Inside SA’s truck meca

Interview with Kobus van Zyl

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The same can be said in a South African (SA) context, with the Daimler Group performing well despite tough economic times. Freightliner is arguably the premier long distance truck in the country, Western Star the number one recovery truck hands down, while Mercedes-Benz battles the likes of Volvo in the high-end market.

Road Ahead was lucky enough to be invited to Daimler Trucks’ ‘Greatest Show on Earth’ recently, where Daimler spent a small fortune putting on an unforgettable event on the banks of the Vaal River, including a helicopter ride to Soccer City, after a majestic sunset cruise down the river.

Daimler SA CEO, Kobus van Zyl was on hand for more on their outlook for 2016, keys to their success and much more. The no-nonsense Van Zyl, who holds a heavy duty truck license, starts off by outlining his vision for 2016.

“Firstly I must say that normally the second half of the year is better than first half, and we also see the same with 2015, so there’s reasonable activity, but we see the extra heavy for 2016 at best flat compared to last year.”

There are obviously many factors and scenarios that go into fluctuations in sales figures, which are not helped by poor decision-making at governmental level, the falling rand with resultant operational cost hikes, not to mention strike action, which Daimler seem to have under control, for now.

“The main drivers are from external factors like customer confidence, business confidence in the economy and as you know this is quite tricky at the moment, where our confidence levels are lower than your lowest compared to the last couple of years, but it is actually how truck owners use this external information in terms of their replacement programmes. We find that especially in – let me call it marginal businesses – or marginal industries that customers tend to extend their replacement programmes, but fortunately for us, and this is what we experience, most customers stay with their replacement programmes and realise that this is just a cycle and that it will get better again, so I would say the main drivers are business confidence and secondly how that impacts on replacement programmes.”

Advance driver aids

Driver training, and advanced driver aids are saving companies millions of rands in recent times, with organisations acknowledging that more is needed. The days of truck drivers doing 24-hour non-stop shifts is thankfully coming to an end in reputable companies that put safety first, that is.

Van Zyl comments: “We realise that while technology is improving significantly in terms of assisting the driver in operating the unit I’m talking here of the automated transmissions and the lane assists and active safety systems. We know that the drivers are and will probably be the most critical influencing factor in the economic operation of the vehicle, so utilising our switchboard system where we can actually track driver behaviour on a real time basis, not only at a high level but also down to, for example, how is the driver utilising the pedal, the fuel pedal; how the driver is using the retarders and the braking systems, and then using the factual data to tailor-make training programmes for specific drivers. This is what we do, and then we also have a very intensive ‘train the trainer’ programme where we want to assist customers to actually have their driver trainers fulfil the role on a more regular basis,” he reflects.

Self-drive trucks in SA have been another big talking point, with companies looking at every avenue to save money in tight economic times. But Van Zyl questions whether the infrastructure is conducive to that.

“We are a long way from that, and to be honest with you we are a long way from self-driving trucks all over the world.  Daimler has a couple of trucks registered both as freightliners Mercedes Benz [D1] which we are driving on the roads in Europe and America but we are a long way from that here.  Obviously our intention with what we showed is just to show where we can take this as a technology leader, but in SA and Africa, in fact for the developing world it’s a long way to go.”

We also have a long way to go to convince the world that SA is a stable place to do business, with much unrest and labour action in 2014, while slowing down on the vehicle manufacturing side in 2015, with a three year agreement signed between labour and their bosses. These extended periods of ‘work as normal’ are vital to the growth of the truck manufacturing sector, which is one of the pillars of the SA economy, with mining taking a back seat, with shrinking GDP return.

Van Zyl discusses the stability of their assembly plant in East London: “We see a fairly stable manufacturing environment, and we monitor this very closely at our plant in East London.  We are very heartened by the relative lack of industrial action the last couple of months where parties obviously were able to agree and finalise negotiations much faster without negative effects on the industry.

“We must not underestimate the effect of the electricity challenges in the mining sector, that there’s physically not sufficient capacity to exploit the weaker – or the stronger dollar at the moment. We also see that obviously the Chinese economy, which is not growing at the rate it did for the last couple of years, is clearly also negatively affecting commodities and we see this in our customer base that there’s definitely capacity in that segment, and I think that could be one of the reasons why the mining industry is tracking lower than in the past.”

Fuel quality

One of the biggest talking points and irritations to come out of 2015 was the lack of a reliable source of 50 ppm fuel north of the border. This is a critical problem for companies that want to run cleaner and more efficient Euro 6 engines, but cannot do so with the current state of premium diesel supply.

