Apollo Focuses Sales Efforts on U.S.
There is no question that Apollo Tyres Ltd. wants to greatly increase its presence in North America. The company’s attempted purchase of Cooper Tire & Rubber Co. last year is proof that it wants to sell more tires here.
Now, the company is turning to its subsidiary, Apollo Vredestein B.V., to start making things happen. Through its U.S. arm, Apollo Vredestein Tires Inc., the company has long sold passenger and light truck tires targeting upscale vehicles with a slant toward both performance and winter performance.
The company is not only looking to expand its Vredestein-labeled passenger line, but has begun a large push on Vredestein agricultural tires. Toward that end, the company hired farm tire sales veteran Bill Haney as its OHT (off-highway-tire) specialist in February 2014 to move the program forward.
Haney says that the company had in the past brought in some agricultural tires to meet European equipment OEM replacement requirements, but did not actively sell the tires. Those days are gone, with the company now importing both bias and radial Vredestein agricultural tires, plus Apollo-branded industrial tires, such as R4/G2 and skid steer tires.
“We are looking for a much larger contribution from farm tires for our total business,” says Emil Herbak, president of Apollo Vredestein Tires Inc. “We think our OHT can grow faster than our passenger line in the U.S.”
Currently, Herbak says that passenger tires sales account for most of the business in the U.S., but he wants to see farm tires move upward to as much as 30% of the total sales, similar to what it is for the company right now in Europe. Herbak also is looking to expand the Vredestein line of light truck tires within the next two years.
From a logistics standpoint, Haney says that combining farm tires with passenger tires in containers allows the company to ship products very efficiently. The company also has moved its warehouse from New Jersey to the Pittsburgh, Pa., area to help with efficiencies.
Haney says most of the Vredestein farm tires will be radial and produced primarily in the company’s Enschede, Netherlands, plant for now. The company’s current capacity for OHT tires is 543,000 per year, and growing. In addition, the Enschede plant also is capable of producing 7 million passenger and other tires per year. The company says that the plant produces about 50% of all Vredestein farm tires for Apollo.
The company’s new plant in Hungary is scheduled to go on-line in 2017 and also will be producing tires for export. This plant will have a capacity of 5.5 million passenger and light truck tires, along with 675,000 commercial vehicle tires.
Customers in the U.S. are looking for a full range of farm tires, says Haney, and he says his company is not at that level yet. “We have a decent range, not a full range.” The customer also wants availability, “meaning a quick timeliness of shipments, and that’s where we excel,” says Haney.
Vredestein builds to a monthly updated forecast, putting tires in a warehouse, then shipping tires as quickly as six weeks to the U.S. from Europe, explains Haney.
“The high fill rate is the result of the process that we produce those tires based on our monthly budget,” says Herbak.
Vredestein uses the direct container approach for its program in the U.S., but if someone needs backup, they’ll do so from the company’s warehouse outside of Pittsburgh.
The company also is looking to grow its OE business in the U.S., but did not want to reveal who the farm equipment companies were at this time. About 50% of the company’s farm tire business in Europe is OE.
Right now, the Vredestein brand farm tires represent about 90% of the company’s OHT business in North America, but Haney is looking to grow the industrial side with Apollo-branded products to ideally about a 50/50 split. The current number one SKU is a 38-inch radial tractor tire for the company which fits tractors that have 120 hp to 250 hp.
The Vredestein radial tractor tire line is called Traxion. The tires feature a unique tread design that employs non-parallel lugs that the company says improves self-cleaning which results in increased traction. The line was developed in 1996 and is kept very current and modern looking.
The company has announced a number of new sizes of farm tires that are designed specifically for the North American market. Several of those sizes are being made available in the fourth quarter of this year, with more coming in the first quarter of 2016.
Herbak and Haney are looking to price the Vredestein tires in the Tier 2/Tier 3 spot below the higher priced Tier 1 competitors. Haney is quick to add that “we have Tier 1 technology and performance. As we’re building this brand, we want to promote the fact that dealers can make good margins and good profits with Vredestein tires. They’re selling a tire similar to the high-priced, very expensive tires,” says Haney.
Still a relatively small player in the market, Haney jokes, “I would consider being very successful with our brand here if we were to get out of the ‘others’ category in (MTD’s) market share report and have our name listed.”
To spearhead the sales effort in North America, Vredestein has three sales people, in addition to Herbak and Haney. They are actively looking for a fourth salesperson to work in the Midwest and Canada.
Timing is everything
To better understand why the company believes the timing is right for them now to target the North American market, they invited MTD to their headquarters in Holland to discuss the company’s plans. The company’s headquarters are in Enschede, next to its factory that was built in 1947.
Apollo Vredestein represents about 25% of Apollo Tyres Ltd. total sales, or roughly $500 million. Apollo bought Vredestein in 2009. In total, Apollo has five factories in India, plus Enschede, Netherlands, and the newest plant coming on-stream in Gyongyoshalasz, Hungary, in 2017.
The markets served and product mix for both entities is far different.
Apollo Tyres Ltd.’s tire product mix in 2014 was 45% truck and bus; 36% passenger vehicle;11% OHT; 6% light truck; and 2% others.
The replacement sales for Apollo accounted for 78% of its business while OE represented 22%.
Apollo Vredestein’s tire product mix in 2014 was 71% passenger vehicle; 25% agricultural and industrial; 9% space master; 2% two-wheel; and 1% others.
On the passenger vehicle side of its business, Apollo Vredestein B.V. sales are broken down as follows: 30% summer, 28% winter, 17% all-season, 10% SUV, 8% light truck, and the remaining 7% other tires, including Apollo branded tires.
