By Alex Hawkes
FAMCO's long-standing partnership with Volvo Trucks in the Middle East is renown within the region's construction and logistics industry. Now, with the launch of their latest innovation, the two companies are driving towards an even larger share of the market.
A business partnership that has lasted over 20 years is a rarity in the rapidly changing Middle East marketplace. Considering how reliant fleet manager are upon the quality of regional distributors and suppliers of trucks, the relationship between Al-Futtaim Auto and Machinery Company (FAMCO) and Volvo Trucks makes an interesting case study.
Volvo Trucks has a strong global presence visible to anyone with even a limited knowledge of the industry. Often on the higher end of the price scale, a certain level of quality is often attributed to the brand, which in turn must be supported by an equally effective distributor. This is the challenge for FAMCO, which supplies Volvo Trucks to the entire UAE, with bases in Dubai, Abu Dhabi and Al Ain.
"The focus for us at Famco is probably the construction sector - the six by four tractor unit is by far the most dominant vehicle in that sector. For example in the northern emirates with the tipper trailer application bringing aggregate in from the quarries," identifies Paul Floyd, managing director, FAMCO.
"Secondary to that is the general road haulage, which would be a four by two vehicle generally taking container traffic. Customers include companies like GAC and courier services," he continues.
The boom of construction engulfing the UAE means neither FAMCO nor Volvo are lacking in customer demand. The focus is therefore trying to maintain high standards whilst matching rising expectations. One of the top priorities for any distrubutor is ensuring value for money.
"As a distributor, it is all about cost of ownership. Of course everyone wants to negotiate the price of the truck when they are buying it, but we are not the lowest price vehicle and we can't be because the features built into these vehicles are features other vehicles don't have. So it's the cost of ownership argument," says Floyd.
"Yes you have got the capital cost, say you keep the truck for five years, part of that calculation is what is the residual value? The residual value on the Volvo is very good," he explains.
The residual value Floyd refers to is largely a result of the manufacturer ensuring a high quality design of vehicle. Volvo Trucks is currently promoting its new I-Shift transmission in the Middle East. The I-Shift is a 12 speed electronically controlled mechanical splitter and range change gearbox designed for optimum gear changing. Available on the Volvo FH and Volvo FM series, it has a capacity for high loads and gross combination weights, making it ideal for the construction sector.
Launching the promotion, Volvo organised an event at the Dubai Autodrome where trucks with I-Shift transmission were showcased around the racecourse. Inviting potential customers to participate in a ride around the track, a variety of trailers were placed on the lorries as they braved the fierce corners. The effect of the transmission was particularly impressive on challenging bends with the driver confidently displaying the ease of each turn that would normally require expertise in a more conventional vehicle.
Intended to significantly reduce gear changes, Volvo believes the concept to be much suited to the current Middle East situation. "I think it will receive a very positive response in the Middle East for two reasons. Firstly it is suitable for the congestion problems on the roads and secondly it tackles the shortage of skilled drivers," says Stefan Tilk, area director, Northern Africa and Middle East, Volvo Trucks.
"Its very easy to drive, even I can drive it. It optimises fuel and spare parts and knocks all costs down. These new transmissions will really benefit the region and make the roads safer," he adds.
Aside the new engine, Volvo has always had to maintain an eye on adapting vehicle models to suit the Middle East temperament. The climate is of course a serious consideration, but less obvious are concerns such as the absence of weight restrictions on vehicles on the roads, a sharp contrast to say Europe or the US.
"When we launch a new model, we have to really test it on the roads out here for a year to ensure there are no problems with weight. We put the right specifications on the vehicle to adapt to the different conditions," exemplifies Tilk.
"Whilst security on vehicles here remain the same as in Europe and the US, some tougher measures are required in countries such as Sudan where we implement extra protection," he adds.
Volvo is currently working on establishing greater satellite connections in order to enable the implementation of its Dynafleet programme. An optional tracking device common in Europe and US, the company is looking to establish the product in the Middle East market within the next one to two years. With growing interest in fleet management programmes developing in the region, this could potentially add a new dimension to the scene.
Sometimes quality of product can account for little if it is not complemented by a strong support network. With a 24 hour headquarters in the Rashidiya neighbourhood of Dubai, alongside its two other branches, FAMCO is prepared to match Volvo's goals.
"We offer maintenance contracts with our vehicles, which can either be a routine maintenance contract or it can include repair as well. For a monthly fee a fleet manager can budget exactly how much it will cost to run a fleet through paying a fixed rate. We therefore take the risk on all the repairs, although there are conditions of course. The vehicle has to be brought to us - we don't want them taking the truck elsewhere and putting mysterious parts on it," reveals Floyd.
"It will come in at periodical intervals where we will do the oil change, all the regular service and filter change, and advise on break air, steering and other safety features," he adds.
Purchase of the truck is therefore not where the relationship with a customer ends with FAMCO. The supplier is a ISO 9001:2000 quality standard and ISO 14001:2001 environment standard certified company, evidence of its aftersales mentality.
Yet a level of responsibility is required by fleet managers to ensure that FAMCO is able to complete its job correctly. "We cannot be responsible for the maintenance schedule. We can remind fleet managers when the vehicle should be due for maintenance, but they are the ones who need to service it.
We try our best to make them aware," says Floyd.
Maintenance standards of trucks is not merely the concern of fleet managers, it is a concern for all those on the road, but Floyd firmly believes overall standards in the Middle East are of high quality. "Standards really are pretty good, you will always have different ends of the market. There will always be the operators that buy the cheapest vehicle, possibly buy second hand, and run them on a shoe string," he reflects. "Our customers are probably the more professional operators who value the quality, reliability and economy of the Volvo trucks. Most of our customers are very good at servicing and maintaining the vehicles."
Questioned on the future, the only fear Volvo Trucks and FAMCO voiced was the challenge of meeting the growth. Production of the vehicle has struggled in recent times to match the overwhelming demand for the trucks, not just in the Middle East but throughout the world.
"Demand has been extremely good, the problem being it is too good. We are lacking time with our own supplies in certain aspect, but we are picking up the flow now. It's a global trend and we didn't expect this much demand. Of course this varies between models," says Tilk.
Aiming to push sales figures higher than last year, the partnership has experienced a 45% growth in the truck market segment between 2003 and 2006. With an all time company high market share and more trucks being frequently imported, FAMCO has set plans in to action to tackle the demand.
"We are gearing up all the time, that is why we are expanding the branch network because it's the after market support that is vital. We expect this kind of growth to continue because a lot of it is involving the construction industry," says Floyd.
"If and when Dubai starts to slow down, we expect Abu Dhabi to become more busy in the near future. Its difficult to predict, one of the biggest challenges we have I suppose, is predicting the market because it is changing so fast," he ponders.