Mercedes-Benz exec on the heavy duty Mideast truck market

Roland Schneider on why the company is on a roll in Saudi Arabia and Kuwait

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If you visit a construction job-site in Saudi Arabia, there’s a good chance you’ll spot a Mercedes-Benz truck. Quite apart from the new vehicles sold each year by the brand’s distributor in the Kingdom, a huge population of older vehicles has been in use for many years, including the iconic bonnet-type trucks which are still widely used today – a true testament to reliability.

There are so many of these in some parts of Saudi Arabia, with fleets of heavy vehicles up to 80% Mercedes-Benz, that people talk about a Mercedes-Benz when they mean a used truck in general, says Roland Schneider, director of Overseas Sales at Mercedes-Benz Trucks. It’s an example of a brand name standing in for a product type he says, such as ‘Bobcat’ or ‘JCB’ in the construction equipment market.

“There are of course different product generations available. Some of the old bonnet types are still running around, and they contribute to the huge brand image we have because they are very long-lasting, and at the end of the day you come back to reliability and durability, and to quality,” he explains.

Saudi Arabia may be the largest market for heavy-duty vehicles in the Gulf, with annual sales estimated to be above 11,000 units, but Mercedes-Benz is well-represented in other Gulf states, particularly Kuwait, and in the UAE, the second largest market, says Schneider.

“For decades we have been extremely strong In the Middle East in the heavy duty segments above 16 tonnes, extremely strong in market share and in reputation.”

The Middle East is also a large buyer of second-hand trucks from Europe, which helps to boost the residual values of the fleet vehicles there and ultimately increases sales in Europe.

Currently in charge of overseas sales, Schneider is well acquainted with the Middle East business, having spent four-and-a-half years running the commercial vehicles business for Mercedes-Benz from the regional office in Jebel Ali from 2001 to 2005. The office opened in 2001, when parent company Daimler merged with Chrysler and was renamed DaimlerChrysler Middle East. Following the demerger in March 2008, the regional office became Daimler Middle East & Levant (DMEL).

Schneider says that at the time it was the first building in the logistics area of the Jebel Ali Free Zone, which today is home to numerous automotive logistics centres. Here Mercedes-Benz Trucks could capitalise on being part of a larger automotive group, since the logistics centre catered to Mercedes-Benz commercial vehicles – both trucks and vans – as well as buses and passenger vehicles, giving the company an economy of scale advantage uncommon in the commercial vehicle market.

The ready supply of spare parts helps build up the service level, says Schneider, taking dealers beyond simply selling units by investing in their workshops and having staff become qualified. “This laid the ground for not just being present, but parts logistics. By having parts in the region you also create a higher service level.”

The flagship Mercedes-Benz Trucks heavy-duty truck is the Actros, which corresponds to the most common – and most demanding – requirements, and is of course available in a range of configurations, whether for long-haul distribution or construction. Schneider is effusive, saying, “The Actros is an excellent, competitive, super-successful heavy-duty truck in the Middle East.”

That’s not to discount the importance of its lighter models designed for off-road applications, such as the Zetros and Unimog, profiled in the February edition of Truck & Fleet ME, in ‘Conquering the Dunes’.

Compared with the Actros sold in Europe, the version destined for the Middle East has to be up-specced to cope with the conditions. Apart from the different engine to cope with the high-sulphur fuel (though this is no longer a factor in the UAE), Schneider says that Middle East vehicles have to carry heavier loads. While weight regulations vary in the GCC, overload capability is demanded by construction fleet owners, says Schneider. This also improves residual value of vehicles if they are sold in their second or third life, especially into markets in Africa where overloading is common.

Overload specification requires a more rigid and durable vehicle, with special attention paid to the springs and front axles. “We try to specify them with a certain buffer, because we know that the operations will be different to a traditional application in Europe,” he explains.

When it comes to the exact technical demands from a product development point of view, familiarity with the application requirements – whether it’s a mine in Indonesia or a construction site in the Middle East – is essential.

“[Application specialists] need to know where the vehicle will ultimately be required to perform, in order to understand how to backwards-specify the truck. For new vehicles, our product engineers are very focused on producing equipment that matches the requirements of the region.”

In Saudi Arabia, the company began selling in the 1950s with E.A. Juffali & Brothers, dealer for both the commercial vehicle and passenger vehicle businesses. In 1974, Juffali and Mercedes-Benz founded a joint venture to manufacture commercial vehicles. The factory was inaugurated by the late King Khalid Bin Abdul Aziz, and heralded as a boost to the economic diversification of the Kingdom. The first trucks rolled off the assembly line in 1977, the first factory of its kind in the region.

