Tyre major Apollo Tyres is planning to set up a new factory in Andhra Pradesh to manufacture tyres for two-wheelers and pick up trucks.

“Along with Q2 accounts, we have taken our board’s approval to acquire lands in Andhra Pradesh. We are signing an MoU with the Chief Minister of Andhra Pradesh tomorrow in New Delhi. After that, we will be able to share further details,” Neeraj Kanwar, Vice-Chairman & Managing Director, Apollo Tyres, said here after inaugurating company’s global R & D centre at its tyre manufacturing complex near Chennai.

“But to give an indication, we will be looking at expanding two-wheeler tyre capacity. We will also be looking at making products for pick-up trucks. This industry is doing well and we gather that there is a shortage for tyres in that segment,” he added.

It is learnt from the Andhra Pradesh government sources that the new unit will entail an investment of ₹500 crore and will come up on the industrial corridor in Chittoor District.

All of Apollo’s factories are running at 85 per cent utilisation levels. “In a plant, you normally take up to 90-92 per cent. So today we are close to the peak level of capacity,” Kanwar pointed out.

Kanwar was speaking to media persons at the inauguration of its new global R & D Centre, which has been established at an investment of ₹90 crore at Oragadam, the industrial hub to the west of Chennai. This will service the product development needs for the entire Asia Pacific, West Asi and Africa regions.

This is its second global R&D Centre, after the Netherlands facility, which has been operational since 2013. Kanwar said there were about 300 people working in its R&D operations in its two facilities and the company will continue to invest in R&D and hire more people.

Besides the two Global R&D Centres, Apollo Tyres has also established two satellite R&D Centres in Bengaluru and Germany. The company claimed to have reaped several benefits, including increase in market share through stronger focus on R&D.

Its R&D spend as a percentage of turnover has grown from 0.74 per cent in 2011-12 to about two per cent in 2015-16.

Apollo Tyres posted a seven per cent decline in its consolidated net profit at ₹260 crore for the quarter ended September 30, 2016, when compared with ₹280 crore in a year-ago period on the back of lower operating income. Its gross sales stood at ₹3,294 crore against ₹3,248 crore. “In India, we had good growth in the passenger vehicle segment, while the commercial vehicle segment was down during the first two months of the quarter due to monsoon, general sluggishness in demand from both OE and replacement segments and growing imports from China,” said Kanwar.

However, the sales of CV have started picking up and we expect better demand in Q3 and Q4 of this fiscal, he added.