The trucks market has fallen by 40% but it won’t be forever

The trucks market has fallen by 40% but it won’t be forever
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The trucks market has fallen by 40% but there is still hope, thinks one of the top managers of a company in the ‘Big 7’ of construction vehicles producers.

How the state can help construction vehicle producers.

Dmitry Shved, Marketing Director of LLC “Iveco Russia”, answers our questions.

— Mr. Shved, what is today’s situation on the Russian market for construction and municipal vehicles?
— The volumes are decreasing. The truck market has fallen by 40%, including the road construction industry. 2015 will be a hard year, with sales decreasing by 35-40% as compared with 2014. However, economic growth is forecast for 2016, and I think that the beginning of next spring will see a growth in the demand for municipal road construction vehicles. On the whole, according to our forecast, by the end of 2017 we’ll return to the level of 2013 if the situation with the Russian economy improves.
Our company is in the “Big 7” of European truck producers, and the rivalry in this segment is very keen. In a crisis, customers are interested in paying a minimal price for a vehicle, and they want to be sure of its longevity and economical operation.
— How have the “Big 7”divided the Russian market for construction vehicles?
— The leader of the market is the Volkswagen Group of Companies, including Scania and MAN. Then comes Mercedes, which is trying to increase its sales volume on the Russian market. This company has its own local production and they are working hard at getting reimbursement for their expenditures. Besides them, IVECO, DAF and Renault work here. DAF sells mainly freight trucks and is now experiencing great hardship as the market has significantly fallen and its market share is decreasing. After uniting with Volvo (a very large market player), Renault has lost the greater part of its share: its sales have decreased because Volvo charges high prices as compared with the competition. And MAN and Scania, on the other hand, offer very attractive prices, as do Mercedes, and we try to look up to them. Other producers are in very complex situations: the Belorussian MAZ has stopped its work, and only part-time employment is to be had at KamAZ. State-guaranteed orders and attractive prices due to local production are helping - that’s why KamAz’s share is growing and that of MAZ is decreasing.
— The construction market has several segments: dwelling, road, oil and gas, etc. Let’s talk about the prospects of vehicle delivery for each of them.
— Due to the mortgage loans rate subsidiary program, serious volumes of dwelling construction are being maintained. So, mixers, 6?4 and 8?4 self-dumping trucks widely used in dwelling construction are also being bought. It was for this market that we introduced our 682-project with a 6x4 wheel formula, which is positioned between European and Russian products. The Russian truck costs 3.5 mln rubles, a good European one (including our product), about 6 mln. Our new product will cost 4.5 mln rubles. So we plan to meet the requirements of those who want to buy a good quality, comfortable truck and make a profit.
Oil and gas construction is also giving us a helping hand. As we produce all-wheel-drive self-dumping trucks, lorries and haul trucks which have showed good performance in the oil and gas industry, we’ve got some rather serious orders. We’ll willingly take part in a large-scale road construction infrastructure programs. The Government finances them, and we are ready to take part in the struggle for orders.
— How have anti-Russian sanctions and the devaluation of the ruble influenced the business indices of your company? How does production localization in Russia help?
— Of course, the price for local production is growing much slower than for imported production. In this sense, our plant IVECO-??? in Miass, in the Chelyabinsk region, a full-scale assembly unit which is 20 years old now, gives us an advantage and allows us to smooth over negative tendencies and to offer self-dumping trucks at a fixed ruble price. In this crisis environment we have significantly decreased our profit margin, and part of our modifications are sold in a way that is called “even”, as we are planning to increase our market share.
— What’s your localization level, its depth?
— See for yourselves. In Russia we produce IVECO Euro?argo, medium-duty trucks with 6x4 and 6x6 wheel formulae, and IVECO Trakker, with an 8x8 wheel formula. None of the European plants have such trucks - it’s a specialized product for the market of Russia and CIS.
— Vehicle rental and leasing are good prospects in the current conditions. Does your company do such things? If so, how much is the leasing of a reasonably new truck?
— We render leasing services both via our network, Iveco Capital, and via other companies’ and banks’ services. Besides this, we regularly sponsor events to stimulate demand. As far as rent is concerned, we are ready to offer a buy-back scheme - that is, after the customer uses the rented equipment, either we or the bank buys it back.
— Russia is the biggest gas producer in the world, and your company offers a full line of automobiles for working on high-pressure or condensed gas. What do you think about the present level and outlook for automobile transport transfer on natural gas motor fuel, methane in particular?
— The equipment transfer to methane possibilities are evident and vast. If we count efficiency, the purchase of our equipment gives a 50% economy in fuel and up to a 30% total cost of ownership decrease during three years of exploitation. Significant economy in fuel, oil and lubricants is achieved. Our engines are optimal: they are designed for gas, not modified for it. It’s clear that the existing 250 gas-filling works are not enough for Russia. Some players in the oil and gas market are actively investing in gas-filling works construction.
Another problem is customs duties for automobiles using methane, which are 15-19% higher than for petrol ones. I think these duties should be decreased. All over the world the transfer to an ecologically higher class vehicle (and methane automobile is Euro-6 standard) is being stimulated.
The government gives preferences to customers, granting subsidies for equipment purchase. It would be good to grant preferences to private companies, or at least to abolish transport tax for automobiles using methane, and to allow medium-duty trucks to enter the centre of a city. Owing to its turning radius, it won’t cause extra traffic jams. Why not start with Moscow?
— Our traditional question: how do you spend your free time, what are you fond of?
— I like reading, including books on economics. Recently I read “The Return of the Great Depression”. At least three times a week I go to the gym and the swimming pool. It helps keep me fit and gives me energy for work. My hobbies are automobiles and carting. Last year I took part in a Carting Championship for automobile producers on the Russian market.

Andrei Chernakov