Van Zyl is trying to keep a level head in this regard: “Obviously we would love to see it tomorrow but there’s been no clear indication from the stakeholders as to when this will be a reality.  I can tell you that apart from us and all other manufacturers being able to introduce the latest products available, which does not only have significant enhancement in safety technology but will have a significant fuel consumption benefit.  Other manufacturers have had upwards of 5% better fuel consumption with the new technology, so clearly that will positively affect the total cost of ownership and profitability for the customer but also have a market positive effect on the carbon footprint in SA,” he says.

Van Zyl has spent more years than he cares to remember in the logistics business in SA and has seen many changes from a technological, structural and operational standpoint, and goes on to outline how the demands of fleet managers have changed over the last 20 years?

“We have seen a huge improvement, or change in sophistication where fleets of trucks in the past were very much bought on specifically hardware as the main criteria but we see that more and more customers are looking at the total package and words like total cost of ownership, understanding operational risks, and these kind of things, the value chain are becoming the buzz words in the business and with all due respect we see far fewer tyre kickers buying trucks.

“Customers are far more sophisticated in analysing, for example, ways to finance the trucks, you know off-balance sheet, on-balance sheet, residual value, buy-backs and so on, and it’s a very, very sophisticated game.”

Talking about buy-backs opportunities in the second-hand market, both in SA and north of the border, we’ve seen a massive push for the second-hand market in Africa. This is largely due to unavailability of Euro 6 fuel, and therefore there is a high demand for five-10 year old Euro 3 trucks.

“We are very bullish to be honest about the second-hand market, more so north of us where traditionally those markets were dumped on by the European manufacturers and also the American manufacturers but with the introduction of better emission standards in these countries we see the pipeline of used trucks being dumped in Africa.  We are very bullish about the used vehicle business.  Our TruckStore which is a living example of this is doing really well, we’re very happy with their performance. “

Pipeline vs. truck

There has been a lot of talk of the new fuel pipeline from Durban to Johannesburg taking a chunk out of the logistics industry in that region, but Van Zyl believes that pipelines and trucks can work in harmony.

“We are of the firm belief that there are some products which are better transported in a pipe or a train. The introduction of the pipeline between Durban and Jo’burg has affected fuel transport, but I think the effect is far less than what was originally anticipated. We know that trucks will always be required for the second and third tier distributions so we have no issue with the co-developments between the road, the rail and the pipelines. To be very honest with you, the fact that there’s been such deterioration in the road conditions, especially the rural roads is also affecting truck manufacturers negatively because of our warranty programmes and so on. We can see that there are issues with the road infrastructure.”

With new Chinese trucks coming into the country at very cheap prices, Van Zyl needs to remind customers that it’s all about total cost to owner, and not just worrying about purchase price.

“We use our total cost of ownership argument. There’s a definite place for cheaper products in the country, there’s no question about it, and so we don’t actively target our Chinese competitors, but in our Daimler portfolio we use our different products to compete in the different segments and obviously with Mercedes Benz we tackle our premium segments, and with Fuso we tackle our middle segment. We believe that in the long run this is not going to affect our overall segment performance in the premium and the middle segments.”

With Daimler’s roots firmly in the USA and Europe it is somewhat surprising that Van Zyl alludes to the fact that they could learn a thing or two about how SA logistics companies operate and perform. I was expecting quite the opposite.

“To be honest with you we have many, many operators in SA that are at least on par, if not ahead, of what I have experienced in Europe, so from a transport operator perspective we are up there with the best, no question about it. Obviously we would like the introduction of cleaner fuels,” he insists.

2020 fuel

As we move towards the next generation in fuel, and alternatives therein, Van Zyl outlines some of the options going forward, and some of the new technologies that are already in place.

“We have introduced gas vehicles in our bus business and pretty soon you will see CNG busses in some of the major Metros, dual fuel, so all of this is available. We also have dabbled a bit with hybrid-trucks in SA but there is no incentive for the customer to buy this vehicle. My wife buys at a certain supermarket because she knows its cleaner there and everything is more free-range and so on, and as a result we were able to introduce Euro 5 vehicles for some of our customers because the final customer is now willing to pay a premium for cleaner stuff. This is not the case in the rest of the industry. It’s amazing, when we go to car shows in Europe the little board next to the car that has the CO2 emission and the font is three times the size of the price, because this is what customers look for and until we get defined customer demand supported by really targeted incentive schemes by our government we don’t see that this will be hugely successful.”

Busses

The bus side of the Daimler business has been going from strength to strength with some large orders of late, as SA puts much needed resources into first-world public transport, which Van Zyl says we already have with the Gautrain.

“I drive past the Gautrain station here in Centurian and you can physically not find parking anywhere. We supply the busses to Gautrain as well, so we get the utilisation numbers and these are substantially higher than what was originally planned, so if you make the service available it is not long before customers start using it,” he concludes.

Gregory Simpson

 

 

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