APOLLO TYRES SWOT ANALYSIS

STRENGTHS:
1. Emphasis on Research & Development: Apollo invests heavily on Research and
Development (R&D) activities. Improvement in key performance parameters such as
durability, grip and mileage are the primary focus of Apollo. This enables the company to
invest in new and innovative products. Research and innovation centres are located in Asia
and Europe. There are significant investments in R&D to find innovative solutions related to
manufacturing processes, products and by-products.  Advanced R&D facilities will support
growth through cutting-edge technology and innovation
a. Investment: R&D allocated capital expenditure and operational expenditure
(consolidated for FY20): 1,368.11 million
b. Research partnerships: Collaboration with Center for Tire Research, USA, Dresden
University, Twente University, SRM University and BITS Pilani
c. Research collaboration: R&D centre is an approved research centre of Anna
University, enabling employees to enrol for PhD and conduct their research work at
R&D Centre.

APOLLO’S GLOBAL R&D CENTRE AT CHENNAI

2. Market Share: As of fiscal 2020, Apollo Tyres is the second largest player by revenue with
20-25% market share in the Indian tyre industry (in value terms). It is the 2nd highest market
share holder in LCV’s and the highest market share holder in Medium and heavy commercial
vehicles. The company is a leading player in the truck and bus tyre segment. Replacement
demand leads to three fourth of the total company revenue. At segment level, revenue from
Truck & Buses (TB) and Passenger Cars (PCR) contributed 43% and 39% respectively to total
revenue. Apollo Tyres’ leadership position in the commercial vehicle segment will enable the
 company to leverage new and related business opportunities

SOURCE: CRISIL RESEARCH & COMPANY ANNUAL REPORT

3. Excellent Geographical coverage across Asian & European markets: With a diversified
market base across geographies, Apollo Tyres is not dependent on domestic market alone
and is strategically working towards growth opportunities in other large markets. With a
view to increase its export operations, the company has set up a commercial vehicle R&D
facility in Chennai, India, as well as a passenger vehicle R&D centre in the Netherlands.
Revenue from exports accounted for ~10% of total revenue for the company in fiscal 2020.
Its current manufacturing units & their capacities are as follows:
a. India Limda, Gujarat: 1,84,740 MT Chennai, Tamil Nadu: 2,91,666 MT Perambra,
Kerala: 1,13,510 MT Kalamassery, Kerala: 42,087 MT
b. Europe Enschede, the Netherlands: 54,238 MT Gyöngyöshalász, Hungary: 47,688 MT
c. Some new initiatives:
i. The company has setup new plant in Andhra Pradesh to produce Passenger
Car Radial (PCR) tyres and Truck and Bus Radial (TBR) tyres which has been
commissioned since June 2020
ii. Apollo Tyres has introduced its European tyre brand Vredestein in India for
premium cars in the replacement market

SOURCE: GOOGLE IMAGES

4. Reliable dealership network: The company has 5,300 third party dealers (including 1700
exclusive dealers in the country). In Europe the company had a network of 5800 third party
dealers. Whereas in other geographies 140 active third party dealers are present in Thailand,
 80 national/regional distributors in the rest of ASEAN, 49 distributors in Middle East and
Africa, 10 in SAARC and 5 in Oceania.

The Company aims to build strong relationship with dealers and has multiple programmes,
like the Apollo Value Edge Club, that are aimed to excite and support the partners in their
growth journey. Further to its journey of enhancing service level towards business partners,
the Company has introduced two robust IT-enabled platforms: Business Partner Service
Centre (BPSC) and Sampark.

• BPSC is a single window solution for all business transactions, queries, benefits and
grievances. Business partner can also access their transactions, make payments and place
orders via the BPSC.
• Sampark is 24X7 digital platform for its dealers and available through browser and mobile
app for all transaction of the business partners.
These initiatives have helped improve the dealer experience, the Company’s turnaround
time and strengthened the trust by making the business more transparent and easier.

