Apollo lands: Tire maker brings commercial portfolio to N.A.

ATLANTA — To paraphrase astronaut Neil Armstrong: Apollo has landed. With a commercial truck tire portfolio. In North America. To compete against the Tier 1s in the market.

Indian tire maker Apollo Tyres Ltd. — which last year (re)launched the Vredestein brand of passenger tires in North America — is rolling out a range of Apollo-branded truck/bus tires in the U.S. and Canada after several years of testing its products throughout the continent.

This launch involves not only a product line new to the North American commercial truck industry, but also a brand name that is as unfamiliar in the U.S. as it is a brand leader in the company's home market of India, where it claims a 32% market share.

This latest product introduction complements the company's ambitious Vredestein rollout in North American markets last summer.

"My vision has been always to become a truly multinational global Indian company," Onkar Kanwar, chairman and founder of Apollo and architect of the company's value-driven strategy, told Tire Business in an exclusive interview from his home in New Dehli, not far from company headquarters in Gurgaon, India.

"America is one of largest and most mature markets," Mr. Kanwar said. "We would like to be the greatest player in our first year with the Michelins and Contis of the world. We have been doing that in Europe very well, and we see no reason why we can't do it (in North America)."

The truck tire rollout, planned in three phases, includes the full range of commercial tire applications with sizes covering 17.5- to 24.5-inch rim diameters. The first phase, which began early last year, includes regional, super-regional and mixed-use products rolling out at intervals through 2022.

The company plans to have 13 SKUs available in those product lines this year and expand that to 23 by June 2022.

Coach/urban and mixed-use products will start to arrive in the U.S. by the first quarter of 2022 as part of Phase III. By the third quarter of 2024, Apollo plans to have released 45 SKUs, covering 90% of the market.

The tires will be produced at Apollo's 4-year-old plant in Gyöngyöshalász, Hungary, as well as at its plant in Chennai, India.

So why would Apollo, the world's No. 15 ranked tire maker, with sales of $2.27 billion in 2019, want to position itself in a highly competitive market against other Tier 1s with much greater name recognition?

"Why not?" Neeraj Kanwar, Apollo's vice chairman and managing director, and son of Onkar, asked rhetorically.

"If truck is one of the largest markets in your country, and if Apollo knows how to make a truck tire and does a very good job of it, why not get our offering to the customer and into the market?

"That's really the rationale of why we are getting into the truck tire market."

Five-year plan

Apollo mobilized the TBR launch just as it did with the Vredestein rollout: methodically, meticulously and memorably, not to mention monetarily. The goal for both products is the same: producing a quality Tier 1 product for the North American consumer and selling it at a Tier 2 price.

The project, five years in the making, went through rigorous testing, both at the research and development division in India as well as in real-world conditions on U.S. roads, conducted by an independent third party.

Apollo focused on several variables in its testing, such as vehicle manufacturers; tractor and trailer configurations; service vocations; loads; routes; speeds; and retread expectations, the executives said.

The vice chairman said the investment in R&D alone — which doesn't include additional costs such as personnel — is in the "tens of millions" for the passenger and commercial products, including $8 million to $10 million for TBR alone.

Apollo reports that its spending on R&D has jumped to 2% of its sales, while it continues to work with various institutions, including Virginia Tech University, the University of Twente in the Netherlands and the University of Dresden and Leibniz Institute of Polymer Research in Dresden, Germany, on tire- and vehicle-related research.

"The idea is, this market offers a lot of opportunities if you are giving the right product, good service, then you can really make good money," Onkar Kanwar said. "That is very, very important. Service is important, and quality is a given."

He said the product must meet stringent standards, especially with liability issues specific to North America.

"God forbid anything happens, you're going to have billions of dollars of suits," he said. "... So one has to be very cautious to do the right testing and bring the right product."

Abhishek Bisht, Apollo's assistant vice president, Americas, said it was important that the Apollo brand not be introduced "in a haphazard way," and the company purposely didn't rush the product to the market.

"There have been several opportunities in the last several years to fill in the demand gap by sending a few containers," Mr. Bisht said. "But the management here has wanted to play the long game, and they were very clear they didn't want to send any tires that were half done.

"We really didn't time it for this moment, but that's how the journey is ending."

Neeraj Kanwar said he would never use "any mature market as fillers." His philosophy, he said, is to produce the best product, as the company did when it entered the European market. That's why the investment was made to perfect the Apollo brand for the U.S.

"(We) have to have the right product for that market, and therefore we put a huge investment behind truck tires for the U.S. market," Neeraj Kanwar said. "Those investments now have to show results on performance. Now it's left up to the team to channel it to the right network and get the volumes going and start building the brand."

With retreadability an important factor for commercial fleets, Apollo said its casings have undergone extensive testing, performing well through several retread cycles.

