As a group, Daimler AG today is a $130bn company and the world’s largest manufacturer commercial vehicles — across a host of both well-known and lesser known brands. However, whether it is Mercedes-Benz in Europe, Bharat-Benz in India, Fuso in Far East Asia — whichever brand in whatever country — Dr Wolfgang Bernhard is currently the man leading the fray.
He espouses: “Daimler is the world’s largest commercial vehicle manufacturer, and as the largest commercial vehicle manufacturer we are present throughout the world.
“We are the market leader in the US and NAFTA — with almost 40% of market; we are number one in Europe; we are a major competitor in Japan; in India we entered the market about two-three years ago with our own brand, Bharat-Benz, and at this point in time we are already number three; and obviously and most importantly we are present in the Middle East and north Africa with Mercedes.
“In Daimler Trucks we sold 128,000 vehicles in Q3 — an increase of 2% on last year; in Daimler Buses, we sold 7,400 buses in Q3, down 40% — mainly due to the downturn in Brazil, while Mercedes-Benz vans were up, at 75,000 vehicles in Q3 — a 5% increase on last year. For the quarter we published an EBIT (Earnings before Interest & Tax) of $800m. If you ask me what we aspire to sell for the year 2015, on the truck side we would like to sell 500,000 vehicles throughout the world; in light vans and commercial vehicles we would like to sell 300,000 vehicles.”
Until recently, this vast and expansive portfolio has been controlled entirely by Daimler Trucks & Buses out of Stuttgart, Germany — its marching orders carried regionally through the same network as Mercedes-Benz cars.
However, with the launch of Daimler’s first regional sales operation for trucks and buses, manifested as Daimler Commercial Vehicles MENA (Middle East and North Africa), ocated in Jebel Ali, Dubai and headed by Ronald Schneider, this is no longer the case.
Bernhard notes: “It is an important cornerstone for our growth story, getting us closer to our customers and to understanding the businesses and values of our local partners in order to be able to serve them better — including not being separated from them by time zones or difficulties in talking with them.
“It is not by remote control from Stuttgart, but by being here in Dubai, close to the markets, that we can best serve our customers, and it shows our a commitment to the future of the region. We are acting upon our promises by enacting our words in deeds,” he adds.
Indeed, for the past year-and-a-half the group has been quietly planning the launch of not just one, but six regional centres. So far, Dubai is the first, but the remaining five — India, Singapore, Johannesburg, Nairobi, Latin America — are scheduled to be launched on a rolling basis from the beginning of 2016.
Bernhard explains: “You might ask yourselves ‘why did we come to this region and why is it important to us?’ Obviously, we believe that we can grow and that we have something to offer. We have great vehicles that can contribute to various regions of this world. Moreover, we believe that the MENA region in particular can add to the growth story that we currently have throughout the world.
“We have in the past serviced the Middle East, South East Asia and Africa out of our German headquarters — so there were people sitting in Germany, interfacing with our local partners, and they were doing that not only for passenger cars, but also for commercial vehicles in one unit.
“We are about to change that by setting up these regional centres in order to get closer to our customers and show the commitment that we have to this region.”
Daimler Commercial Vehicles MENA, based out of Dubai’s Jebel Ali free zone, decentralises the 19 country markets across Daimler’s Middle East and North Africa (MENA) region, from Morocco in the West through to Pakistan in the East, away from Stuttgart.
The new entity will be responsible for the group’s full commercial vehicles portfolio in the region — from the Mercedes-Benz Citan van and light Fuso trucks to the heavy-duty Mercedes-Benz Actros and Zetros trucks, and will also be handling the upcoming resumption of commercial vehicle activities in Iran.
Bernhard notes: “This business unit had a clear focus, and that focus is commercial vehicles. In the past, that focus was not really clear — it was both passenger cars and commercial vehicles. So this is an organisation dedicated to the special needs of a commercial vehicle business — everything that is important. Passenger cars is a consumer business; trucks is business to business.
“We have been in these markets since the 1950s, so we are not newcomers. We have very long-lasting relationships with our business partners her in the emirates, in Saudi, in Iraq, in Iran, everywhere, we have very long-standing relationships that we look back to.
“We all know that this region is in some ways going through difficult times: some of the countries we are talking about are struggling with the oil price going down. You should take this as a sign of commitment from Daimler Trucks that especially when times are difficult we are not holding back; we are establishing out commitment to the future for this region.”
