Stating that the uncertainty due to the coronavirus pandemic will continue, Apollo Tyres Chairman and Managing Director Onkar S Kanwar has said he doesn't see an early end to the 'new normal'.
In view of a bleak global, Indian and European outlook, the tyre major has adopted a "cautious approach" with focus on employee safety, conserving cash, re-engineering production and cutting down all avoidable costs while continuing to spend on R&D, e-training and brand building, among others.
"FY20 was a tough year by all measures. While the auto industry had been on a slow growth path even in FY19, the last year proved to be a complete dampener for the industry due to poor consumer sentiment, increased cost of ownership on account of higher insurance cost, and higher financing cost owing to the liquidity crisis in the non-banking financial company (NBFC) sector," Kanwar said in his address to shareholders in the company's annual report for 2019-20.
He, however, said the company is still bullish about the economy bouncing back and "did see signs of a recovery in the third quarter, but the fourth quarter witnessed headwinds in the form of the COVID-19 outbreak and the subsequent nation-wide lockdown".
"India saw its economic growth hitting an 11-year low of 4.2 per cent for FY20, even as the auto industry sales fell 18 per cent, adversely impacting the entire tyre industry, which, in turn, declined by 8 per cent, in terms of total tyres manufactured," Kanwar said.
Looking ahead, he said "it is reasonable to assume that the uncertainty will continue. I personally do not see an early end of this 'new normal'. Yet, the show must go on and we are already adapting and finding opportunities for growth."
Kanwar further said the company's immediate priority is the safety and well-being of its employees, even as it continues to make the "'new normal' our normal".
Despite the crisis, he said, "We have been able to organise the virtual inauguration of our seventh manufacturing plant in Andhra Pradesh, India in June 2020.
"This was closely followed by the opening of our facility to manufacture high-end bias and steel radial tyres for the two-wheeler segment in Limda, Gujarat, India in July 2020."
On the overall outlook, Apollo Tyres said against the bleak global, Indian and European outlook, it has adopted a cautious approach.
"The focus is on employee safety and conserving cash. The company is re-engineering production and cutting down all avoidable costs and focusing on the good costs like R&D, e-training and brand building, among others," it said.
COVID-19 has grave consequences for the automobile industry and all related sectors, with most automobile manufacturers having announced temporary closure of plants due to collapsing demand, supply shortages and government measures.
"OEMs (original equipment manufacturers) in India are forecasting a de-growth of 30-40 per cent in FY21 demand given the BS-VI implementation and price increase, COVID-19 impact, poor consumer sentiment and liquidity crunch, which in turn will seriously impact the tyre industry," the company said.
Apollo Tyres Vice-Chairman and Managing Director Neeraj Kanwar said, "Looking ahead at FY21, we are aware that the COVID-19 pandemic and the lockdown will have serious implications on the business. It has been a difficult few months for us having to temporarily close our plants and making tough decisions on cost-cutting across the board."
However, he said the company is looking at challenges as opportunities and has already launched multiple initiatives under the DRIVE leadership theme to re-engineer Apollo Tyres.
"We are learning from the pandemic experience and will make this our new normal as we energise the entire company to achieve higher productivity," he said.
