THE DEFINITIVE TRUCKING SITE

October 2008

In South Africa, the emblem VW stands in the minds of most as the label for the ‘People’s Car’. However, there is so much more to the name as FleetWatch correspondent Dave Scott found out on a recent visit to the 62nd IAA Truck Show in Hannover. Did you know, for example, that Volkswagen AG has a 29,9% stake in MAN as well as 68.6% of the voting rights in Scania AB? This is a powerful group and although its entry into the South Africa truck market has been a slow one, it has adopted a longterm view to its participation in our market. Watch this space! 

Volkswagen is one of the world’s great automobile companies and VW a most recognised personal transport brand. In terms of motor vehicles and parts, the 21 July 2008 issue of Fortune magazine's annual ‘Global 500’ review for 2007 rates Volkswagen the 5th largest company in the world among 33 other vehicle and parts manufacturers. Among Fortune’s most admired list of motor vehicle manufacturers – VW ranks 5th having jumped from 11th position in 2005. So they must be doing something right in highly competitive global conditions. 

Tracing shareholder architecture behind the scenes, VW becomes even more influential in heavy trucks and buses. VW is also the leading shareholder – 29,9% - in the German conglomerate MAN, who attempted to take over Scania in late 2006, and has a major decisive vote in MAN. In a step that could dramatically reshape the heavy vehicle industry, VW has won control of Scania holding 68.6% of the voting rights in Scania. This could end up in an eventual merger of the Swedish truck maker with German rival MAN. 

Reuters reports that Porsche announced it had raised its stake in Wolfsburg-based VW to over 35%, a level it said gave it effective control over Europe’s largest carmaker. Porsche has said it plans to boost its holding in VW above 50 percent, giving it a simple majority. 

So when a Porsche flashes past you on the freeway, just think of heavy trucks! 

VW has a different approach to commercial vehicles. Nutzfahrzeuge – commercial vehicles – in the VW stable extends from a Caddy van at 2152kg GVM all the way up to an extra-heavy truck over 1650kg GVM. Competitors in the truck business do not include light commercials under 3500kg GVM. This means that a VW bakkie will be part of the commercial vehicle line-up and not a passenger car responsibility.

Software – not machinery – drives VW production 
VW’s commercial vehicle world really started in Hannover, Germany, where a rough idea sketched on a notepad, outlining a square ‘transporter’ equipped with a rear-mounted air-cooled engine, launched the famous VW Kombi in 1950. They hit 1 million ‘Kombis’ manufactured in 1962 and the latest version, the T5, currently churns out at the amazing rate of 820 units per day. Watching massive 8500kg ton presses eat into 1000 tons of steel coils every day provides the backdrop to this very high production volume where 40% of the excess steel material is recycled. Even a single toolset for stamping out components weighs up to 50 tons. The scale and variety of production is almost incomprehensible – 23 standard colours are complemented by 180 special colours on right-hand and left-hand drive models that are available in 4 X 2 or 4 X 4 versions with long or short wheelbases. But reality is….. Success is not based on the working machinery and people one sees, the 1400 employees and 610 robots. It’s the software behind all this that makes VW Hannover so productive. It’s the intellectual capital and layers of computer code that drive the system. 

The VW Crafter – their big van with GVM ranging from 3,5t to 5,0t – is manufactured in Düsseldorf in Germany near the Mercedes Sprinter plant. The Crafter’s body shell is, after all, made in the Sprinter plant where Merc and VW share economies of scale. 

The world of VW heavy trucks is really in Brazil where they forecast to sell 60 000 VW trucks this year and 100 000 by 2018. It’s Brazil’s leading truck brand and only recently launched into the SA market. Leading export destinations for VW trucks out of Brazil are: Chile, Argentina, South Africa and NAFTA – countries within the North American Free Trade Agreement, a trilateral trade bloc in North America created by the governments of the USA, Canada and Mexico. 

One would expect that a VW truck leading in an ‘emerging market’ such as Brazil should be ideally suited for African conditions. After all, to even the Brazilians, fuel challenges are similar to Africa where in the words of Roberto Cortes, President of Volkswagen Trucks and Buses, Brazilian diesel fuel is 0.005% sulphur in Sao Paulo and up to 2% sulphur by mass in the further countryside. 

However, VW trucks – and vans – are encountering major gradients in attempting an entry on Southern African roads. They have only started to record sales into the heavy truck market during 2008 while buses are doing much better for the first half of 2008 with big contracts awarded into Mozambique and 84 sold for the first 6 months.

VW RPU – destined for SA
It’s interesting that VW are such latecomers in the 1-ton bakkie market. The Caddy bakkie based on a very old Citi Golf has not allowed VW to make inroads into the fiercely contested Hilux, Hardbody, KB or Colt segment where Japanese 1-tonners reign supreme. But here comes the VW RPU – it hasn’t been officially blessed with a ‘pet name’ yet – the RPU standing for a ‘Rugged-tised and Robust’ Pick- Up. The VW RPU is expected to be launched in the last quarter of 2009 and will be produced in Argentina as part of VW’s global strategy. South Africa is mentioned as a major market – so watch out Hilux, here come the Germans! Overheard on the technical grapevine is that RPU will have a high-spec, high-torque common rail diesel engine capable of providing fuel economy around 8 litres/100km with a 6-speed transmission. The RPU teaser launch took place in Hannover in an aircraft hangar with smoke and thunder – it’s all about marketing. 

The VW RPU will provide South African dealers with a much needed market segment in which to play and more leverage for VW trucks to find dealers to invest in heavy trucks and buses. 

The power of perception 
Perception is a powerful reality. For any Brazilian, VW means trucks and big trucks at that. For the casual South African observer it's: ‘Do they make trucks?’ There’s no doubting the sincerity of VW’s SA executive in embracing a strategy of being a major player in the truck and bus market – they have the local and international muscle to do this. They are also tweaking the VW truck and bus line-up with modifications and upgrades that will make it more acceptable to SA transport users. And VWSA also realise the truck and bus business is a long-haul. 

So adjusting previous forecasts to match reality is the easy bit. Changing entrenched perceptions to believe in VW heavy trucks is the major challenge. Much more important than being big is being the most admired and the worldwide VW organisation has to grasp this concept – it’s much more than product line-up and price. Excellent service is a people thing and VWSA are newcomers to this in truck and bus terms. They deserve a round of applause for the dedicated start. The VW RPU will help bring success but it’s not the cornerstone of truck and bus marketing.