MENA is a promising growth region for Daimler’s commercial vehicles. Between 2011 and 2014, the group’s sales of trucks, buses and vans into the region grew by an average of 23% each year, with the group selling 45,900 commercial vehicles at most recent count in 2014. While its experts predict a comparatively weaker economic and growth rate of only 2.5% in 2015, the growth rate in the region is expected stabilise above 4% from 2016 to 2019.
The three biggest sales markets in the region for Daimler’s trucks, vans and buses are UAE, Saudi Arabia and Egypt, with these countries accounting for approximately two-thirds of all deliveries.
“When we look at the region, we see that the economic dynamics are still intact, growth rates that are still above 4%, and a population across the MENA region that is larger than that of the Unites States or the European Union — 600 million people compared with 300 for the US and 500 for Europe — so there’s a big population potential,” Bernhard says.
“There are a lot of young people in this area, and we also see that investment is booming, and not only in the oil industry; we see investment into real estate, trade and construction. Each of those sectors already comprise more than 10% of the GDP, so there is stable economic foundation that will still be here even when the oil is gone,” he adds.
Iranian Intrigue
Daimler AG has one of the most established historic presences in Iran of any foreign automotive manufacturer. While Iranian producers focused on iterations of French and Chinese vehicles models under sanctions, much of the reason behind this comes down to the accessibility of parts rather than volition.
The Germany group is one of the oldest trade partners of Iran Khodro Company (IKCO), the largest auto manufacturer in the region — with an annual capacity of 600,000 vehicles a year. Daimler previously owned a 30% stake in Iranian Diesel Engine Manufacturing and even established the infrastructure for the production of Mercedes diesel engines in Tabriz, in northwest Iran.
However, Daimler was forced to abandon its share of the company in 2010 and discard plans to export three-axle trucks to Iran in the wake of the tightening international sanctions on the country and its industry.
Bernhard comments: “We have a very long history with Iran, going back even to the 1940s. We have had a very quiet period over the last few years due to the political situation, but obviously we are looking forward to an opening up of the market in the next couple of months.
“We have had quite a substantial operation, with manufacturing facilities for engines, axles and trucks — these operations were mothballed when we left the country a couple of years ago, but the infrastructure is still in place and ready to go. Right now we are in talks with the Iranian authorities on how to restart and relaunch the business that we had there.”
In August, Iran’s media widely reported that Iran Khodro executives had demanded $44.7m (EUR42m) in reparations for Daimler’s earlier withdrawal from the country, while Daimler had “announced its readiness” to buy back the 30% stake in IDEM and resume production of the latest diesel engines, Hashem Yekke-Zare, CEO of IKCO, was reported as saying.
A key point of discussion between Daimler and Iran Khodro is the potential production of Mercedes Benz OM 924, OM 926 and OM 457 heavy-duty truck engines, and the possibility of technical collaboration to raise the standard of IDEM’s engines from Euro II and Euro III emission standards up to Euro V and Euro VI.
Coincidentally, the Iranian National Standards Organisation was recently called to audit IKCO’s engine labs with a view to the company applying for ISO 17025 certification required to perform Euro IV tests.
Road ahead
However, the present concern for the Daimler is to continue to implement its ongoing segregation of it operations between its passenger and commercial interests — a process the group enacted at the end of 2014.
In the short-term, the focus of this will remain Daimler’s sales approach, the first change to be enacted. Bernhard notes: “We have products, from light duty to heavy duty, simple buses to sophisticated, long-distance buses, and any customer who enters our sales operation should re-emerge with one of our products — there’s no reason why they should re-emerge empty-handed.”
In the mid-term, the division of the regional business into distinct passenger and commercial business units, a process still largely confined to the sales side of the operations, will continue along the lines of other organisational components, including finance and parts distribution.
Bernhard details: “Mid-term we will also do that — making sure that not only the organisation looks different, but the money flows, responsibilities, legal entities will reflect that as well.”
He continues: “Growth goes in two directions: one direction is the sale of new vehicles, the other one is growing by selling more parts services — where we see big opportunities. This region can contribute to the overall growth story of Daimler trucks.
“On the retail side, our partners in the UAE but also in other markets have plans to improve in the retail quality, the showrooms, workshops and customer service — so this will be done by the general distributors as part of their development plans, which we will also drive in the future.
“On the passenger side, the brand is what matters, which is entirely different from the commercial side, where people need to figure out whether they are able to make money with that product.”
With MENA sales of 45,000 vehicles out of Daimler Trucks & Buses’ sales of 500,000 units worldwide, the region represents approximately 10% of the company’s global market, and as Bernhard adds: “I can assure you that that 10% gets my attention.”
