Increased presence in Southeast Asia
In recent years, Scania has increased its vehicle deliveries to several markets in Southeast Asia. The vehicles now on the roads in Indonesia and Singapore are paving the way for growth in the service business. Meanwhile, Scania is establishing new operations in Myanmar, among other places. The development of that country’s infrastructure will generate attractive long-term opportunities.
Scania’s basic strategy is the same for all markets and segments — to offer customers the best profitability during the service life of vehicles. In Asia, the challenge is that many transport companies still just look at a vehicle’s price and load capacity. But even today there are sectors that work on the basis of high capacity utilisation of vehicles and thus demand services that boost uptime.
Indonesia has Asia’s fourth largest coal reserves and an extensive mining industry. This is reflected in Scania’s business in Indonesia, which is 95 percent related to this segment. Scania’s largest global customer in the mining industry, PT Pamapersada Nusantara (PAMA), is based in Indonesia. PAMA has one of the world’s largest fleets of mining vehicles, including 640 from Scania.
“In a couple of years we managed to double the number of Scania vehicles in the country. Today we have around 2,900 mining vehicles and between 150 and 200 buses on the roads,” says Mikael Benje, head of Scania’s representative office in Indonesia.
Opportunities in the service business
The large Scania vehicle population and the demanding conditions in mines offer good opportunities for Scania to develop its service business.
“Here we have huge potential,” says Benje. “Mining vehicles are worked hard and require rapid access to parts. One of the reasons we built a new parts warehouse in Singapore is that we want to cut lead times in the region.”
In late 2012, sales of new vehicles were weak in Indonesia, partly due to a decrease in coal prices, but Benje is optimistic. In September, Scania and local distributor United Tractors (UT) opened an assembly facility for buses in Jakarta with a monthly capacity of 25 units.
“During 2013, we expect to have roughly the same volume as in 2012: 450 to 500 trucks in Indonesia. We expect growth in the coming years. Aside from this, we anticipate a volume of about 80 buses and 50 engines annually.”
Concentration on city buses
Singapore’s vehicle market is characterised by strong competition from Chinese and Japanese manufacturers. Scania, which has had a local presence for more than 35 years, has been the most successful of the European manufacturers and currently has a market share of about 14 percent.
“Public transport is a key issue in Singapore. The government has allocated significant funds to increase the number of city buses. Among other things, this has meant that Scania since 2007 has delivered 1,100 city buses to SBS Transit Ltd, Singapore’s largest bus operator,” says James Armstrong, head of Scania in Southeast Asia.
“With so many Scania buses out on the roads, we have great potential to provide the operator with servicing and preventive measures in order to maximise bus uptime. We also see opportunities for Scania to assume operation of customer workshops.”
The construction boom in Singapore is expected to continue, generating demand for Scania’s heavy vehicles. The country’s intensive port traffic also offers potential business.
“There is good demand for marine engines, for example in pilot boats, but also for industrial engines in goods handling equipment,” says Armstrong, noting that there is good overall potential when it comes to service-related products.
Renewing the infrastructure
Myanmar, formerly known as Burma, has recently opened up to the outside world. Like various other international companies, Scania is in the process of establishing itself there. Scania’s recently appointed distributor Octagon has already sold numerous buses and coaches for domestic traffic between major cities. The dealership is now building up a service network from Yangon (formerly Rangoon) in the south to Mandalay in the north.
“The main focus in Myanmar during the next few years will probably be on improving and renewing the infrastructure. We thus expect heavy demand for vehicles from the construction industry. The country also has considerable natural resources in the form of timber, precious stones and metals. This is driving demand for products for the forestry and mining industries,” says Armstrong.
There are often electricity supply problems, requiring stand-by power of various kinds.
“The power grid has problems supplying electricity, especially during the summer months when hydroelectric power is not so effective. There is huge demand for engines for power generation in mines, shopping centres and hospitals – anywhere that needs a stand-by power source,” says Armstrong.
In October 2012, Scania’s President and CEO Martin Lundstedt visited the company’s workshop in the capital Naypyidaw as well as the construction site of a large new workshop in Yangon.
If the positive trend continues, Myanmar can become one of the most important markets in the region for heavy vehicles of western European standards and quality,” said Lundstedt during his visit.
Population: About 238 million
GDP: About USD 845 billion
GDP forecast 2013*: +6.3 percent
Population: About 50 million
GDP: About USD 50 billion
GDP forecast 2013*: +6.0 percent
Population: About 5 million
GDP: About USD 325 billion
GDP forecast 2013*: +2.9 percent
Text: Erik Aronsson, Per-Ola Knutas Photo: Erik Ljungberg