Big interview: Ajit Kumar of Swaidan Trading
Ajit Kumar on the strategies that have delivered Swaidan Trading deal after deal in regional public transport and increasing success with its steadily expanding curation of European brands
There are few things more instructive in business than success stories, and that is what we currently see in Swaidan Trading, a Saeed & Mohammed Al Naboodah Group company that has swiftly swept from non-entity to serious player in the public bus sector.
The interesting thing about this market segment is the winner-takes-all nature of the tendering process, with government transport authorities typically placing orders for hundreds of buses at intervals often exceeding five years apart.
Under these high stakes, high reward conditions, you would expect it to be difficult or risky for companies with no prior involvement in the sector to invest time and energy competing with more established players in the market segment, but Swaidan Trading has bucked the trend.
In a relatively short period, the trading arm has carved out an impressive niche for itself in public transport, winning first Dubai’s Roads & Transport Authority (RTA) and now the Oman National Transport Company (ONTC) round to its VDL buses, a premium vehicular product from the Netherlands.
The strategies applied to achieve this have been both incisive and decisive — with Swaidan objectively targeting the high volume supply and maintenance contracts presented by government tenders for public transport.
Ajit Kumar, formerly GM and now CEO of the UAE-based company, explains: “We started our relationship with VDL in 2006. We bid twice with the RTA and were not successful, but in 2008 we were successful for the first time.
“VDL was at that point in time the world’s largest single order of buses — it was a deal for about $517m (AED1.9bn) for the supply and maintenance over a period of 10 years. That was our first foray into public transport, and when I look back it was a very important milestone, because it changed our profile in terms of the kind of products that we supply. It helped catapult us into the public transport arena, which gives you much higher visibility and access.
Suddenly government organisations and authorities all across the region start noticing you, that you executed this big order and that you’re maintaining it — so it set us up for future opportunities, not just with the RTA, but across the region.”
In Oman, Swaidan Trading is active through First Vehicles, a joint venture with Oman’s Al Izz Group that in late 2015 signed a deal with the Oman National Transport Company (ONTC) for the supply of 40 low-floor VDL-brand buses, which have since gone live as part of the transport network in Muscat, together with aftersales services.
In a perfectly aimed precision strike of an incorporation, Swaidan Trading established First Vehicles with Al Izz Group in April 2015 specifically to target the very tender that they have now secured.
Kumar confirms: “The primary purpose was to try to secure the ONTC opportunity, because it would give us high visibility and an opportunity to engage with the government — things that otherwise take a lot of time. One of the reasons that they selected us was because of the excellent work that we have done with the RTA, and once you do well in one market within the public transport domain then the rest of the markets knows your good work, because it is directly visible.”
For Swaidan, the formation of the joint venture with Al Izz Group was fortuitous, as the group, Kumar notes, is “as actively involved as us in trying to take the public transport to a different level in Oman”. With the RTA contract under its belt and the VDL brand in tow, Swaidan’s experience was no doubt equally attractive to Al Izz Group.
Now, expanding on Swaidan’s success with VDL as a brand with the RTA and ONTC, Kumar notes: “VDL is a complete player in the market: they have public transport as well as coaches. The coaches of course cater particularly to the tourism sector and to some extent corporate travel, but public transport is what you get really noticed for across the world, because that is where millions of passengers use the product every day — and it’s also a very severe operation, because you’ll have a situation where the buses are running for up to 20 hours a day — so there are rigorous operational requirements.
“Each of these buses actually caters to a certain segment, and when we bring in a new franchise it’s to plug in the gap that we do not have. With Ashok Leyland we cater to the basic market, which is primarily worker transport. Then we have a brand called Bluebird that’s from the US, and that’s primarily a school bus, and then with Sunwin, which is a Volvo-affiliated brand from China, and that caters to the coach market, and to some extent the luxury school bus segment. VDL is of course, the Rolls Royce of the buses that we have, and that caters to a completely different segment — it’s a high-quality bus.
“The distinction of VDL is that is a company fully based in Western Europe — so the products and services that VDL deliver are of the highest standards in the world. Unlike most other manufacturers, who have diverse manufacturing bases and cater to a variety of customer groups and price bands, VDL is high in terms of price positioning, but can tailor products to each customer’s requirement.”
