TBY talks to two top managers on the challenges of the Kazakhstani market, growth sectors, and Kazakhstan as a base of operations.
What challenges and opportunities has Kazakhstan’s geography presented to your operations?
BO HALLBERG Kazakhstan is huge, with a lot of cities. It is very important that you really work in the regions, and try to find your customers. We often travel to Uralsk, about 300 kilometers away, to meet with several clients and show them what the brand is. That has been the main challenge here.
HENRIK APPELBOM The size of the country is a challenge in every respect, and we have to plan our resources accordingly. At the same time it is an opportunity. Most of our potential customers are far away. It is difficult for us to access remote corners of the country. We have to adapt to countless business climates. We cannot just duplicate foreign practices in Kazakhstan. We need to have a local approach, and this condition has given us invaluable local knowledge.
How would you describe your customer portfolio?
BH Clients are very interested, but they are also very much focused on the price. They focus on the price and do not look at what this truck is going to give them over its life cycle. We have a small network and we can support our clients, but there are some brands that do not even have dealerships. Our clients are companies that run long-haulage operations, but we have also other customers in the form of chains selling various products that they want to transport around the country. We also have customers in the construction sector, and we have sold some buses.
HA Our main clients have been from the international transport sector, but lately more and more business is coming from the mining and oil and gas sectors. We work with local companies as well as foreign ones operating in Kazakhstan. Today, most customers who buy our products are somehow related to import-export or natural resources. If you look at the natural resources industry, trucks and machines are just one part of the production line. Our machinery takes extracted materials from point A to B. Through blood, sweat, and tears we have managed to gain many customers in this line of work.
What is your assessment of the truck market in Kazakhstan?
BH Western trucks still only represent a small percentage of the market when compared to Chinese trucks. We bring in our trucks from Europe. With our factory in Russia, and the enactment of the Customs Union, it will be easier for us to import trucks, opening up new opportunities. As far as manufacturing is concerned in Kazakhstan, I think that the market has to grow first.
HA Volvo has by far the biggest number of Western trucks running in Kazakhstan. The crisis hit the industry hard, and demand all but stopped in 2008, with around 50% of trucks standing still. This also affected the service segment adversely. In 2010 we delivered 145 trucks. In 2009 we delivered 60, and the year before that only two. In 2011 we are looking to grow by a further 100%. At the beginning of 2008, I looked at the competition and saw the opportunity to set the foundations for growth. It afforded us the time to build up our organizational structure, and I knew that we wouldn’t be missing out on any huge deals, as there really were none to be made. We focused on customers with their own funding, which were generally from extractive industries. Pre-crisis and mid-crisis, most demand came from the extractive industries. After the economy began to pick up, we started to see more demand for refrigerated trucks. The advent of the Customs Union has reinforced Kazakhstan’s geographical advantage in trade, as it is now easier to bring in goods to the Russian market from China through Kazakhstan.
© The Business Year