Apollo considers Mexico dealership network

By Stephen Downer, Special to Tire Business

GUADALAJARA, Mexico — India's Apollo Tyres Ltd. is mulling whether to open a tire dealership network in Mexico this year or next.

In a full-page advertisement that appeared in the March-April issue of Mexico tire industry trade association ANDELLAC's bi-monthly magazine, the tire maker invited those interested in possibly being part of the network to contact Mauricio Castañeda, who heads the company's sales operations in Mexico, the Caribbean, Central America and the Andean region.

Based in Gurgaon, in the northern India state of Haryana, Apollo acquired Dutch tire maker Vredestein Banden B.V. for an undisclosed sum in 2009.

Apollo Vredestein B.V.'s head office is in Enschede, the Netherlands, where it has a manufacturing plant. The company also makes tires at a new facility in Hungary— opened in 2017— and at four plants in India under the brand names Apollo and Vredestein.

Mr. Castañeda, who is based in Guadalajara, responded via email to questions submitted by Tire Business.

Tire Business (TB): When does Apollo Vredestein intend to open a dealership network in Mexico?

Mauricio Castañeda (MC): “Apollo Tyres is looking at setting up its dealership network in the latter part of the year or the beginning of next year.”

TB: How many dealers will there be in the network?

MC: “We are currently evaluating the network proposals and will soon finalize our strategy.”

TB: Why has Apollo Vredestein decided to set up a network in Mexico at this particular time?

MC: “Mexico is the largest market in the region for Apollo Tyres. However, we have serviced Mexico and other countries in Central America from India and Europe. With the new greenfield plant in Hungary recently inaugurated, we are in a better position to service Mexico now. Setting up a dedicated network is part of the strategy to have a sharper focus on Mexico.”

TB: What will the focus of your sales efforts in Mexico be — tires for light vehicles or tires for commercial vehicles?

MC: “Currently, we are evaluating network options for all main categories — TBR, LTR, PCLT, agricultural and OHT. We also offer a full range of bias truck and light truck tires.”

TB: Will it be a full-service dealership network or just a sales network?

MC: “We are evaluating various options and no final decision has been taken.”

TB: How much will Apollo Vredestein invest in setting up the dealership network?

MC: “We are evaluating various options and no final decision has been taken.”

TB: How competitive a market is Mexico and why do you think that Apollo Vredestein can succeed here?

MC: “The Mexican market is extremely competitive and requires a very compelling value proposition for both the network and the end users. We have similar experiences in countries in Europe and in India, and we hope to leverage our understanding of these markets to create a localized strategy for Mexico.”

TB: In which other Latin American markets does Apollo Vredestein sell tires?

MC: “We have a distributor network in most of the Latin American and Central American markets like Brazil, Colombia, Bolivia, Ecuador, Trinidad & Tobago, Nicaragua and others.”

TB: What are the biggest selling Apollo Vredestein tires in other Latin American markets — tires for light vehicles, tires for agriculture or tires for commercial vehicles?

MC: “TBR and PCR are our biggest sellers in the region. We also experience strong demand for our bias product lines.”

TB: How many years has Apollo Vredestein marketed tires in Latin America and which are the company's most successful markets?

MC: “The Vredestein brand has a legacy of over 100 years, and we have been in the Latin American market for a long time. In fact, some of our customers go back almost 20 years.”

TB: How many tires would you expect to sell in Mexico in the first two or three years after the establishment of the dealership network?

MC: “We would try to achieve average market share within three years of the network's establishment.”

TB: Knowing that companies such as Pirelli, Michelin, Bridgestone and Goodyear are well entrenched in Mexico and either have manufacturing plants here or are constructing plants, is it likely that Apollo Vredestein will build a manufacturing facility in Mexico in the years to come?

MC: “Currently we are focusing on the Hungarian plant and have no plans to set up a manufacturing base in Mexico.”

TB: What qualities are you looking for in the companies that have shown an interest in working with you?

MC: “We are looking for dealerships with strong fundamentals in terms of consumer/retailer base, infrastructure, financial stability, good will in the market and a willingness to work closely with us in order to establish a new brand.”

TB: Where will Apollo Vredestein's head office in Mexico be located?

MC: “The current office is in Guadalajara and there are no plans to relocate for the moment.”

Apollo Tyres fiscal 2016-17 operating profit was unchanged from a year ago at $290.7 million, while net profit for the year ended March 31 slipped 2.1 percent to $159.9 million.

Net sales jumped 11.1 percent to $1.87 billion, as growth in Europe (up 36 percent) and other overseas markets (up 132 percent) overshadowed the firm's 1.9-pecent increase in its core Asia-Pacific/Middle-East/Africa markets, according to the company.

India accounts for 63 percent of the tire maker's sales, followed by Europe at 32 percent and other markets at 5 percent.

The company inaugurated its first greenfield plant outside of India — a $505 million car and truck tire plant in rural Hungary near Budapest — in early April.

The factory, Apollo's sixth worldwide and second in Europe, opened with the capacity to produce 5.5 million passenger and light truck tires and 675,000 commercial vehicle tires per year once Phase I is complete, the tire maker said. It will produce both Apollo- and Vredestein-brand tires primarily for the European market.

Stephen Downer is a Mexico-based freelance writer who covers that country and Latin America for Tire Business and its Latin America e-newsletter.