Company sources said that ``a final decision on whether the plant will be set up or not will be taken next year after Continental has made up its mind.'' Apollo has taken the decision to put off the venture as Continental has not finalised its plans for India.

It is understood that the foreign major has been affected by the South-East Asian economic crisis and as a result is facing a huge excess in capacities all over the world. Therefore, it was not keen to invest in a greenfield venture in India at present.

For Apollo Tyres, it was a huge market opportunity to invest in a facility for radial tyres in view of the growing trend toward radialisation in the new generation passenger cars being launched in the country.

Sources said that the company has, however, decided toincrease the capacity of its two plants at Kochi and Baroda (equivalent to) to 180,000 truck tyres per month from January 1999. It is adding an additional 70,000 tyres per month from April 1, 1999.

Apollo's production this year has gone up from 140,000 to 180,000 tyres per month. The slowdown in the automobile sector has squeezed profit margins of all the auto-ancillary industries, including the tyre industry. The recession in the industry may have affected Apollo's decision, not to set up a third plant for radials, and instead increase capacities in existing plants.

With a view to overcome the sluggishness in traditional strongholds, Apollo has decided to broadbase its product portfolio and spread its dealership network to exploit the new and growing segments.

The company this year faced a disruption of operations in its Kerala plant for over three months due to industrial relations problem. Apollo was earlier in the process of scouting for a suitable location for the plant.

During 1997-98, radialpassenger car tyres constituted 38 per cent of the total passenger car tyres. Out of the 4.2 million passenger car tyres produced in 1997-98, 1.6 million were radials.

The German company was in talks with two other Indian companies -- Modi Continental and JK Industries for a possible tie-up. Modi Continental continues to export Continental tyres under a marketing arrangement.