According to the tire maker, tires outfitted on waste-refuse vehicles — which are prone to severe strain on treads, belts and beading — have fared well in tests while measured against Tier 1 competitors. Two retread methods were used: the spiceless ringtread and standard precure treads.

Thirty tires that were tested showed no flaws during tacticle examination or shearography screening. They are being tested for a third time currently.

"The results of retreading casings are also showing very positive results," Neeraj Kanwar said. "Our results are being benchmarked between 90% to 120%."

Pivoting to success

Interestingly, the trajectory of the company's recent successes have been bolstered, in part, as a result of some of its early struggles.

Founded in 1972 by the Kanwar family with one plant in Kerala, India, today's Apollo has, in a large way, been shaped by several brief but failed alliances it has forged over the last two decades with other well-known manufacturers.

Some of the most notable include:

• Its short-lived technological agreement with Continental A.G.;
• Its equally short joint venture (JV) with Group Michelin (2003-05), which provided Apollo access to Michelin technology while the French tire maker could use Apollo's distribution channel in India;
• The acquisition of the Dunlop brand in South Africa (2006), marking its earliest foray into the global market; and
• Its failed takeover attempt of Cooper Tire & Rubber Co. (2013), doomed in part because of worker unrest at a Cooper JV plant in China.

Neeraj Kanwar said he believes the failed JV with Michelin — Apollo ended the original four-year agreement in 2005, just two years into the process — as a seminal point for the tire maker.

"Good, bad or ugly, the JV didn't work, and when I look back, I think it was a blessing in disguise because our main aim at that point in time in 2004-05 was, the first vision was to become a self-reliant technology company," Neeraj Kanwar said. "What we needed to do in that was to emphasize a lot of training in R&D. A lot of talent pool was hired into R&D."

While he said the company's truck radial technology was "home-grown" in India, the Dunlop acquisition helped the company perfect it further, given the on-road, off-road commercial truck conditions in India, with payloads "four to five times of what's allowed."

As Apollo began to build more and more R&D resources, it acquired even more with its purchase of Enschede, Netherlands-based Vredestein Banden in 2009.

Flash forward more than a decade later, and those lessons helped play a pivotal role in the development of a North American-only commercial product.

"I can only say that I am very blessed with good people," Onkar Kanwar said. "It is because of the team we have and leadership we have in various places. We have young men taking on the mettle. We are working as one team. The dream was to build together something which each one of them can be proud. That is the reason we are having this journey."

In addition to testing, Apollo surveyed commercial dealers in the market about their priorities in introducing a new brand to their businesses and to fleet customers. Those key factors they cared most about include product availability; warranty; tire performance; retreadability; ease of doing business; and online access to product information.

Meanwhile, Apollo's strategy to its dealer network includes exclusive sales territories; transparent pricing; volume bonuses; guaranteed 72-hour product delivery; product training; and the ability for dealers to resolve complaints and process adjustments.

Neeraj Kanwar emphasized the company has no plans to sell its commercial products directly to fleets.

"All over the world, our partnerships are long-term partnerships with the dealer," Mr. Kanwar said. "It goes hand in glove. We don't want to break any channel of distribution. Working with our business partners, i.e., the dealers, we have a win-win situation, because we learn from them and they learn from us."

Mr. Bisht said Apollo's value proposition centers on the dealer.

"We are very clear that we never want to become competition to them, which is often the case in the U.S. with manufacturers," he said.

"We feel that this whole process can be done better, and that's how the value proposition has been arrived at. Many see it, all linked to the Apollo core values of empowering our network, whether it is on the spot disposition of any complaints, giving the power to the dealers, whether it goes into an actually unprecedented road hazard warranty."

Neeraj Kanwar said Apollo's partnerships with dealers in every region it serves has been part of the strength of the company.

"To me, that business partner to bring the long-term relationship for the future is very critical for the business to be successful," he said.

The next step for the company will include bolstering its supply chain, as Apollo looks to become self-sufficient in the U.S.

"So if we are able to have our own warehouse, our own local warehouse, serving our U.S. markets, serving our U.S. customers, it makes it much more beneficial to the U.S. team to serve," Neeraj Kanwar said.

Company executives say their only goal is to build the brand within the next three to five years in both passenger and commercial markets. And the tire maker is almost starting from Ground Zero: 10 tire makers account for nearly 79% of the $48 billion North American tire market.

Apollo, meanwhile, has less than a 1% market share in North America. It has grown into a global Top 15 tire maker almost exclusively by serving two other markets — India and Europe. There is potential, the firm's executives believe, to grow organically and gain market share from others with a product priced below other Tier 1 offerings.

"The company focus is the North American market, and we will keep learning as we keep developing the process for this market," Onkar Kanwar said. "It's fun. The U.S. is going to teach us a lot, and we are going to learn from it."