Apollo Vredestein B.V. OHT tire sales are broken down to 60% implement tires and 31% rear tractor radials. The company notes that the tractor tires are growing at a faster rate than the implement tires. Interestingly, the implement sales are mainly OE, while the tractor tires sales are coming from the replacement market. The rest of the OHT tires come from tractor front tires at 2% and industrial tires at 7%.
According to Ruud Nijland, divisional head of OHT sales EA region, the company intends to double its sales and market share from 10% to 20% of OHT tires in the next five years in Europe.
One of the ways the company is planning to grow is to expand its OE business. “Previously, we could not do this due to capacity constraints, but with increases at our Enschede plant and our OHT plant in India, it is now possible,” says Nijland.
He revealed that the OHT production at Enschede is now up 25% and within two quarters, will be up 50% from the 2014 total.
As the company increases its capacity, it is now able to approach larger customers without the fear of too much demand and too little product. Nijland talked frankly about the severe spot shortage of large tractor radial tires in 2007-12 in both Europe and the U.S. “People were asking us for container-loads, but we did not have them available.”
The company is a supplier of radial tires to New Holland in the U.K. and wants to leverage that to gaining OE fitment at New Holland in the U.S., too. Nijland says the company is talking with two other OE companies in the U.S., but said it is too early to reveal their names.
For the record, Vredestein is OE in Europe with a number of companies, including Case IH, John Deere, Kuhn, Krone, McHale, and several more.
New kids on the block
Nijland says that Vredestein tires are priced in the premium range in most of Europe, “clearly above the middle tier.” He understands, however, that “we are the newcomer to the U.S. and we are promotionally priced”
“We are still in the introductory stage in the U.S. and have not built a strong reputation. We must prove ourselves to both our dealers and our customers,” says Nijland.
He points out that in Europe, the company has grown personnel from nine OHT specialists in the company to 25 in the past three years to move the brand forward.
Although the company had been looking at the North American market for some time, it was not until Apollo made the decision to increase capacity in Europe and India that they decided to move forward.
Apollo decided to use the Vredestein brand as its global farm tire brand and showed a line of tires in the U.S. in 2013.
Based on the response, Nijland said they began making plans “to have a dedicated portfolio of farm tires for North America.”
The company has also hired an outside marketing firm for its Vredestein farm tires “because we realize that agricultural customers are a different breed than car tire customers. We want to address their needs and connect with their culture.”
Currently, Apollo has an OHT R&D center in India and one in Europe which is located in close proximity to its factory in The Netherlands.
According to Dr. Seshu Bhagavathula, chief technology officer of Apollo, the company is planning a more balanced approach to R&D between the two centers moving forward.
“Today, we lean more to the Asian side, but we’re looking to Europe more and more and I believe more high-tech development will come from Europe.”
Bhagavathula, who has spent over 20 years in Europe in the automotive industry, says the company continues to bring more employees to the Europe research and development center and emphasizes that he wants more development done there in order to meet the needs of Europe and North America.
Bhagavathula said the company is planning to have a small R&D office in the U.S. someday based on the objective for this region.
“We’ve been known as fast followers, but I want us to take a leap and become the leader. We will do this by working with the best suppliers and using the best materials to produce the highest quality tires,” says Bhagavathula. ■
Heimann feels Apollo’s future success lies in OE business
Mathias Heimann joined Apollo Tyres Ltd. in October 2014. He is currently the president of Europe and Americas for Apollo and the CEO of Apollo Vredestein B.V. He has over 20 years of business experience, with most of his time being in the automotive sector.
In the early 1980s, Heimann attended high school in the U.S. in the Detroit area. He says that he saw what happens when manufacturing leaves an area and the community starts to decay. But today, he believes that manufacturing is beginning to return to the country, “just like a pendulum swinging back and forth.”
Heimann worked for Continental AG in its tire division and before joining Apollo was working for Sime Darby in Malaysia managing that company’s BMW operations. He sat down with MTD and answered our questions.
On the merging of Apollo and Vredestein:
Apollo’s DNA was in truck and bus and it was very successful. It was the first Indian company to seriously look at opportunities abroad. It was already looking at Europe when the Vredestein opportunity arose. Vredestein complements Apollo because it comes from the other direction — car tires. It is constantly pushing the envelope, such as with the first W-speed rating for a winter tire in 2004. Then it was first with a Y-speed rating in 2014 and this year with a Y-speed rating for an all-season tire.
On his accomplishments so far:
“It’s too early to talk about accomplishments. I’d prefer to discuss my three major tasks.” First, he sees moving from one factory to two factories in the region and joining them with the rest of Apollo’s production as a major priority. “Vredestein made profitability the major focus in the past, but we now must look at cost-logic. It is most important to look at the costs and quality — these are the drivers.” Secondly, the company must grow its capacity volume. “In the past, when the volume was done, they were finished. We must grow the volume.” Third, he wants to grow OE business through an OE mind set. “This will be our future success.”
On why OE is so important to the company:
He believes it is the area where the company can grow the fastest in relative terms. His goal is to grow OE twofold in the next two to five years. This will come from both passenger and on the farm tire side of the business.
On increasing presence in North America:
“I am aware that our current product offering does not match all North American needs. We cannot consider it ‘one market.’ The tire mixes are different for California than for parts of Montana and Canada and the East Coast. I think the Vredestein car tires match the ‘German mind set’ for speed.” He believes these tires make sense on the retail side for high- and medium-end cars of European origin. He also wants to bring in an SUV range of tire fitments but believes the company is a year-and-a-half or two years away from that.
On the Apollo brand in North America:
He knows that Apollo can’t be considered a globalized company without being in the U.S. market. To date, the plans have not been made regarding the approach to selling the brand in the U.S. “We haven’t decided on OE or replacement.” He adds that the company also can’t be known as a global company without bringing in more North Americans to work inside the company. “This makes us a global company, not an Indian company.”