Demand bounces back across product categories since easing of localised lockdowns: Apollo Tyres

“In terms of the demand environment, we saw maximum impact of covid second wave and the lockdowns in the month of May, and since then, we have witnessed a steady demand recovery. The demand is coming back strongly across product categories. The truck OEM demand are the slowest to pick up, which is expected to take another quarter to speed up”, Apollo Tyres Chairman Onkar Kanwar told ET, adding that in the replacement segment, across categories, the company has seen good momentum.

Given the traction, Apollo Tyres has not made any changes in its business plans, despite the outbreak of the second wave of the pandemic. “For FY’22, we had already announced a capex of Rs 1800 crores earlier, which we are going ahead with. We continue monitoring the situation closely to see if there is demand slowdown, which may need minor capex deferment. But surely there will not be much deviation from this capex figure for FY’22,” Kanwar said. Capacity utilisation across the company’s manufacturing units stands at over 80%, currently.

To de-risk operations, the company has been growing its overseas markets. The company has launched a comprehensive brand offering in North America, backed by a full range of Apollo and Vredestein brand of tyres for commercial and passenger vehicles. Apollo Tyres aims to continue to grow the business organically in US.

In fact, Apollo Tyres’ international business has fared better than India, especially in the past quarter, the company said. In Europe, the company has gained market share in truck, bus and farm tyre segment.

Kanwar said, “We’ve been building the overseas markets from the last several years, for not being dependent on one geography. We have developed our markets in North America, South America, the ASEAN-Middle East region as part of our strategy to de-risk ourselves and not being dependent on just one market alone. There’s a lot of R&D, brand building that has gone in in these geographies. And in such times as last quarter, we upped the volumes in these geographies.”

Mid-term, Apollo Tyres has set a target of clocking revenues to the tune of $ 5 billion (approx. Rs 36,600 core) annually, up from Rs 11,733 crore in FY21. With the global pandemic accelerating the pace of digitalisation, and several changes in the autonomous industry, including electrification and autonomous driving, Kanwar said these would be key focus areas for the company in its growth journey.

As regards the rise in input costs, Kanwar said they have been on an upward trend from the last several months and putting pressure on margins. Even in the current quarter, the raw material prices are expected to be up 5%, as compared to the previous quarter. “To negate the rise in input costs, we have already taken few price corrections, in addition to several cost control measures internally, which are an ongoing process”, Kanwar said, adding the slowdown in Chinese economy due to the fresh wave of there, is covid now resulting in some softening of raw material prices.