Interestingly this is a theme common to Swaidan’s selection and marketing of a number of the equipment brands that it distributes, including both Kaeser Kompressoren and Sennebogen Maschinenfabrik — two companies in completely separate segments, but both of which, like VDL, still base their entire production operations within Europe.
With respect to Sennebogen and its materials handling cranes, which Swaidan approached at around about the same time as it began its relationship with VDL, Kumar explains: “We have been with Sennebogen since 2006, when there was a huge demand for cranes. At that time, we did look at many Japanese cranes, but we found that the philosophy of Sennebogen was a better match with the way we look at things — and that’s why we took Sennebogen as our partner.”
It is interesting how these preferences form, and certainly across the region you see the opposite dynamic with companies that almost exclusively take on Japanese brands and find themselves appreciating and adopting the principles of Japan’s Kaizen business philosophy of organisation and continuous improvement in the work place. An excellent example is the Abdul Latif Jameel group, the distributor of Toyota in Saudi Arabia since 1955, and more recently Daihatsu, Hino, and, in heavy equipment, Komatsu.
For Swaidan, however, it is VDL’s European technicians have triumphed in the battle of bus brands, and Kumar notes that 2015, across the various VDL lines, was “a record year for us in terms of business opportunity and the kind of volumes that we did”, and that this phenomenon wasn’t limited to a particular industry or particular customer.
He says: “It was a fantastic year with a very diverse demand, and that’s a very good trend to have. 2016 is promising, and we actually did better than 2015 in the first four months, but we can see a certain amount of slowdown happening, particularly in the oil sector.”
VDL is equally appreciative of Swaidan, and as at the recent 2016 UITP MENA Congress and Exhibition, the fourth iteration of a biennial event hosted by the RTA and The International Association of Public Transport, Swaidan was VDL’s regional representative.
Looking forward, Kumar also sees another advantage in the Dutch brand, and that is in its focus on sustainability and future-minded adaptation. He highlights: “We are looking at energy efficiency, lightweight, reducing the carbon footprint — these are factors that all of the manufacturers need to bring to the table now. We expect that in the next few years, a lot of focus will be on alternative energy, and on alternatives to conventional diesel buses.”
Kumar notes that at the present point in time, the UAE presents a very challenging environment to the introduction of alternatives to conventional diesel, and that most attempts remain in the experimental phase, with manufacturers trying to prove their technology in the region and validate it in the eyes of the authorities, looking to the coming rounds of tendering in the next few years.
Kumar adds: “There is a lot of talk of electric, but, so far, nobody has been able to demonstrate that the technology has adequate range. You can have the perfect electric bus, but because of the environmental conditions that you have, it will give you a limited range.
“Also, since most of the electricity generated in the region is hydrocarbon-based, you’re effectively still burning fossil fuels to get electricity, so it’s not truly green — and those are issues that still need to be addressed. But ultimately, it’s likely going to be a toss-up between a hybrid bus and a pure electric bus.”
Kumar notes that the critical challenge for electric and hybrid electric vehicles technology in the Gulf right now is how to maintain charge for the duration of a public transport vehicle’s typical usage, which might be 300km a day. With the current burden of the units on an electric bus’s batteries, this is not feasible.
Secondly, even with the emerging prospect of more rapid charging technologies and the possibility of recharging electric buses by degrees over the course of a working day, the rapid frequency of the charging would be require would cause any batteries to rapidly degrade and require replacement.
Kumar notes: “There is the number of cycle that a battery can stay charged, and then you have to change the battery. It might be four years or six years, but typically a bus would last eight to 10 years in this region, so it’s not proven yet that batteries will be able to survive for the life of their bus.
“But everyone is running for it — most of the authorities always like to tell the population, ‘Hey, we are at the forefront in terms of technology’, and express their concern about the environment.”
CNG is another alternative to diesel that in the long-run could pave a way for a gradual transition into biofuels, but again, Kumar notes, the behaviour of CNG at high temperatures is still being tested. He adds that with CNG, the internal combustion temperature of the engines is also higher.
Secondly, Kumar explains, there is also a problem with CNG in terms of secondary markets. He asks: “What happens to your bus after its normal life is done? If you have to move it to a third country, they need to have a CNG infrastructure. As most of the buses from here go on to the African market, the end of life value will be practically zero if you go for a full CNG solution.”
As it stands, the current focus of developments in the region are on less lofty technological developments, and the buses that it is providing to the ONTC are novel for their low-floor design.
