Mercedes is determined to grab market share

It has been 120 years since Daimler sold its first truck and the company along with Mercedes Benz have come a long way. It also has several decades of experience of operating in the Middle East. CMME finds out why it has decided that now is the right time to step up its presence in the region?

The construction machinery industry has some of the world’s biggest brands circulating in it. Take Caterpillar for example. It may make big, grunting machinery but at the same time can put its name to a clothing and boots range without anyone batting an eyelid. And it’s not the only one. Volvo now has a range of umbrellas and JCB even has a rugged mobile phone among its SKUs (actually for that matter, so too does Caterpillar now).

Take a tour of the many copy-cat (pun not intended) badges at Bauma China and you don’t have to be a super marketing guru to realise that this is an industry where name and image gets you a long way.

It’s bizarre then, that it has taken decades for Mercedes-Daimler to capitalise on its brand strength in the Middle East. It is arguably the biggest seller of heavy vehicles in the Middle East, but you could be forgiven for not knowing it. But this is about to change.

Last month saw the famous German company take centre-stage at the Commercial Vehicles event held in Dubai. It had the biggest stand and its regional CEO kicked off the second day of the event. This was a new Mercedes-Daimler. One prepared to be bold.

“The Middle East is clearly for us, besides China, Brazil, India and Russia, the number five in the fast growing markets. And we are driving,” says Heiko Selzam, Director, Sales and Marketing of Commercial Vehicles at Mercedes. “Around 150 years ago we invented the truck and today our vision is trucks for the world. We want to be the number one in the trucks commercial vehicles market. It’s a very ambitious target in light of the challenges that lie ahead, and the strategic foundation for this target has been set up in four key areas.”

“The management of cycles, operational excellence, growth and market exploitation (especially in the Middle East), future product generations.

“When it comes to the management of cycles, the commercial vehicles business is traditionally characterised by strong economic fluctuations of the global economy. These fluctuations are particurly strong in the sector and in the Middle East, the changing exchange rates and the lifecycle of fleets are impacting our business category. We want to balance these fluctuations and remain profitable in the long-term.”

Achieving that balance is key for Mercedes. While its customers are prepared to pay a premium for its famous reliability and cutting edge technology, it is facing mounting cost pressures.

While some of its other markets such as Brazil are served by local production, new trucks in the Middle East are supplied from its plant in Germany. Between April 2011 and January 2012 the Dirham fell 50 fils against the Euro. That may not sound a lot but it means that in those eight months, Mercedes-Daimler built trucks became 10 percent more expensive. Small wonder the company is reviewing its production.

“This means looking at production capacities and flexible working times,” he says, “but also our increasing our global production network to become less dependent on market positions.”

Mercedes work on its operational excellence has seen it try to reduce its fixed costs and in a particularly bold move it is aiming to standardise its designs and move Daimler engines into all its trucks across of its ranges. He says that this will make the company better able to introduce new technology into its next generation.

“The heavy duty engine platform that we have introduced into the Actros, proves that we have achieved results.”

Turning away from development he outlines his vision for Mercedes in the region.

“We want to expand and strengthen our presence across all manufacturers over six tonnes. This involves opening of new markets in Russia, India, China and the Middle East. We have chosen a specific approach to each market to meet customer’s needs. At the moment we cannot run a sustainable and profitable presence over 16 tonnes so we will focus on the light and medium ranges of trucks to be exploit the full market potential.”

Despite the squeeze on its production costs, Mercedes-Daimler has continued to develop some bleeding edge technology,