Apollo Tyres, one of India’s largest tyre manufacturers, will refocus its product strategy to enhance profitability amid slower growth, rising input costs, and increasing competition.
The Delhi-based company will discontinue the production of small tyres for commercial vehicles and passenger cars, shifting its focus to larger, more premium radials that typically offer better margins.
Speaking in a post-earnings call, Neeraj Kanwar, vice chairman and managing director, Apollo Tyres said: “We are trying to vacate the 12-inch and 13-inch (tyre) market, especially with the OEMs (original equipment makers), and then going up-sizing of 14, 15, 16, 17-inch, which has more profitability but volumes are less.”
These smaller-size tyres are mainly supplied to the aftermarket as they are used by car models that are no longer in production. Hyundai Eon, older generation Maruti Alto, Hyundai Santro, Datsun Go, Chevrolet Spark are some of the models that use such tyre sizes.
Apollo has faced criticism for weaker top-line growth compared to its peers in recent quarters. The company has relied on OEM demand, which has remained flat for several months, alongside a weak export market. In Q3 FY25, overall volume growth in the replacement segment was 5%, while OEM sales declined by nearly -10%.
The company is now turning to premiumisation in the passenger car radial space for a margin boost.
“It’s a journey, it takes time. The whole idea is to go more premium…the volume will start coming. Our quarter-on-quarter is already above the growth curve of our competitive peers. At the same time, we are keeping at the EBITDA margin that we have kept for the past two to three quarters. So it will take time, but you will see, again, signs of growth in Q4, and then next year will be much better than this year,” Kanwar added.
Apollo Tyres net profit fell 32% year on year to Rs 337 crore in the third quarter of FY25, missing Bloomberg estimate of Rs 421 crore. Revenue was 5% y-o-y at Rs 6928 crore, slightly ahead of the estimate of Rs 6,895 crore.
Apollo is resisting a price hike in the current quarter despite pressure on margins.
“These are not the margins that we are happy with. We would definitely want to up the margins and we would keep looking at avenues to do that as we go forward,” Gaurav Kumar, chief financial officer, Apollo Tyres.
Further, Apollo executives said growth in India is expected to be driven by the replacement segment, which is seeing increased demand momentum in the current quarter.