SOURCE: ANNUAL REPORT

5. Strong financials: the company has been growing rapidly in the past couple of years. By
initiating or intensifying a business performance enhancement programme and response
plan, the Company conserved Financial Capital
Key Ratios   Mar-19 Mar-18 Mar-17 Mar-16
Net sales growth Per cent 17.7 12.3 11.3 (7.8)
EBITDA growth Per cent 17.0 (8.3) (6.2) 3.5
EBITDA margins Per cent 11.5 11.6 14.3 16.9
Net profit margins Per cent 3.9 4.9 8.3 9.5
RoCE Per cent 7.5 9.5 16.5 23.3
Tangible Net Worth Rs Million 91,473 88,633 65,907 59,196
Capital Employed Rs Million 1,48,484 1,42,677 1,07,305 81,073
Gearing Times 0.5 0.5 0.5 0.3
Net Cash Accrual/total debt Times 0.3 0.2 0.4 0.9

Interest coverage Times 9.6 10.0 17.1 20.9

Assets turnover ratio Times 1.0 1.1 1.2 1.3
Current ratio Times 1.4 1.2 1.1 1.2

Source: CRISIL RESEARCH

As observed, there is a Rising Net Cash Flow and Cash from Operating activity and Growth in
Net Profit with increasing Profit Margin.

At the end of the financial year 2020, the company clocked a turnover of US$ 2.27 billion, backed by
a global workforce of approximately 17,200 employees. As of March 31, 2020, the company traded
in India on the Bombay Stock Exchange and National Stock Exchange, with 59.10% of shares held by
the public, government entities, banks and financial institutions.

In 2018-19, MRF had revenues of Rs 15,837 crore while Apollo tyres was behind at
Rs 12,354 crore. Apollo has however led the domestic tyre market in terms of
growth in the last 3 years with a CAGR of 12.6%

6. Sustainability:
a. In-line with its efforts towards sustainability, the Company has joined the Global
Platform for Sustainable Natural Rubber promoted by the World Business Council on
Sustainable Development in order to contribute to the improvement of socio-
economic factors in the natural rubber supply chain
b. In order to align its upstream supply chain with this objective, Apollo Tyres has a
Sustainable Supply Chain policy, which includes guidelines for conducting its
business by reducing impact on environment by good governance and ethics and
adhering to Human Rights
c. The Company also promotes and encourages suppliers to embrace environment-
friendly and green materials in their production processes, including usage of
recycled products. In this regard, it emphasises the usage of environment-friendly,
re-usable, recyclable packing materials like returnable pallets, returnable metal
boxes, returnable metallic spools for the supply of raw material to its global
manufacturing plant locations. This helps in enhanced vertical space utilisation in
storage warehouses. The packaging of raw material should also be ‘wood-free’. In
addition, a supplier needs to conform to the local regulations, as and where
applicable in each country of supply.
d. PAH COMPLIANCE: The Company is geared to meet all raw material related
requirements with reference to usage of PAH (Polycyclic Aromatic Hydrocarbons)
free materials for supply of tyres to Europe and other markets.

7. Value for money: In case of PVs, Apollo has unconditional 5-year warranty policy covering
everything from small cuts to blow-out which makes Apollo a good-value-for-money
buy. Bridgestone also provides a 5-year warranty covers against only manufacturing defects,
JK Tyres have a 5-year warranty policy, Ceat has a 2-year warranty policy, MRF provides a 3-
year warranty against any manufacturing defects etc. 

8. Brand recognition: The Company is powered by strong product brands in its key markets –
Apollo and Vredestein. In India, the Company is a leading brand in the CV segment, which
accounts for the bulk of the industry’s revenue. The Company is best positioned to maintain
its leadership position in the truck radial segment and drive growth through the same. In
Europe, the Company’s brand, Vredestein has a heritage of over 110 years and an
established presence and enjoys a reasonable premium positioning, especially in Winter and
All-Season segments. Vredestein has been named All-Season Manufacturer of the Year by
 German automobile magazine, Auto Bild. The Company’s new ranges like Vredestein
Wintrac Pro and Vredestein Quatrac Pro have been given top ratings by multiple external
media and tyre testing agencies. Further, increased spending on building the corporate
brand is starting to make Apollo Tyres a stronger brand in India and a recognised one
globally.

