On the road to steady growth

The commercial vehicles market in the Middle East has been on a path of consolidation rather than expansion in the last few years, but industry experts are cautiously optimistic about the year ahead.
There was a steady improvement in commercial vehicle sales during 2011, with a four per cent increase over the first quarter of 2011 compared to 2010, according to official figures released by motor trade data specialists Auto Strategies International.
In the Gulf Cooperation Council (GCC) region, sales for trucks and buses over 4,000-kg gross vehicle weight stood at 58,025 units in 2010. Over the first three months of 2011, 11,924 commercial vehicles were sold, while in the same period in 2010 a total of 11,433 units were sold. While these figures are below those of 2008, which saw sales of 116,997 trucks and buses, the signs are still positive for the industry. No figures are as yet available for the rest of 2011 or for the early months of 2012.
“Over the last two to three years there has been a lot of consolidation and rationalisation in warehouse and distribution companies’ operations and activities,” says Alexander Borg, Regional Director and Coordinator, Chartered Institute of Logistics and Transport (CILT), UAE.
Borg says when the industry was hit hard by the financial crisis, some companies used the opportunity to take stock of their operations, services and fleets. “It was a good time to be carrying out a SWOT [strengths, weaknesses, opportunities, and threats] analysis and consolidating what they had, and maybe building forecasts for the next two years,” he says.
Indicators he received from Dubai’s Department of Economic Development earlier this year, forecast a 10 per cent growth within the big warehouse and distribution companies. “In terms of commercial vehicles, from the indicators we have from Al Futtaim, a big importer in this part of the world, very positive sales have been reported,” Borg says.
He adds that Al Futtaim had maintained its momentum because the company is hands-on with the industry and is sensitive to the market. “It will definitely come up with a good business model and price, which in turn makes it attractive for people to plan budgets and buy,” he says.
Better prospects
So what is expected this year? “For 2012, I believe we will see a lot of standards and regulations coming in, but I don’t think that will keep the industry as a whole from moving on with existing operations and activities. It will not keep the entrepreneur from investing in it,” he adds.
Marco Bonaveglio, Head of Operational and Product Marketing, Renault Trucks, says, “The prospects for 2012 should be slightly better than 2011. It seems to be a challenging but definitely an interesting year.”
Bonaveglio adds that the economic and political situation over the past three years changed the truck market completely. “We can actually identify three types of markets: stable — for example Oman and Qatar; growing — Iraq and Saudi Arabia; and volatile — Libya or the UAE. “Customers are now very exigent in terms of investment; they are looking much more into prices, specifications, and resale value of the trucks they are buying,” he says. “Whereas in 2008 UAE demand for trucks outstripped supply, today’s situation is almost the opposite.”
Factors driving the growth of the commercial vehicle market include investors, oil, trade and construction development projects such as those in Saudi Arabia, Oman, Iraq, Abu Dhabi and Qatar (as it readies for the FIFA World Cup in 2022). While infrastructure spending is leading growth in the most active markets of Saudi Arabia, Oman and Iraq, in Dubai, the main contributor is considered to be the service economy.
“What is driving growth in the commercial vehicles business are sectors such as organised retail, mining, freight and logistics, tourism and so on. For instance there is a shift in retail industry where large supermarket chains are opening smaller stores across the region. These stores require a continuous supply of fresh food and consumer goods, so these companies are investing in fleets and hiring third party service providers — that’s the driver,” says Biju Saith, Conference Manager, Streamline Marketing Group. Streamline organises the annual Commercial Vehicles Middle East trade show, which begins at the Dubai International Convention and Exhibition Centre today.
Another point, according to Borg, is the high mobility of people in the region, who are changing jobs all the time. “I think that is an important factor as it affects logistics and transport,” says Borg.
Sharing best practices
CILT wants to create more awareness and share best practices within the industry. “We are concerned that much has to be done in the transport field — safety, CPC [Certificate of Professional Competence], driving standards, standards for vehicles, second-hand cars, environment, etc,” says Borg.
The institute is presently encouraging government departments in Dubai and Abu Dhabi to consider adopting the CPC, a legal requirement in parts of Europe
for drivers of vehicles over 3.5 tonnes.
Strong performance
The institute is supporting the third edition of the CVME show along with Emirates Transport, RAK Transport Authority, RTA and the Society of Engineers, UAE.
Heiko Selzam, Director, Sales and Marketing — Commercial Vehicles, Mercedes-Benz Middle East, says, “The commercial vehicles industry is changing. It is no longer just about selling a truck, but providing a solution. The concept of combining an exhibition with a conference offers a great chance to open dialogue with customers, partners and experts.”
Pranay Mehta, Division Manager, JASPA General Trading Co, says the trend in the commercial vehicle market has been increasing year on year and has shown a positive growth in the previous years. “As Dubai is one of the main business hubs, it has driven the growth of the commercial vehicle market. Also, the UAE government has been focusing on development of infrastructure facilities in the country, which drives the growth of the market,” he says.
According to Volker Seitz, spokesman for Volkswagen Commercial Vehicles, the Volkswagen LCV has reached an all-time high worldwide with 528,810 vehicles delivered in 2011. This is 49 per cent above its deliveries in 2009 and 21.2 per cent above the company’s 2010 performance. “This excellent result exceeded for the Middle East with a growth of more than 200 per cent compared to 2009,” he says.
The company’s strong performance is mainly based on the sales of its most recent models such as the Caddy, T5 Transporter, Multivan, Crafter and Amarok DoubleCab. “Our aim is to increase our market share in the following years. We will also increase the number of showrooms and service outlets,” he says.