The company continues to assemble trucks today, which means the vehicles avoid the import duty that applies to built-up vehicles. Juffali’s plant in Jeddah produces between 4,000 and 4,500 trucks per year, says Schneider, though its total plant capacity is even larger. In 2010, Juffali celebrated delivery of the 75,000th vehicle assembled in the plant.

Mercedes-Benz is one of only a handful of manufacturers with assembly plants in the Kingdom, but the advantage is not just shorter lead-times and avoiding customs fees. Schneider says, “In KSA, traditionally it is a strong political signal if a manufacturer still produces locally. It is perceived as very strong. If [Mercedes-Benz and Juffali] are using the Kingdom for local assembly, if they create jobs, if there are 4,000-5,000 trucks per year, then it is a strong signal to KSA. Likewise with our joint venture, that is perceived very positively.”

Beyond the advantages of an assembly operation, Schneider credits Juffali with building up an “amazing” brand reputation for Mercedes-Benz Trucks in Saudi Arabia, describing the firm as a well-developed and sophisticated vehicle distributor, comparable with European standards, and focused on all aspects of the commercial vehicles business, including assembly, service and fleet.

Mercedes-Benz Trucks is strong in Kuwait too, and there the relationship goes both ways. In 1974, the Kuwait Investment Authority (KIA) acquired a major equity stake in parent company Daimler, and is currently Daimler’s single biggest shareholder with 6.8% of the company’s shares. Last year a celebration of the 40-year partnership was attended by Dr Dieter Zetsche, chairman of the board of Management of Daimler AG, and HH Sheikh Jaber AlMubarak Al-Hamad Al-Sabah, the Prime Minister of the State of Kuwait. Kuwait was described as “Daimler’s most reliable partner despite all ups and downs in corporate history”.

Apart from the application requirements, high temperatures and dust, one major difference between the Middle East and Europe is that here overall fleet sizes are often larger. In the GCC, there are fleets with annual purchase volumes of 500-1,000 units, says Schneider, a scale uncommon in Europe.

These larger customers often want to carry out more of the servicing in-house, in their own workshops. Schneider says that naturally there is a desire to see their dealers and distributors carrying out more of the service repairs, for the sake of profitability. “You need the sales and the service to run a profitable organisation, and we enable and encourage the distributors to do as many service repairs as possible.”

Nevertheless, for customers who want to take care of servicing in-house, there is full support, with training for service technicians and workshop, which may even be extended to authorising a fleet’s workshop to do their own warranty repairs, says Schneiderr.

One factor that tends to work in the distributor’s favour today – and is evident across all areas of the automotive and equipment sectors and beyond – is increasing complexity, with extra on-board electronics or expensive diagnostic equipment. “The tendency of course is the more complex the vehicles become, the more complex they become to repair; this tendency is not just for Mercedes Benz Trucks, it applies for everyone.”

When asked whether the current generation of trucks is more difficult for larger fleet owners to fully service in their workshops, Schneider gives the example of the transition from the older SK range to the Actros in the early 2000s. Before the Actros arrived, there was apprehension from service organisations about the electronic injection and electronic engine technologies they would have to repair, and assembly of the SK model continued in Saudi Arabia for two years longer than in other markets. But once the model arrived, says Schneider, the quality of the product itself, including the engines, meant there were no problems.

There is no stopping the pace of vehicle and engine development, notes Schneider. Manufacturers are focused on the productivity and fuel-efficiency advantages of product features such as fuel injection. But no matter how Mercedes-Benz Trucks vehicles develop, the way to keep them running remains old-fashioned – namely competent and capable after-sales support, along with the high-quality product.

“We try to support our dealers and distributors with a lot of support, training and tools,” explains Schneider.

“That is why it is very important to have a regional presence there, since by being in Dubai you can go anywhere in one day, and this makes it much easier to work together as dealer and manufacturer on specific fleet requests. That is part of the success of our positive market performance in the Middle East. We have shown that we are looking after the fleet customers.”

Manufacturing in Saudi Arabia

Saudi Arabia is looking at developing an automotive manufacturing sector, to capitalise on its cheap energy and supplies of raw materials including aluminium, used in many light-weight passenger vehicles, while developing the sector would also add jobs.

But Schneider says there is no question of Mercedes-Benz Trucks setting up a manufacturing unit for heavy vehicles in the Kingdom (as opposed to the current knock-down kit assembly), since the total market volume for heavy vehicles in Saudi Arabia, even with the other GCC nations added, is dwarfed by the large volumes required to sustain a manufacturing operation.

Mercedes-Benz Trucks’ plant in Wörth, Germany, which produces the built-up Actros trucks shipped to the GCC countries as well as the assembly kits for Saudi Arabia, has annual production of over 100,000 units.


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