The last twelve months have been a tumultuous time for the transport industry in the Gulf, as the persistent depression in oil prices came to a head in late 2016 — hitting the budgets of regional governments hard and causing a significant slowdown in the construction sector.
This situation has had severe impact on the heavy commercial vehicles segment in many countries in the region, but particularly in Saudi Arabia, where according to the estimates of several heavy truck manufacturers has declined by anywhere between 60% and 70%, since 2014, from a total population numbering around 10,000 units to just a few thousand units in 2016.
It is ultimately unclear whether this is due to fleet operators standing their fleets down, or whether they are simply refraining from new purchases and fleet renewal. However, the result for manufacturers and fabricators supplying products into the segment is the same: it makes for a challenging market.
Ivan Fornazaric, founder and MD of the Gorica Group, has now been involved in the trailer and truck body segment for 30 years.
Commenting on the challenges facing the segment, he notes: “The current general market situation is volatile and unpredictable, due to both economic and political upheavals in the region, and has been impacted by both low oil prices and cash flow problems. However, some industry sectors are still performing well, especially if you look at logistics and food transportation.
“By covering various sectors we can balance these ups and downs, despite all the challenges, by shifting focus on sectors that perform well at any one point in time.”
At the same time, Fornazaric notes that ongoing developments in truck and trailer regulations in the region are a current and ongoing stimulus for growth in the market.
He explains: “The change and enforcement of new road traffic regulations will lead the market to being filled with higher quality and more deserving products. Sooner rather than later, the governments in the region will have to stop the import of old, used trucks and especially trailers.”
As an example, he points to the market for imported refrigerated semi-trailers that have already been banned from being used in food transportation in Europe — as per the EU law — after seven years of operation.
He notes: “Unfortunately these trailers are imported into the GCC, where they operate for another seven years. All of us here in the GCC then consume food transported in such units, which are no longer fit for purpose.”
In response, Gorica established a factory in 2015 for the production of rigid refrigerated ‘reefer’ rigid truck bodies — under the Frigo brand — using equipment purchased from German reefer specialist Krone.
Another trailer and truck body veteran is Schmitz Cargobull, which this year celebrates 125 years since its establishment in Germany. Fabian Bahlmann, GM at Schmitz Cargobull Middle East, also points to a drive towards quality product, including in food logistics, noting: “We feel a demand towards innovation, reliability and safety. And that’s what we offer: reefer trailers with a unique chassis design and ‘Ferroplast’ thermo technology; curtainsider trailers that are easier to operate and safer on the road thanks to new load securing features; and our S.HD flatbed range of multifunctional heavy-duty trailers, which have a robust chassis design that involves the cold-forming, galvanizing and bolting of core parts.
“One thing that unites all of our trailers is their advanced safety: every Schmitz Cargobull comes equipped with electronic braking systems and anti-lock braking systems.”
Completing the line-up of top suppliers of trailers and truck bodies in the region is Al Shirawi Equipment Company (ASECO), which — established 40 years ago — was the first local manufacturer of trailers and truck bodies in the region (under the Atlas brand).
Naveed Naqshbandi, president of ASECO, notes: “The GCC markets are cyclical in nature, but with population growth we expect the volatility to smoothen out and demand to stabilise — albeit at lower levels than what was seen from 2005 through to 2008.
“We strongly believe in the future of the GCC and Africa markets, and have just commissioned a 90,000m2 plant — our largest manufacturing facility to date. We are using the slowdown to introduce updated product lines or reactivate dormant product lines.
On the broader trends, Naqshbandi adds: “We see the market maturing both commercially and technically moving towards better engineered products that are built stronger and lighter using superior material like special steels and sophisticated tools.
“A maturing market also ensures fair and transparent trade practices, where the value proposition, not extraneous considerations, decide market share. We are therefore working on enhancing our value proposition through superior product design and production methods, coupled with financing.”
Both Fornazaric and Naqshbandi see the potential for weaker players in the market to be hit hardest, with Fornazaric noting: “Due to the volatility, market consolidation is taking place and we expect this trend to continue. Only quality producers and professional companies will survive and excel.”
