Ag tire maker BKT finds balance in U.S. market growth

COPLEY, Ohio — Make no mistake: North America has been and will continue to be a crucial market for the growth of specialty tire manufacturer Balkrishna Industries Ltd. (BKT).

It is so much of a priority that Arvind Poddar, chairman and managing director of the Mumbai, India-based tire maker, said the company diverted product to North America during the COVID-19 pandemic, despite high demand in other regions of the world.

"Our ultimate goal and thinking is that out of 100% (of BKT's global tire sales), this market should be about 25% to 30% in metric tires," Poddar told Tire Business during an exclusive interview held at the tire maker's North American headquarters in Copley.

He said BKT will continue to export tires to North America.

However, plans for a U.S. tire plant, which Poddar announced in October 2018 during his Tire Industry Hall of Fame induction acceptance speech, are "off the table."

BKT pursued building a plant — estimated at the time to be a $120 million investment — into 2019, evaluating several sites across the U.S. Later that year, however, the company suspended plans for the factory, citing "business uncertainties" related to difficult macroeconomics and the "volatile" climate conditions.

Poddar said that if BKT were to build another plant in the future, it would be in his home country. BKT operates four plants in India, including one in Bhuj, Gujarat, which opened in 2013.

"There is no problem in building a plant anywhere in the world," Poddar said. "But is there somebody willing to pay for it? Naturally when you are going to produce in any number of countries, the cost is going to be higher."

He said nobody is willing to pay more for the same tire.

"We are fine. There is no point in putting a plant in America or North America or anywhere else in the world (other than India)," he said.

BKT has invested heavily in its plants in India, investing between $500 million and $550 million in a series of expansions over the past several years, including:

• A chemical plant on the grounds of the Bhuj factory complex in northwest India for manufacturing carbon black;

• A new plant in Waluj, Maharashtra State, to replace a 30-year-old farm/industrial/OTR tire plant nearby; and

• Modernizing plants in Bhiwadi and Chopanki, located in India's northern Rajasthan State.

Completing the chemical plant in Bhuj has been fortuitous for BKT, particularly in the wake of Russia's invasion of Ukraine and the sanctions that ensued, restricting the import of carbon black from Russia.

At one time, Poddar said Russia accounted for 92% of the carbon black business in Europe. BKT began producing carbon black a little more than two years ago, and today, Poddar said his company sells 30% of its carbon black capacity to other tire makers.

Poddar lauded the quality of carbon black that BKT produces, which he said is made with virgin oil, without using charcoal as a cost-savings ingredient as other carbon black manufacturers use.

"We are very clear that the main purpose of producing the carbon black is for our use."

Carbon black, he said, plays "a very particular role in improving your end product, which is tires." With that in mind, he said BKT tests its carbon black at its laboratory to ensure its quality and won't use it until it passes those tests.

"By using our own carbon black, not only because of the quality, but certain companies' consumption (of carbon black) has gone down," he said. "We want to further improve the product quality. "

By year-end, Poddar said BKT should complete its project to increase capacity at the Bhuj plant to 200,000 metric tons a year from 120,000 tons.

Of that output, about 30,000 tons of specialty carbon black is manufactured, which is sold to other businesses, such as ink producers.

"They need a high quality (carbon black)," he said, "not a tire grade or rubber grade, but a specialty grade."

"We are the only company in the world to have integrated carbon black (production) in our plant," Poddar said.

Earlier this year, BKT manufactured the first radial agricultural tires at the Bhuj plant and is ramping up manufacturing capacity there to 50,000 tons per year, while boosting output of 51- and 57-inch rim-diameter OTR tires at the factory.

As a player that competes exclusively in OTR tire markets, BKT is using sports to market itself to a broader global audience. The tire maker has various sponsorship deals in soccer, rugby, curling and Monster Jam, a motorsports series, primarily held in North America, that features several competitions featuring trucks with oversized tires.

"Whether you are 3 years, or 80 years, everybody is watching sports," Poddar said. "So that is the best media to penetrate worldwide."

The goal, he said, is to make BKT green as popular as, say, Coca-Cola red.

"Why should we not be like the red color?" he asked.

The tact seems to be working.

The company saw a 6% to 7% growth in sales from 2019 to 2020; a 31% increase from 2020 to 2021; and it is on pace for 25% growth this year.

The company, which began making OTR tires in 1987 and now offers 3,200 SKUs, eclipsed $1 billion in sales in 2021 for the first time.

With global sales in 2021 of $1.05 billion, BKT is considered the 32nd largest tire maker in the world, according to the most recent Tire Business Global Tire Report.

In five years, Poddar said BKT is targeting a 10% share of the world's OTR tire sales, where Bridgestone Corp., Michelin Group, Titan International Inc. and the soon-to-be-combined Yokohama Off-Highway Tire/Trelleborg Wheel Systems venture are considered the major players.

"The demand for our product all across the world is growing. There are definitely many challenges (after the pandemic), but we've turned those challenges into our fortune."

Poddar credits the quality of the product, its policies, its service and its branding as pillars of BKT's growth.

"Everybody appreciates our quality, which is on par with core leaders," he said. "We are very strict on our policy. We believe very strongly in service. We are creating a brand. We are spending money. A lot of companies, not only in the tire segment, but all across as the pandemic started, they slashed down their marketing budget.

"But we expanded and increased our marketing because we believe in our product, and we believe in our brand."