Hungary and Slovakia to face off for new tyre plant

By bne IntelliNews May 29, 2014

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India's Apollo Tyres has narrowed a search for the plant it's planning to build in Central Europe to sites in Hungary and the Slovak Republic, having apparently discarded Poland as an option.

Apollo's board of directors recently approved an investment of $685m over four years to build a car and truck tyre plant in Emerging Europe, but until now the company hadn't released details about possible sites, reports Rubber News. According to Luis Ceveniz, responsible for the Indian company's European operations, a final decision is due in the next two to three weeks.

Apollo's managing director Neeraj Kanwar said via email that the firm hopes the plant will be complete in four to five years. "Apollo Tyres is currently unable to meet the growing demands for both Apollo and Vredestein tires for the European market, due to the capacity constraints at our facility in Enschede, Netherlands," Kanwar said. "This, along with the steady recovery in the automotive market in Europe, has led us to this decision to prioritize our investments in a greenfield (plant) in Eastern Europe."

Apollo's search for a plant started with 11 sites, Ceneviz said. The selection criteria comprise labour skills, costs, raw materials and infrastructure, along with investment incentives offered by the nations and/or regions being considered. Last month, it had also noted political stability as an important issue.

Tyre makers have been burning rubber into Central Europe in recent years, as they chase supply contracts for the region's thriving auto industry. Earlier this month, South Korean tyre producer Nexen announced that after a long search that it has settled on a location in the Czech Republic for a new operation. Poland, Slovakia and Hungary were all reportedly in the initial running for the KRW400bn (€288m) investment.

The company is due to sign off on the deal with the Czech government in June. The plant will be established in the eastern end of the country, in the same Czech village as South Korean carmaker Hyundai Motors' factory, and just across the border from a Kia facility in Slovakia.

Compatriot Hankook Tire sparked a vicious bidding war in 2005 when it was looking for a base in the region. It finally settled on Hungary, and is in the midst of conducting a second expansion of the plant. In a sign of how things have changed in the past few years, back in 2005 Prague said it would not offer incentives to Hankook or any similar low added-value project. 

Apollo originally announced in 2008 that it planned to build a passenger tyre plant in Hungary, but the global crisis appeared to put paid to that idea. In late April, it said it would resurrect the scheme, and that it was looking at Poland as well as Slovakia and Hungary.

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