By Quinton de Villiers
Our clients rely on our ability to design and operate an intelligent transport and logistics solution on their behalf. The heart of this capability are our combined human resources, infrastructure and capital equipment that we use to efficiently move their product to market. This includes the many trucks in Bridgewater Logistics’ sizeable fleet and those of our many trusted long-term partners that augment our own in-house road haulage experience and capabilities.
Any decision to procure capital equipment at Bridgewater Logistics is, therefore, not taken lightly. The process involves extensive research by our own teams before making a final decision on any preferred truck marques, and a similar approach is adopted in the procurement of our forklifts in the warehousing operations.
However, I suspect that making these decisions will become much more complex, considering the rapidly changing face of the global truck market.
While Bridgewater Logistics has always preferred to operate premium European truck brands that offer high quality and solid technical after-market support to keep our team on the road, our management is also keeping a close watch on the rapid rise of truck brands from the East.
Certainly worth noting is their success in rivalling European brands in other capital equipment-intensive markets.
A sound example is the rapid rise of Chinese brands in the tipper truck market.
They have wrestled share away from premium European brands by providing a more affordable solution. Their offering does not have all the extra “bells-and-whistles” that drive up the costs of trucks, focusing rather on providing participants in the embattled construction sector with an affordable alternative that still gets the job done properly, efficiently and safely.
Yes, these trucks are not operating in an industry that is not nearly as demanding as ours, but this can still be viewed as a small victory for Chinese truck OEMs.
In addition, they have every intention to compete in other markets that have long been dominated by “tried-and-tested” truck brands. This includes the specialist transport and logistics sector, known for insisting on only the best in its fleet.
While their entry into other specialised markets has enjoyed varied levels of success, it does point towards the eventual arrival of “new kids on the block”, and are, therefore, certainly worth noting.
These OEMs have already made small strides into the mining sector, despite being a notoriously difficult market to enter with its “tried-and-tested-only” mantra. It is not unusual to see Chinese tipper trucks operating in-and-around coal collieries in the Witbank region, or close to busy rock quarries in the vicinity of development nodes in the country.
Again, these applications are limited to a soft rock environment, which are nowhere near to as demanding as those of the opencast hard-rock setting. Even so, I know of at least one mining major that has experimented with large Chinese load-and-haul equipment in its pit.
Chinese brands have also even enjoyed a bit of success in the South African commercial plantations. These are arguably the most sophisticated and complex transport undertakings in the country where trucks endure a severe hammering and need to perform at all costs. I know of at least one large pulp and paper producer in the country that is experimenting with using Chinese trucks in fire-fighting applications in their valuable commercial plantations. It may be a far cry from hauling timber out of rough terrain to the closest mill, or port, but it is a small gain for these OEMs, which have also seized a sizeable share of other South African agricultural-related markets.
Affordability of the truck offering was an overriding factor that allowed these OEMs to gain a foothold in all of these sectors.
However, the South African transport and logistics sector has also come under immense strain due to poor local economic conditions, and it too is on a drive to contain costs.
The latest truck sales figures from the National Association of Automobile Manufacturers of South Africa, Associated Motor Holdings and Amalgamated Automobile Distributors provide a sobering indication of the actual state of the market.
According to these reputable bodies, the South African truck market experienced a 2,8% decline in sales during June to reach a total of 1 652 units. This brings the total for the first six months of this year to 8 888 units, which is a decrease of 2,8% on the half-year results from 2016.
They also note that while the yearly results for the medium-commercial vehicle segment has remained unchanged at 800 units, the heavy commercial segment declined by 2,3% to 2 628 units, while sales in the extra heavy commercial vehicle segment decreased by a slight 1,5% to a total of 5 767 units.
This data is also corroborated by Statistics SA’s latest survey on the performance of the local transport sector for the first quarter of 2017. It shows that the industry’s total turnover reduced by 2,9% versus the fourth quarter of 2016, while inventories reduced by 9,6%, and capital expenditure declined by 13,1%. In the first quarter of 2016, the transport sector’s turnover increased by 12,8%.
While more affordable truck offerings are sure to appeal to many participants in the transport and logistics sector under these prevailing tough circumstances, I believe that these OEMs still have a lot of work ahead of them to convince astute logisticians to take them more seriously.
Quality is a major consideration, and there is still much that can be done to improve the reliability of Chinese trucks for our industry.
Certainly, the basis for such improvements already exists in their engineering and design divisions and factories, and, perhaps, we can start drawing similar analogies to the rapid rise of Japanese brands in the international market.
Many were very sceptical about Japanese and Korean products, which were merely brushed aside as “Jap Crap” in the 1980s. Now, brands, such as Komatsu, Doosan, Toyota, Hitachi and Isuzu, to name only a few, all continue to occupy a respected standing in most markets for the high quality of their design and engineering capabilities.
I have no doubt that Chinese manufacturers will also be able to achieve this, considering pockets of excellence in the industry.
Bear in mind Volvo Construction Equipment’s decision to purchase SDLG a few years ago. The Swedish OEM based this decision on the quality of the Chinese OEM’s products that is now also very apparent in other equipment brands in the country. Combined with the back-up support from the Babcock group, which also represents Volvo Construction Equipment in southern Africa, SDLG equipment is a force to be reckoned with in South Africa.
Another sound example is Caterpillar’s acquisition of SEM. Like Volvo, this leading OEM wanted a quality and affordable brand in its stable that would be able to compete against an onslaught of other Chinese brands in its entry-level markets. SEM lends support from the Barloworld group, which has long been associated with the Caterpillar marque.
Strong after-market support features very strongly in both of these examples, creating a recipe for success, and allaying any fears in the market of an inability to keep the fleet population running round the clock.
This is another key consideration for Bridgewater Logistics when acquiring any equipment and extends all the way to our fleet of Shantui forklifts that are used in our warehousing operations. We need an equipment partner that will work with us round-the-clock to help minimise downtime. We demand an instant response and a plan of action in the event of a breakdown or failure.
Keeping trucks on the road, therefore, requires a significant investment in infrastructure and equipment by both OEM and their local dealers. It also demonstrates staying power and inspires confidence.
While I have already seen some solid steps being taken in this direction by Chinese brands, more still needs to be done, especially if they intend supporting long-distance or cross-border operators.
Another big question is: will these OEMs from the east still be able to retain their cost advantage when launching a product that meets the more arduous requirements of specialist road transporters?
That is a difficult one to answer, but we are not willing to compromise on essential so-called extra “bells-and-whistles” that impede safety or performance levels of our drivers. In many instances, these so-called “optional extras” on the “specs”” brochures are a must. I have noted that one well-known Chinese crane manufacturer’s products are certainly no longer as competitive in terms of pricing now that they incorporate so many of the features of their European competitors.
Time will tell, but the dragon has entered the building, and needs to be taken much more seriously!
Quinton de Villiers is the founder and managing director of Bridgewater Logistics with a long and impressive track-record in African logistics and security. Follow Quinton at #InTheFastLane for more insights and expert commentary on African transport and logistics.