Apollo’s social media metrics stands at:

Facebook page- 918,809 likes; Instagram- 14.5k followers, Twitter- 117.1k followers,
YouTube- 32.8k subscribers

Apollo Tyres has associated with Sachin Tendulkar as the face of its brand. In addition to it
being the global tyre partner for English Premier League club, Manchester United, Apollo
Tyres also has a presence in the German Bundesliga, with its association with Borussia
Monchengladbach. In India, it has a presence in the Indian Super League (ISL), being the
principal sponsor of Chennaiyin FC, and in the I-League, with its title sponsorship of Minerva
Punjab FC.

WEAKNESSES:
1. Less presence in two/three-wheeler segment: Apollo Tyres entered the two-wheeler
tyre business much later in 2016. The demand for two-wheeler and three-wheeler tyres
is quite high in rural Indian market. Also, the company did not attempt to gain the
market share with price cutting and expects profitability of the segment to continue to
"remain decent". The Company plans to introduce the products in Europe and other
parts of the world to drive further growth. However, the company is aiming for
leadership position in the domestic premium two-wheeler segment, which primarily
comprises high-end bikes. The company said it is also ready to serve international
markets with high-end bias and steel radial tyres. The premium segment constitutes
nearly 20 per cent of the two-wheeler market in India and is the fastest growing one.

2. Inability to pass on the higher cost to customers: In a rapidly rising raw material cost
scenario, at certain times the company is unable to pass on cost escalations to
consumers, in a timely fashion, due to intense competition and various market dynamics
resulting in pressure on margins.
 3. Labour unrests: Labour unrests put backlogs on production which blocks the supply
chain and creates massive problems for the company. Previous unrests have occurred in
plants of Vadodara & Durban. These unrests directly affect the bottom line of the
company.

4. Less presence in SUV segment:  Apollo Tyres is yet to establish itself as the market
leaders in SUV segment. The SUV market is one of the fastest growing segments with
double-digit growth rate. However, to increase its presence in compact & large SUVs it is
strengthening its technological capabilities and branding. Also, it recently came out with
a new range of tyres for large SUVs.

OPPORTUNITIES:
1. European market: The European Market offers a bright opportunity for expansion. The
Company has started deliveries to European OEM manufacturers endorsing the premium
position of its Vredestein brand. Also, this will help to generate replacement demand. With
the premium positioning of the Vredestein brand in Europe and now with the modern state-
of the-art plant in Hungary, the Company has good prospects for improving its product mix
towards a more profitable premium car tyre segment.

2. New geographies: The Company still needs to establish a larger presence in new growing
geographies to reach an economically viable operation size. The Company continues to
increase its focus on new geographies such as North America and in regions where it has
already made some inroads, such as in ASEAN countries and the Middle East. These
geographies will be the growth avenues for future.

3. New segments: Expanding into new segments & increasing its product portfolio is the need
of the hour for Apollo. In India, the Company has a healthy lead over its competition in terms
of capacity and market share in the Truck Bus Radial (TBR) segment. This implies robust
growth prospects with increasing radialisation. In Europe, the Company has launched TBR
tyres in Europe, which will further enhance revenue and market presence. Growth prospects
exist in the premium segment of PV (17” and above) in all product segments (Summer/All
Season/Winter). Global tyre manufacturers have been making constant efforts to innovate
and offer a diverse range of products such as tyres with pressure warning systems, run flat
tyres, eco-friendly tyres and energy efficient tyres. Apollo Tyres have to pursue a growth
strategy of continuous innovation and increasing emphasis on product differentiation.

