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Scania sees China as important strategic market for future growth

A year ago at this time, Steve Wager was the head of Scania South Africa and enjoying the brand’s runner up position in that market and successful and profitable growth. Fast forward 12 months on December 18, 2016, Wager was handing over symbolic keys to the 999th and 1,000th truck Scania had sold in China in 2016 to ZTO Express as general manager of Scania Sales (China) Co., Ltd. It was part of the festivities of the 2016 Scania China Truck Driver Competition held over that weekend.

On December 19, Wager spoke to the media extensively about his fresh tenure in China, reflection of the market in 2016 and outlook for 2017, what China meant for the Swedish truck maker as well as new product plans for what he calls Scania’s strategic growth market. Following are highlights of the interview. – Editor

 

2016: A year of successful growth in China to be continued

This year (2016) has been an exceptional year. That (ZTO handover) signifies the importance of the serious approach that we are taking into the Chinese market. Scania will grow over the coming years and see many more such handover of vehicles.

The express segment is the one that has the demand where our products perfectly fit. It’s all about minimizing total operating cost and maximizing uptime.

We started to get very close to many of the key accounts, breaking into new segments particularly the express segment, which has been growing at 40-50 percent a year.

All of our vehicles are now standard with maintenance packages including the FMS control package. Piece of mind is what it’s all about, the logistics operator wants to fix his cost as much as possible and focus on developing his revenues. That’s where we at Scania are able to offer operator total solutions, so that they can fix their costs, this is something we will be progressively doing more and more in the Chinese market.

I’m really looking forward hopefully to the next five plus years of working here.

 

Year of Rooster means fidelity and punctuality and that fits Scania perfectly

Soon is the year of the Rooster, which symbolizes fidelity and punctuality, both those traits can apply to Scania. Both are strengths to our company. Fidelity, when a customer enters into a partnership with Scania it really is a partnership, we don’t just sell metal, sell a vehicle, we sell a total solution, we enter into a long-term partnership with a customer.

Fidelity goes back to our three core values: customer first, respect for the individual and quality. All of our employees carry these core values inside them and that is how we behave for our customers.

One thing you get from Scania vs. local brands is uptime. We have very high uptime and very important total operating economy including uptime. Express segment growth is one of the reasons why operators in this growing segment are choosing Scania as their vehicle. We can give maximum uptime because of strength of our products, if it does go wrong, then how quickly we get the vehicle back on the road and operating again earning money for the customer.

Scania will have a vehicle that meets the stringent requirements of the China 5 emissions regulations (effective July 1, 2017). That’s 6-7 months away, plenty of time and availability of Euro 4 products.

We will be progressively opening a network of used truck sites where customers can buy pre-owned Scanias maintained in our workshops and come with a warranty.

Once we have the retail network in place, we can move into other products, operating lease or trade-ins. We will offer short-term rental, all of this is to be able to try to fix the cost for an operator so he gets piece of mind, focus on developing revenues and his business rather than worry the hassle of cost of the vehicle, we can fix cost per km or per ton.

Another important element of fixing costs is not only having a maintenance contract, but also a full repair and maintenance contract where we totally take away the risk for an operator when it comes to repair and maintaining his vehicle. Accidents and so on, it is to invest in the driver, in the training of the driver, he can also minimize these costs, driver training is very important that we offer in our portfolio.

 

Scania truck sales in China doubled in 2016

This year (2016) will be slightly more than a 1,000. It will be 1,000+ tractors. We are very big when it comes to fire segment and special vehicle applications, a few more hundred there.

It’s more or less double last year’s sales. Scania global sales are around 75,000-80,000 trucks in recent years. We are at 1,000 out of 80,000, which on the face of it small, but that isn’t the case.

 

Sales operation integration and decentralization success factors for 2016

The relocation of our head office form Beijing to Shanghai. The main aim from our perspective was to bring our two operations together because we already had an existing operation in Shanghai, our services area and a number of other activities. And we have our sales service and administration in Beijing. We talk all the time about offering a solution approach, team approach. You can’t really do that if you have the offices apart. For me it’s important we bring everything together and then we can offer one single team approach and one solution to the market. That’s partially the reason for the strong growth.

It’s also because we have now a very strongly focused and aggressive sales strategy in China. We’ve been successful with key account customers such as ZTO and the likes. And regional focus: moving a lot of decision making to our regions. We have to delegate responsibility and authority to our regional operations, then we get far quicker decisions and are closer to our customers.

I don’t see GB1589 meaning the end of the 6×2 segment. Perhaps quite the opposite. There has to be an optimization of vehicle and weight and length and we have the products that can satisfy those requirements.

 

Market growth to continue in 2017, better development in H1

What is the normal level of the (heavy-duty truck) market in China? 400,000-500,000 units, probably nearer 400,000. One fundamental is in any economy, the truck market grows more or less in proportion with the growth of the GDP. It’s a proven fact if you do statistical analysis on any economy, the truck market grows overtime more or less with growth in GDP. Here in China, we have enjoyed exceptional growth over the last few years. I think that will continue, I don’t see any reasons why we will see a reduction from the 7s in GDP growth. The market will continue to grow (the total market).

There will be a distortion due to the China 5 emissions standards effect, our experience in other markets, in Europe for example, is there is a pre-buy effect and we will see a bigger development in the market in the first half of the year than the second half of the year.

 

Slightly moving down the product pyramid

When it comes to the market in the segment in which we operate, we segment it into A, B and C. C is the segment where Scania cannot really compete. It’s based on price and there is no demand for uptime and fuel economy. Then we are into the B segment, with B-, B+ and so on. Then A and A+, Scania is traditionally operated in the A+ part of the pyramid, very much premium and there is high demand for uptime, fuel economy and strong focus and understanding from transport operators on total operating economy.

As we see it, this top end segment will continue to grow, it will grow rapidly but is still a small segment. It’s 2,000-3,000 vehicles a year. That will be off the back of mainly the express segment, where there is strong demand for TOE.

At the same time, we can move down, convince more operators that there is a solution by owning a Scania. We can do that through strong argumentation of TOE, having a product that is more affordable to many operators. That is where we will be focusing a lot of our attentions on in 2017.

 

New Generation Scania to hit Chinese market in 2018

This truck is not yet here in China. It will be launched at the beginning of 2018. For now we are selling and continue to sell our well proven and tested existing range of vehicles.

It’s still very early, not all of the cab options have even been seen yet. We launched and showcased the R and S cab, but the more popular G cab and fleet vehicles are not even seen in Europe yet.

 

No plans for truck JV, growth in coach presence to continue with Higer

Higer-Scania is a partnership supply agreement or cooperation. Scania does not have a history of entering into JVs. Scania prefers to keep control of the situation. There are no plans to enter into any JV cooperation in China.

We have in recent year been putting more efforts in selling more coaches into the Chinese market. It is a huge market, one-third of the total global market for coaches. We would like to expand our volumes further in particular through the excellent cooperation with Higer.

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