BKT USA Inc. is on track to build its first manufacturing plant in the U.S., according to Minoo Mehta, president of the U.S. subsidiary of India's Balkrishna Industries Ltd. (BKT). Mr. Mehta discussed his company's successes as well as the challenges ahead in an interview with Tire Business.
Q: How would you describe business thus far in 2019?
A: BKT deals with only off the road tires. Hence, our business is divided into various off-road segments.
Farm: The ag industry has been hit the most in the Midwest due to severe weather conditions. Millions of acres have not been tilled this year. The deteriorating trade relationship with China has put severe pressure on exports of ag products.
Prices have slumped, and farmers are hurting. All these, ultimately, affect the demand of ag tires.
Industrial and construction: Although the infrastructure bill was supposed to be a pre-election promise of Mr. Trump, it has not materialized, yet. The demand for tires has managed to stay stable in spite of this. The necessary spurt and impetus needed is still awaited from the government. It is unfortunate that government policies affect the economy and the demand of tires.
Large OTR tires: The demand for BKT tires has increased substantially in this segment, because earlier our range was small, and a reputation for good quality was yet to be established. Now that both are coming in play, repeat demand is on a very healthy pace.
Q: Can you provide an update on your announced plans to build a plant in the U.S.? How soon will a site be selected?
A: The sites that we had selected did not go through, and we are still looking for the ideal location with all our expectations being met. Looking at the political climate in the U.S., we are in no hurry to finalize. The right timing is everything, and when the timing gets right, BKT is known to take swift action.
Q: Please review the expected square footage/capacity/number of employees at the plant? Is the expected cost $100 million?
A: The projections have not changed. We will begin low, start slow, rise higher and catch fire. We are projected to start with $120 million initial investment and with around 120 people and grow further.
Q: Has the capacity upgrade for tires and carbon black been initiated at your plants in India? How far along is the process? What is the timeline for completion?
A: The carbon black plant is up and running and scheduled for a second expansion by February of next year. The new tire plant at Bhuj (India) is continuously adding capacity and the growth in production will be primarily in ag radials, OTR radials, industrial and construction tires.
Q: What are some of the pleasant surprises you are seeing in the industry?
A: Government policies to restrict China flooding the U.S.A. tire market with Chinese government- induced lower prices is the biggest surprise. It has certainly helped in stopping third and fourth tier, low- quality products coming to U.S. markets. It will help end-users in the long run both in terms of longer life and for a safer and greener environment.
Q: How have tariffs and/or antidumping and countervailing duties affected your company? How are you reacting to them?
A: With tariffs, AD and CVD on Chinese goods, the Chinese have set up factories in neighboring countries, thereby continuing the availability but at slightly higher prices. More tires will come from the new factories as they ramp up production.
The lower-priced products always affect upper-price tiers of the market by creating upward pressure on price point. We are in the upper tier and we must continually work towards our value offerings and distance ourselves from the lower-price segment.
Q: Where do you see the industry markets heading during the last half of 2019?
A: The farm industry will be affected severely this year. Other segments will continue to be stable. The government will need to intervene to stop the bleeding for the farmers, and with it being close to election year, things should change for the better.
Q: What kind of trends are you seeing in the marketplace? How is your company reacting to them?
A: The trend is for vehicles to carry more load, run faster, be maintenance-free and cost-effective. Equipment and tire companies will need to keep up with the pace.
BKT keeps up with the changing environment by meeting the needs of the end-customer head on. If the end-customers identify and appreciate what BKT brings to the table, then distributors and dealers will increase their stock levels to keep up. The growth is then organic.
Q: Do you expect to roll out any additional products in 2019? What will they be and what sectors will they serve?
A: We bring out 80 to 100 new SKUs a year. We already have over 2,500 SKUs and continuously add more, having the advantage of our in-house mold factory.
We are adding new sizes and patterns in almost all categories like Harvester, IF and VF series ag radials, all-steel radial flotation ag, MPT, terminal tractor, underground mining, large OTR, forklift, industrial, scraper OTR, scraper ag and forestry tires. We continuously upgrade and tweak the quality for better performance. The BKT brand is being recognized by end-customers for quality products.
Q: Do you foresee any price hikes in the second half of the year?
A: So far, the raw material index is stable. If it changes, then only a slight adjustment may be required.
Q: Do you have an advertising program strategy?
A : BKT has a very robust and aggressive brand advertising program. We are very aware that this investment pays dividends in the long run. Our company financials reflect our commitment towards building our brand. We are very watchful of the ever-changing dynamics of the social media fueled by AI, big data, hybrid clouds, 5G and other technologies.
Q: What is your online strategy? How is it evolving?
A: We definitely see the advantage of an online strategy and are gradually increasing our spending in this segment. The demand of tires in the OTR segment is still slow to be generated through an online strategy, but the brand remembrance make it necessary for us to be very watchful. It is slowly but surely evolving.
Q: What are some of the challenges of the industry going forward? What keeps you up at night?
A:The biggest challenge is dealing with the turmoil created by the political moves of the government. It is unfortunate that government policies affect the economy and the demand of tires.
We need some stability from the government side and some fast action to meet the crisis that their policies create. Right now, the farmers are hurting big, and there is no help in sight with both parties unable to meet and come to some solutions. That is very worrying.