Value-added services to fuel Middle East's commercial vehicle market

Added value and customer relationships will fuel growth of light and medium commercial vehicle markets, a GENAVCO official tells PMV Middle East


The commercial vehicle market in the GCC has been facing a decline in overall market size and sales, reportedly by 40% in the last two years. Despite the tough economic conditions, UAE-based General Navigation and Commerce Company (GENAVCO) has managed to increase year-on-year growth and market share.

Anton Du Plessis, general manager, GENAVCO, says that Isuzu’s leadership position and brand equity give the company a unique advantage to tackle emerging challenges.

“Isuzu has maintained its leadership position in the GCC through difficult market conditions. In the UAE, the company increased its market share from 15% in 2012 to over 31% at present. In 2017 alone, we increased our market share by 2%,” says Du Plessis.

Looking on the bright side, increase in government spending, infrastructure development, and construction are introducing new distribution networks with requirements for warehouses and fleets. Demand will inevitably come from end users or commercial vehicle leasing companies.

In the last two years, GENAVCO has seen its big orders shift from end users to rental companies as fleet operators move from outright purchases to short-term leasing. Currently, the bulk of orders for Isuzu light- and medium-duty vehicles come from fleet operators. As they tighten their spending, fleet operators are finding ways to reduce operating costs and maximise the lifespan of their vehicles by reassigning routes and minimising fuel consumption. As a result, they are not replacing their vehicles as frequently as they used to earlier.

GENAVCO is addressing the issue by focusing on the big picture, by educating customers about smart buying decisions which involves taking into consideration not only historical prices, margins, and discounts, but more importantly, the total cost of ownership, which involves maintenance costs, fuel usage, downtime, operating costs and resale value.

“It’s important for us to build and maintain long-term relationships with our customers and give them the assurance that we are there to support them even during tough times and that we are addressing their current needs, however challenging they might be. This will be possible only if we begin to steer the conversation from discounts and prices to added value, service, and customer relationship management,” says Du Plessis.

The total cost of ownership becomes increasingly relevant when maintenance costs are taken into account, which, according to Du Plessis, isn’t monitored well in this market. Small operators tend to service their vehicles from unauthorised dealers as a temporary solution to save a little money. As a result, they compromise on quality with substandard parts and unskilled labour, increasing the risks of vehicle breakdown. Eventually, when the vehicle breaks down, the customer associates it with an Isuzu vehicle, not realising the poor decisions that led to its failure.

“Fleet operators are starting to realise that they can achieve huge savings in the long run. For example, if a fleet operator can save 20% on fuel consumption with a change in driving habits, it can amount to a savings of AED3–4m over a period of four years, depending on the vehicles’ mileage. Operators have never looked at costs and savings this way in the past. That’s where we have a major role to play, to educate them and guide them in their decision-making. We encourage our clients to consult us while making maintenance decisions so that we can offer preferential discounts on parts and labour for servicing their vehicles,” says Du Plessis.

There are other factors presenting new challenges for vehicle manufacturers and customers in 2018, namely the introduction of VAT in the UAE and Saudi Arabia, and the adoption of the Euro 4 emission standards in the UAE.

“We’re yet to see the impact of these new legislations coming into effect in 2018. In GCC markets, where buyers have grown to love and expect discounts, an increase of 5% or more in costs will be a huge burden on businesses. Large enterprises can absorb these additional costs, but SMEs facing cash flow problems will take the biggest hit,” says Du Plessis.

According to Du Plessis, the UAE market is not yet fully prepared for Euro 4 compliance because of the undetermined price increase as well as the technology upgrades required by local workshops to service Euro 4 compliant vehicles.

“A vehicle that complies with Euro 4 standards will cost more that what it does today. Buyers tend to expect the same price and not the 5–10% increase that will apply when the new Euro 4 compliant vehicles are introduced in the market,” he says.

“All these factors will increase the total cost of ownership of the new vehicles. It’s up to manufacturers like Isuzu to find ways to reduce the total cost of ownership and educate our customers about what’s in their best interests. That’s why we emphasise that vehicle price is only one component of the solution. Offering added value with reduced labour rates, discounted parts, extended warranties, oil change intervals, improved fuel consumption, driven training and so forth can make a bigger impact,” says Du Plessis.

Isuzu Motors Limited was founded in 1916 and is the first car manufacturer in Japan. The Isuzu range of vehicles consist of the heavy duty C&E Series, the medium duty F Series, the light duty N Series and Pickup (DMAX). GENAVCO acquired the Isuzu franchise in 1982. Building on Isuzu’s worldwide reputation for reliability, unparalleled quality and superior performance, GENAVCO has established that Isuzu is ‘the perfect partner’ for every application in the UAE.

Isuzu trucks now rank among the top two best-selling light and medium duty commercial trucks in the UAE.

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