4. Growth in infrastructure: Improved Infrastructure has fuelled more and more

transportation. The growth of the company is closely linked to the expansion plans of the
cities, the government’s thrust on development of road infrastructure and construction of
expressways and national highways.

5. Integrated distribution: Consolidation in the distribution landscape as independent dealers

is disappearing, wholesalers and company-owned networks are growing. Internet is playing
a major role in this change. Vertical and horizontal integration can be done to safeguard
distribution.
 6. Anti-dumping: Anti-dumping measures in EU against Chinese imports will support to expand
Apollo Tyres’ TBR footprint.

7. BS VI Emission norms: As emission norms become stringent, fuel efficiency will increase. For
that, a low rolling resistance is needed. So, the direction is towards low rolling resistance and
BS VI will further that across categories. A lot of Indian companies will find it challenging in
meeting the rolling resistance requirements as they don’t have the technology. Apollo has
made a lot of headway in this as it is supplying to OEMs in Europe already. Apollo is getting
this technology localised for Indian requirements by its R&D team.

8. Venturing into Electric Vehicles Segment: Electric cars require special tires for a variety of
reasons such as their tires must handle more weight compared to internal-combustion
vehicles, and deliver more torque to the road when moving away from a stop. The tires need
to have low rolling resistance and high load bearing capacity to account for extra weight of
the battery pack. Bridgestone is coming up with lighter tyres for Volkswagen ID.3 & Michelin
is coming up with airless tyres for EVs. Apollo can leverage their technological capabilities to
enter in EV segment rigorously.

On March 18, Mahindra and Mahindra launched their 1st

electric car e2o, for which Apollo Amazer 3G has been chosen
as the standard fitment tyre. The specially developed tyre for
this electric car is a result of in-depth research by the Apollo
R&D team to meet the specifications of low rolling resistance,
which translates into better mileage with lesser power being
drawn from the battery.
…… Satish Sharma, Chief, India Operations, Apollo Tyres Ltd
APOLLO AMAZER 3G

THREATS:
1. Raw material price volatility: Rubber production is volatile in India and in other rubber
producing countries in world like Vietnam & Myanmar. The production of rubber is generally
lower than the demand produced, and therefore the price of rubber fluctuates in light of
demand. This creates rampant production, less efficiency & supply chain issues. It has a huge
impact on the company’s pricing policy.

2. Macroeconomic environment: Economic downturn or slowdown in the key markets (India

and Europe) can lead to decreased volumes and capacity utilisation. Further, economic and
global political instability and the trade war between China and the US can impact business
in Europe. A weak Indian currency can result in pressure on margins, since the company is a
net importer. There is a need to prepare for imports from neighbouring countries at
competitive prices, which have been rising in the recent past.
3. Competitive environment: There is a stiff competition from national and international tyre
companies. The tyre industry is highly competitive with fierce competition among all
competitors to provide better products at cheaper prices. Tyre products of China are
relatively cheaper and hence presents a tough competition in the market. Chines imports
can adversely affect Apollo Tyres’ profitability.

SOURCE: GOOGLE IMAGES

4. COVID-19: A prolonged lockdown due to COVID-19 in many parts of the world where the
Company operates can have a significant impact on its business. Further, the coming year
will have one large investment on stream. There would be pressure on margins as the
utilisations ramp up gradually and the Company faces reduced demand due to the
pandemic.

5. Requirement of Huge Capital investment: The company is based on Capital-intensive

operations. There is a regular need of large capex for growth which puts pressure on free
cash flow. Europe operations have been under financial stress with a weak market scenario
coupled with pricing pressures and company’s high-cost plant in western Europe and
investing majorly on a plant in Central-Eastern Europe.

6. Government policies: Government Policies w.r.t export duties, import duties, tax levied on
automobile industries and economic condition of nation as it determines the sale of
automobiles and subsequent sale of tyres.