Recently, I have spoken with a number of original equipment manufacturers (OEMs) looking to make fresh inroads in the Middle East.
On each occasion, I’ve heard a similar story. The challenge is not so much in producing machines that are of interest to local customers; OEMs are always confident about the quality of their products – or at the very least, they would never tell you otherwise. Instead, the main obstacle to entering the market seems to be the region’s dealer model.
This month’s issue contains two interviews with OEMs on the hunt for new GCC distributors. Both Hidromek’s Hakan ilhan [page 22] and Powerscreen’s Conor Hegarty [page 48] sat down with PMV to discuss the challenges of identifying appropriate partners in new markets.
It is not that local dealers are uninterested in representing new brands, but rather that they have existing commitments. Long-standing exclusivity deals make it difficult for OEMs new to the GCC to find suitable representation.
I am by no means suggesting that companies such as Hidromek and Powerscreen are desperately looking for just anybody to represent them in the Middle East. In fact, it is the necessity for OEMs to find the partner that best compliments their operations that makes this search difficult.
Of course, this is not an issue specific to the Middle East. Rather, it seems to be a side effect of the dealer model per se. On the face of it, a solution might be for manufacturers to represent themselves in new markets.
Hidromek, for example, is already selling construction equipment across the Middle East through deals negotiated directly with its Turkish headquarters.
While this is certainly an option in the shorter term, it ignores the many benefits to be gained from having a regional partner. Dealers are not mere middlemen; they provide invaluable local knowledge and customer feedback to OEMs, and offer levels of after-sales support that simply cannot be delivered from an overseas.
After all, if Hidromek thought that its current approach was sustainable in the long term, it would not be engaging in discussions with prospective GCC partners.
Even so, it could be argued that the conventional dealer model stifles competition. Economists commonly state that the best product will rise to the top of its respective market.
This is all well and good, but if there is no entry point into that market, the best product in the world will be unable to compete. This is especially true within the PMV sector, where after-sales support is such an important consideration for customers.
As you might have gathered, I am not proposing that the Middle East does away with the conventional dealer model. I am simply asking whether this model would be strengthened by the relaxation of exclusivity arrangements, or – dare I say it – by allowing dealers to represent more than one brand per product type.
There is unlikely to be much appetite amongst established OEMs for such relaxations, but fresh competition could drive innovation in the PMV sector. The region’s best-selling brands are at the top for a reason, but it does the industry no favours when they pull up the ladder behind them.
Dealer or no dealer?
Is the region's dealer model stifling competition in the PMV industry?
Recently, I have spoken with a number of original equipment manufacturers (OEMs) looking to make fresh inroads in the Middle East.
On each occasion, I’ve heard a similar story. The challenge is not so much in producing machines that are of interest to local customers; OEMs are always confident about the quality of their products – or at the very least, they would never tell you otherwise. Instead, the main obstacle to entering the market seems to be the region’s dealer model.
This month’s issue contains two interviews with OEMs on the hunt for new GCC distributors. Both Hidromek’s Hakan ilhan [page 22] and Powerscreen’s Conor Hegarty [page 48] sat down with PMV to discuss the challenges of identifying appropriate partners in new markets.
It is not that local dealers are uninterested in representing new brands, but rather that they have existing commitments. Long-standing exclusivity deals make it difficult for OEMs new to the GCC to find suitable representation.
I am by no means suggesting that companies such as Hidromek and Powerscreen are desperately looking for just anybody to represent them in the Middle East. In fact, it is the necessity for OEMs to find the partner that best compliments their operations that makes this search difficult.
Of course, this is not an issue specific to the Middle East. Rather, it seems to be a side effect of the dealer model per se. On the face of it, a solution might be for manufacturers to represent themselves in new markets.
Hidromek, for example, is already selling construction equipment across the Middle East through deals negotiated directly with its Turkish headquarters.
While this is certainly an option in the shorter term, it ignores the many benefits to be gained from having a regional partner. Dealers are not mere middlemen; they provide invaluable local knowledge and customer feedback to OEMs, and offer levels of after-sales support that simply cannot be delivered from an overseas.
After all, if Hidromek thought that its current approach was sustainable in the long term, it would not be engaging in discussions with prospective GCC partners.
Even so, it could be argued that the conventional dealer model stifles competition. Economists commonly state that the best product will rise to the top of its respective market.
This is all well and good, but if there is no entry point into that market, the best product in the world will be unable to compete. This is especially true within the PMV sector, where after-sales support is such an important consideration for customers.
As you might have gathered, I am not proposing that the Middle East does away with the conventional dealer model. I am simply asking whether this model would be strengthened by the relaxation of exclusivity arrangements, or – dare I say it – by allowing dealers to represent more than one brand per product type.
There is unlikely to be much appetite amongst established OEMs for such relaxations, but fresh competition could drive innovation in the PMV sector. The region’s best-selling brands are at the top for a reason, but it does the industry no favours when they pull up the ladder behind them.
Chinese OEMs are now on par with Western firms