement of NR for radial application continues to grow rapidly with the increase in the production of truck and bus radial tyres. This increased requirement for radial application has to be met through imports. The duty on import of Nylon Fabric was raised from 10% to 20% in the month of October 2017.
FY2018 for the APMEA region began with a clarion call for the Indian market to cross the Rs. 10,000 crore milestone. The entire financial year saw the India team relentlessly focusing on this goal by launching new products across segments, strengthening the dealer network, increasing investments in branding, winning new OE customers and creating unique and innovative initiatives for dealers and customers and in the process ended the year with increased market share in various categories.
Beyond India, the Thailand market saw high growth in the overall OHT segment including the Agriculture segment. With a strategy of introducing products catering to specific markets and for specific applications, the Company has started witnessing traction in countries like Malaysia, Vietnam and Myanmar among other countries. Despite availability of low cost Chinese tyres in these countries, the Company saw healthy double digit growth from the region. The Company expanded its two-wheeler business beyond India with the launch of the tyres in Bangladesh and Sri Lanka.