Low-floor buses are urban buses that are inherently less suitable for long distances, but more convenient in terms of the access and egress of passengers thanks to the step-less entry that their permanently lowered frames provide. This makes them better for both disabled and elderly people.
The flipside is the higher cost of construction and maintenance for the buses, due to the compression of the suspension and other mechanical components under the lowered frame, and a max speed of 85kmph. In terms of operator training, Kumar adds: “The driver is definitely going to be a challenge, because you need to educate drivers in terms of how you use a full low-floor bus.”
Within Swaidan Trading as a whole, 50% of the businesses income comes from commercial vehicles, including pickups and light trucks. However, buses are a substantial proportion of that business, as, Kumar notes: “The volumes are greater with the buses and the value of the buses is also greater.”
Then there are the spare parts, and this is a part of the business that is not impacted by the oil price, government budgets, delays in fleet renewal, or the decline in re-export opportunities in the region. Kumar states: “The buses continue to run and consume parts, and if you don’t replace parts, they age — so the spare parts business has been less impacted than the new products business.”
As for its other commercial vehicle segments, Swaidan distributes the similarly Ashok Leyland-owned Avia brand of light trucks; the Maxus range of vans (formerly Leyland DAF (LDV)) from China’s Fortune 500 firm SAIC Motors; and Great Wall pick-ups from China’s Great Wall Motors.
Kumar notes: “We have been the leader in the Chinese pick-up segment for the past 14 years, and Great Wall continues to do very well — the product is mature, and it caters to every major segment that uses a pick-up.”
As briefly mentioned earlier, another of Swaidan’s segments is material handling, which it cover with Sennebogen’s range of dedicated cranes, as well as Clark forklifts, Hubtex warehousing side-loaders and Terex heavy-duty forklifts and reach-stackers for container handling.
As with the quality assurance of VDL, Kumar enthuses: “Sennebogen is a very special product: it’s limited in volume, but in terms of engineering applications, they’re among the best in the world.
“The advantage with Sennebogen is that it is a family-owned, niche player in the crane segment. They don’t make all types of cranes; they make a few, and then provide a lot of opportunity to customise the products and engineer solutions for specific applications.”
Kumar highlights that Swaidan is currently supplying a special 300t material handling costing about $2.3m (AED8.5m) to a firm in the UAE to use in a port construction project, alongside the delivery of special material handling cranes to two steel producers and more for the construction and rental sectors.
Most Sennebogen products combine familiar looking crane bodies with highly individualised lifting components and other application-specific features, such as hydraulically adjustable cabins — a useful function in sectors, including port, demolition, waste and recycling operations.
Kumar notes: “The operator actually has a much better view and visibility, and we have a lot of those machines operating here. The recycling market is beginning to get very interesting, particularly in terms of garbage collection and recycling, and we are working with a lot of clients in that field.”
A final advantage of Sennebogen machines in the context of the region is the OEM’s limited use of complex electronics — often more of a hindrance than a help in the tough conditions of the Gulf.
Kumar adds: “They realised very early on that excessive electronics in cranes creates challenges for end users, so they’ve tried to keep their electronics very limited — just as and where required.
“That is something that a lot of end users really like: they find it easy to work with the crane, and if something goes wrong they don’t get stuck, and they don’t have to wait for an engineer to fly in from Germany or for the distributor to support them — so that’s another benefit of Sennebogen.”
The process of careful consideration of the customer’s needs echoes across Swaidan’s selection of the brands it chooses to represent, and part of this is borne out of necessity.
Kumar highlights: “Since we were a late entrant in most of the products that we have, we have had to find something different to engage with the customer.
“We work to create solutions for them, with the flexibility that we have as a distributor of niche brands.
“We also customise forklifts for special applications, whether it’s for handling a boat or an aircraft wing, all of these we are able to provide with the partners that we work with throughout the world.”
Looking forward, beyond the obvious potential of Swaidan Trading ’s VDL bus business off the back of both its supply contracts and long-term maintenance agreements — and the statement that makes to authorities across the region — the material handling and cranes business is one that Kumar only expects to grow.
He projects: “There is now a lot of demand coming in for heavy cranes. In the industry, up to 200t is considered a regular crane, but now we find a lot of people looking at heavier cranes — which is an indicator of opportunities that are going to emerge in the market in the next two to three years.”