Financial Daily from THE HINDU group of publications
Friday, Apr 02, 2004
Continental to source tyre tubes from Metro
New Delhi , April 1
GERMAN tyre major Continental AG has decided to source its global requirements of four-wheel automotive tubes from Metro Group. An outsourcing agreement has now been signed between Continental AG and Metro Group.
"Metro Group will set up a new 100 per cent export oriented unit (EOU) that will be located about 60 km away from Delhi. The initial investment will be about Rs 30 crore. It would be financed from internal accruals and institutional funding. The EOU will have a capacity of 3,000 tonnes per annum. We hope to start commercial production by December this year," Mr Rummy Chhabra, Group Managing Director of Metro Group, told Business Line here.
He also said that 50 per cent of the capacity (1,500 tonnes) would be exported to Continental AG under the brand name of `Continental.'
The remaining will be sold in the domestic market under the brand name `Metro-Continental.'
Continental AG would provide the technical know-how and technology support to Metro for manufacture of the automotive tubes.
The German tyre major will not be making any financial investments in the project.
"It is for the first time that we would be sourcing automotive tubes from India. Metro would be the only supplier of automotive tubes to Continental for its world markets. We are confident that this would be a long-term relationship," Mr Thomas Peter, Head-Automotive Tubes, Continental AG, told Business Line.
He also said that the automotive tubes would mainly be used in bias tyres even as he held that some tubes would find application in radial tyres (especially agricultural tyres).
Asked as to what had prompted Continental to scout for a supplier of automotive tubes, Mr Peter said that Continental's earlier supplier in Yugoslavia has stopped manufacture of automotive tubes.
"The closure of the facility in Yugoslavia had prompted us to look for other long-term suppliers. After checking out many potential suppliers in Korea, Taiwan and other countries, we have decided to go with Metro in India. The main factor that settled the deal in favour of Metro was quality and not cost, even though cost is also important," he said.
Mr Chhabra said that Continental would not get any technical fee for providing the technical know-how for manufacture of automotive tubes. "But we are offering tubes at an attractive price that would ensure profits for Continental," he said.
Last year, Metro Tyres and Continental had launched two-wheel tyres in India under the Metro-Continental brand name.
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