Naqshbandi adds: “The slowdown has affected us like everyone else however we continue investing as we see this as an opportunity to regain market share, which we neglected during the boom years, and to get lean and fighting fit. The slowdown will take a toll on the weaker smaller players in the industry who survived on account of short capacity with the bigger manufacturers.”
Another dynamic of key importance is the interaction between fabricators and truck distributors. Ajit Kumar, CEO of Al Naboodah Commercial Group (also Swaidan Trading), which distributes DAF Trucks, notes: “There is a constant effort being made by manufacturers and distributors to ensure that their trucks and trailers are built to client requirements, minimise fuel consumption and provide low total cost of ownership.
“We work with all the major body fabricators in the UAE and do not have any strategic alliances. We also work with several specialist body fabricators in Europe to deliver specialist mounted bodies including high-compaction garbage compactors and side loaders. As axle loads are higher in the UAE we have to work with the superstructure manufacturers to ensure that there are adequate precautions taken when designing the trailer brakes, axle capacity and tyres.”
From the trailer and trucks body fabricator perspective, Fornazaric adds: “Historically we have strong partnerships with various European and Japanese truck manufacturers through their Middle East offices and their distributorship networks. This cooperation is one of commitment and continues progress despite the market situation.
“We also have several partnerships with European equipment manufacturers — that involve various degrees of collaboration — for the supply of customised equipment. These include Farid, from Italy, for waste management products, and ITAS, from Slovenia, for transit cement mixers. Our sister company GoTrade is also the distributor for Palfinger, the leading manufacturer of truck-mounted cranes and aerial work platforms.
ASECO also collaborates with a range of European brands and equipment providers, as Naqshbandi notes: “There is continuous interaction between us and the major truck manufacturers, to understand the integration requirements of the trucks, while super structures, braking systems, telematics are continuously evolving and we rely on our suppliers like WABCO to keep us up to speed on the latest technological developments and help us incorporate them into our products.
“We also collaborated with Hermanns for the introduction of banana-shaped cement bulkers for the first time in the region and remain the most preferred brand. We likewise have technology partners for most of our product range and some more in the pipeline to be introduced soon.”
On the subject of collaboration Schmitz Cargobull’s Bahlmann, adds: “We believe in direct, straightforward communication and information exchange, and since the set-up of our new customer touchpoint in the Middle East, we have significantly increased the dialogue with our customers and market partners throughout the region.
“We consider the Middle East as a region of strategic importance, and linking up customers of the region enables each customer to benefit from both our local support and Schmitz Cargobull’s global production setup.
“We are currently producing over 55,000 trailers and truck bodies per year, mostly in our German centres and for refrigerated transport, general cargo and construction.”
With respect to the slowdown, he adds: “Being a global manufacturer and supplier in the semi-trailer and truck body market, we can balance stronger and slower performing markets, without losing focus or power.”
Concurring on the importance of collaboration, Al Naboodah’s Kumar notes: “Working together is absolutely necessary in order to bring about standardisation in design and load, and thereby reduce costs.”
“It is also important for the authorities to get involved, as this will help us in driving safety regulations with respect to truck and trailer combinations. Braking systems need to be designed to ensure they meet the load requirements and braking distances.”
In a nod to the benefits of the local fabrication industry, he adds: “Local body fabricators are preferred — due to their ability to meet specific customer requirements with a fully customised product, and their immediate availability — over global players, which have longer lead times and shipment costs.”
As a whole, however, all parties agree that cooperation between truck OEMs and body builders is crucial from the perspective of innovation and product development, and increasingly from the perspective of safety.
Kumar adds: “The industry now needs to focus on lightweight bodies without compromising on strength so that more payload can be transported and thereby increase the profitability of trucking operations.
“And in the UAE specifically, more regulations and legislations are being planned. We are not far away from regulated axle loads, and the approach of Expo 2020 in Dubai makes it the right time for the industry and government to work together on this.”
