The head of the Michelin group Edouard Michelin said on Monday that he expected big paybacks from India as the newly announced partnership with Apollo Tyres was fully operational in four years.
"Our tyres sell at a premium -- in the range of $200-250 a unit. If we sell one million tyres in India as envisaged, our revenues per annum would touch $200-250 million as and when we start selling as many tyres. We are expecting the radial tyre market to grow exponentially in the next few years and we are confident of achieving this," he explained.
"However, it is not just the payout which sets our pace. We also want to be the leading player in the field and contribute to the growth of the radial tyre or high-performance tyre market in the country," he said.
Michelin has made big investments in China and is amazed by the rapid radialisation in the country. "It was amazing. In ten years, radial tyre sales to the total tyre sales in China has risen from zero to 20 per cent. The same pace may or may not happen in India. Of course, because India is a democratic country and decisions take some time to come through," he said, clarifying that he was most comfortable investing in India, despite the infrastructural bottlenecks which needed to be cleared faster.
On being asked whether Michelin's investment in Apollo will have any bearing on the Indian companies' expansion plans, he said, "I think the core of the partnership is to speed up together the availability of high performance products for the Indian market, especially truck tyres in which Michelin has an expertise."
"A partnership between two competitors requires important chemistry of vision and of mind... We felt that beyond the operational partnership of the joint venture, it was meaningful for both Apollo and for us to build a commonality of interest at the shareholders' level. Michelin becoming a significant shareholder in Apollo will mean it has the same interest as Apollo's top management," he responded when asked why the company also picked up a 14.9 per cent stake in Apollo apart from setting up the 51:49 manufacturing joint venture with the same company.
"You can also ask why Michelin does not go alone. In fact, we took 40-50 years to firm up our plans for India. Through our venture with Apollo, we have recognised the inherent strength, which will be a strong asset for speeding up of the radial tyre market. Beyond the short-term financial reasoning, one should look at the pay back we are going to in the long run," he said.