Apollo Tyres has shortlisted Hungary and Slovakia for setting up its proposed euro 500 million greenfield tyre factory. The tyre major’s plan to set up a factory in the central eastern Europe comes in the wake of revival in vehicle demand in the European region.
The company had, in January 2013, indicated that it would drop the proposal of evaluating the potential to build a new tyre unit in eastern Europe, but would go ahead and establish a new factory in Thailand at an initial investment of $250 million.
However, it has now changed the plan and prioritised investments towards a new unit in eastern Europe due to the increased demand scenario and the capacity constraint at its existing facility in the Netherlands. So, Thailand project is unlikely to happen in the immediate term.
“There is a huge difference between the outlook for the automotive industry in Europe between January 2013 and now. While the revival in demand was not visible in January last year in the European region, now we have witnessed continuous increase from last 8 months in new car sales. We are unable to meet the increased demand for both Apollo and Vredestein branded tyres from our facility in Enschede, the Netherlands. This has led to prioritising our investments in greenfield in Eastern Europe,” Neeraj Kanwar, Vice-Chairman, Apollo Tyres told The Hindu.
“Central Eastern Europe is best placed in terms of geopolitical conditions. The availability of skilled workforce at a reasonable rate is also one of the factors, which attracted Apollo Tyres to choose this location,” he added.
The company has sites in Hungary and Slovakia, and is in the final stages of choosing the exact site in one of the two nations. The investment of 500 million euros is to build a factory with a capacity of 16,000 car tyres and 3000 truck tyres a day. The construction work may begin next year, and the unit is expected to commence tyre production by the end of 2016 or early 2017. It has decided to fund the cost through a combination of internal accruals of Apollo Vredestein and debt taken on the books of the same company with no expected outflow of cash from Indian operations.