Ravaged by years of conflict, political instability and now the growing threat of extremism, it goes without saying that Iraq’s economy has been dealt severe blows. Last November, Al Jazeera reported the country’s financial sector faced a recession because of the war between its security forces and extremist group Daesh. Given this bleak scenario, it would be understandable if international companies were to scale back operations as the security crisis continues to worsen.
Renault Trucks, however, is not giving up on Iraq just yet. Following the opening of a production plant for its C, K and D ranges in 2013, the French manufacturer recently appointed Sunflower General Trading Company as the exclusive distributor for its vehicles in the country. The agreement appears to be a clear announcement of the brand’s plans for Iraq: to stay firmly rooted in the country and even expand operations going forward.
Commenting on the appointment of the new dealer, Bernard Amiel, business team director for Renault Trucks Iraq, explains that the key to doing business in the country is having people on the ground.
One of the main advantages Sunflower brings to the table is that it is a family-owned business established for over ten years in Iraq, with subsequent generations living in the country. Alongside its experience in the automotive and trucks sector, it is one of the main business partners of the State Company for Automotive Industry (SCAI), Renault Trucks’ assembly partner in Iraq. The new association is this an ideal match, Amiel tells Truck & Fleet ME.
Under the recently signed dealership agreement, Sunflower will build a new 1,000sqm service centre and workshop in Baghdad. The facility is already under construction and set to open for business in the first quarter of 2016. It will serve existing Iraqi customers and sell new Renault trucks imported by Sunflower. There are also plans to build a second facility in Kut, 150km south of Baghdad.
The main aim behind Sunflower’s appointment is to step up Renault’s after-sales offerings for truck customers in Iraq, nearly all of whom are government clients. Amiel explains, “We are selling 99% of our products to the government sector. The private sector has now stopped buying brand-new trucks. They are mainly buying second-hand trucks from the region, from Kuwait, from Jordan.”
What government clients are mainly looking for, he explains, is after-sales support. “They want to be sure that they can get the parts, that they can get any technical support from local representatives when they need to repair the truck.”
A strong after-sales offering is all the more crucial as trucks get more sophisticated and the technology evolves, he points out. “There are more and more electronics in the vehicle, which was not the case ten years ago, when trucks could be repaired easily or diagnosed by any workshop along the road. Nowadays, this doesn’t exist.”
“You need to have trained people to repair the truck properly. And this is not only for Renault Trucks, it’s for all European trucks. The only way to find what’s wrong with the vehicle and to repair it is to have trained and specialised people.” This means government customers want to be sure before buying vehicles that they will be adequately supported with after-sales service and maintenance.
Ensuring parts availability will also be important. Amiel doesn’t seem too concerned when asked whether the logistics of delivering parts to Iraq will be a challenge. “It shouldn’t be a problem, because we have a central spare parts store in Jebel Ali, from where we supply all our importers in the region. So the back-up supply of parts will be coming directly from Dubai, and it will be either air-freighted, depending on the urgency of the part, or it will be sea-freighted.”
The parts will be shipped via the Iraqi port of Umm Qasr, on the Persian Gulf. “Luckily, the port of Umm Qasr is still an entry port which is safe, where there is no fighting at the moment, contrary to the entry point from the Iraqi border, where there are very few trucks coming in.”
Spare parts were previously shipped either to Umm Qasr or to Aqaba in Jordan via the Red Sea, then transported on a 1,200km land route between Baghdad and Aqaba. The road is not safe at the moment, however, Amiel notes.
To further boost after-market support, Renault Trucks will also continue to offer on-site fleet services for customers via a team of technicians based in the country.
“Our after-sales service is recognised by many of our customers. This is what’s really helped the brand be where it is today. Even [when] we didn’t have a proper importer with a proper workshop, we had Iraqi technicians trained by our technicians in France who were providing service all around the country. Service is very important.”
In addition, Renault Trucks is now trying to encourage its customers to opt for service contracts to ensure their fleets are better maintained, he says.
Business climate and outlook
Despite Renault Trucks’ ambitious plans in Iraq, there’s no denying that sales have taken a blow in the country, on account of the political and economic situation. “The truck business has been affected a lot since the beginning of the year, mainly for two reasons. One is the drop of the price of the oil. Then of course there is the war.”
With the government engaged in fighting Daesh, several ministries have not been allocated an investment budget, which doesn’t bode well for Renault Trucks, considering it almost exclusively caters to the public sector.
This does raise financing issues, Amiel admits, but he points out that manufacturers have to find ways to work around this if they hope to land large orders. Renault Trucks does this by assessing the buyer’s capability to pay back loans and ensuring it has the right collateral.
Even with the challenges of doing business in Iraq, Amiel is still confident that the country has potential for the French manufacturer. “Iraq is a country that will need to be rebuilt completely from scratch. They need everything, so trucks are used in all sectors. In the construction sector, we are selling a lot of 6×4 trucks with tippers, or trucks which are equipped with concrete mixers.”
However, infrastructure is yet to really take off, and for security reasons there isn’t much activity at the moment in the roads sector. Municipal applications and the oil and gas sector are more promising, on the other hand, with medium-duty trucks from Renault’s D range being sold to municipalities for sewage disposal. “The sewage system in small cities and villages around Baghdad is not in good shape, so they have to use a lot of vacuum tankers to keep the city and the villages clean. So a lot of trucks have been sold for this application, plus of course garbage compactors.”
The company also supplies large numbers of 6×4 tractor heads to the Oil Products Distribution Company (OPDC), for transporting refined products to gas stations around the country. “We have a fleet of more than 1,000 trucks running for this particular customer. I would say OPDC is our biggest customer today in Iraq.”
Trucks from Renault’s newer C and K ranges, which were launched in the Middle East last November, haven’t been sold yet in the country. “There is a long lead time between the moment you start manufacturing the kit, sending the kit to Iraq and then assembling the trucks locally. SCAI has a stock of the old range that they are now completing the assembly for, and then by 2016 we should start with the new K and the new C.”
Going forwards, Amiel hopes that by building closer relationships with customers, Renault Trucks will be able to get through tough times in Iraq’s future. “We’re quite present in the country. My team and I, we spend a minimum of 10-15 days per month in Iraq, and we have a close relationship with our main partners and customers.”
Regardless of the political climate, there’s no question about the manufacturer’s plans for Iraq, he concludes. “We’re aiming for the leading position, of course. There is definitely a commitment from the Group to be present.”
“We believe in Iraq. But to tell you when it will really pick up, we don’t know. The country is at war today, but let’s hope that the situation will improve and the funds which are generated from the sales of the crude oil will be allocated to rebuild the country and buy more trucks.”