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, particularly with its engine developer. Certainly on paper its Econic NGT, which is powered by natural gas, looks like a snug fit for the Gulf.
“We are also focusing on alternative fuel trucks and I’m proud to present our Econic NGT,” he enthuses.
Marc Legeay, regional sales manager Middle East at Mercedes Benz Commercial Vehicles, says that the Econic has already found a market in Qatar, a market literally fuelled by CNG. However elsewhere a lack of infrastructure and political will is holding back the potential of sales.
“The material is available, and CNG is available from Dolphin’s refinery in Qatar,” he says. “Abu Dhabi has made the decision to have CNG available at petrol stations. Then it’s just a political decision from there.”
The potential in the Gulf at least is with the municipalities, waste management, fire-fighting and airports, locations where the fuel pumps are not too far away.
“You have to have a certain perimeter of action,” he explains. “We do have this truck running at Doha Airport but it’s with a Euro5 engine, not gas.”
As it plots its next move in the region, Mercedes has three main target markets, Qatar, Saudi Arabia and Iraq. Its ambitions mirrors those of its competitors such as Volvo and MAN Trucks, all of whom have established presences in the markets or are aggressively pushing their distribution networks forward. Legeay says that Mercedes is confident that its dealer network consisting of companies it was worked with for several decades, could prove to be its strongest hand, alongside an ever-evolving service programme.
“We have always had general distributors for cars and trucks,” he says. “We have been here for over 50 years.”
According to Legeay, it means that when people think of Mercedes they don’t just think of the badge but reliability as well. He describes the Actros V8 as the “legendary truck of the market”, extolling its exemplary record in the region. “You must have seen the Mercedes over 4km million, right?”
Surely there is a downside to this reliability. Why get the new model when your old one is still hitting the road?
“Some people can say it’s a pity, we want fleet renewal. OK, but we need to think about budgets. This is not a fancy business. If people are happy with a truck they can run for years and years, it’s our best advertisement.”
Returning to the subject of growth, he also returns to potential of the Iraq market.
“They have oil that they need to transport and they have big cities. Our strategy is to go there with a complete service network. We are not the sort of company that can drop a product into market and leave it.
“We will have one partner, the question is to find the right one. That’s why we’re taking our time we don’t want to make a mistake. We don’t have A countries and B countries, if you buy a Mercedes you get everything that goes with it.”
“We are a normal company, we are not arrogant. At the end of the day an operator would love to buy Mercedes but we have to deserve it. We have to prove we’re the best. That’s the challenge.”