It could be a little confusing for some but Volvo Malaysia Sdn Bhd sells trucks – we are talking heavy-duty trucks / tractor cabs / prime movers. There are buses too but we will not delve into that this time. Volvo Car Malaysia Sdn Bhd, on the other hand, sells passenger cars. They are separate business entities with only the brand name in common, a result of an intellectual property sharing agreement on the parent company level between Volvo Group (trucks & buses) and Volvo Cars (cars). That said, there is a common shareholder between the two Volvo companies i.e. Geely, which wholly owns the car business, and has a small share in the commercial vehicles entity.
In 2020, Volvo Malaysia (also known as Volvo Trucks Malaysia) will have been in this country for 51 years so it is a well-known and established brand. It is also the first foreign commercial vehicle brand to establish its presence in Malaysia. But being the first or oldest does not guarantee you the biggest share of the market, which is what the Volvo management, like Mitch Peden, the Managing Director of Volvo Malaysia, knows.
Mitch took over the reins here in 2018, and like his predecessors, Mitch and his team work hard on providing existing and potential customers with confidence in the Volvo brand not just in terms of quality of product, but of aftersales support too. And rightfully so as just like cars, European trucks have a higher cost and premium compared to Asian brands.
Best Performing Year
This is likely the main factor for its increase in sales volume in 2019 despite the soft conditions experienced in the heavy-duty trucks segment. Last year Volvo sold 479 trucks, just one truck shy of its 2019 target of 480 units. For those who are used to looking at sales figures for passenger cars, this may not seem like much, but the overall prime mover / heavy-duty trucks market in Malaysia sees total annual sales of less than 1,800 units. What Volvo sold last year therefore makes up about 26% of the prime mover market; approximately 70% of its sales were the Volvo FM series.
2019 was not the only year Volvo Malaysia experienced good growth. It sold 450 trucks in 2018, which represented a significant 18% year-on-year growth. And 2019 was not the year with the highest sales volume either; that goes to the year 1996 with 548 trucks sold. But 2019 was a significant year for the company as its best performing year financially.
“We are extremely pleased to have achieved such a remarkable and record-breaking overall result for the year despite some market challenges such as the changes in regulations, more intense competition and stringent loan approvals,” Mitch commented.
To overcome the stringent credit requirements that are so often a barrier to truck purchasing, Volvo, through Volvo Financial Services (VFS) works with partner financing firms to aid its customers in securing loans. At the moment, approximately 40% of Volvo’s sales are financed via VFS with competitive interest rates and favourable payment arrangements to selected customers.
But financing and good salesmanship are not the key drivers for a segment that is very sensitive to reliability, because to the owners, reliability equals income. Trucks are workhorses and the more work it does, the more money you make.
For all the hardware available, the software is just as crucial. Yet while any brand can shout about quality and uptime, Volvo has enhanced its reputation for keeping its customers’ trucks on the road with the Gold Service Agreement. The Volvo Gold Contract is an additional servicing contract that has preventive maintenance measures which ensures vehicle uptime is not compromised. Using the Telematics Gateway, Volvo’s workshop has access to engine data, mileage, fuel consumption as well as the status of vital parts of the truck, ensuring that the workshop is aware of the right kind of servicing and maintenance work required and when to do so. This is advantageous to fleet managers to ensure the fleet’s services are predictable and not compromised by surprise breakdowns.
One of the features of the extended Gold aftersales contract is the Volvo Uptime Promise, which promises monetary compensation of RM300 per day to customers for any breakdown exceeding 12 hours from the time of telephone call to Volvo’s Customer Care Centre hotline to request for Volvo Action Service support, subject to terms and conditions of course.
And although the take-up for Gold contract is just under 30%, Volvo hopes that with the good results shown by customers who had signed up for it, it will attract other customers to follow suit. And since there is a financial compensation element to it that could impact Volvo, it also helps drive its aftersales personnel to become more efficient to keep the Uptime Promise payout to a minimum. Thus far, the payout is about 20% of Volvo’s own forecast. In essence, this is a win-win situation for customers and the brand.
Cultivating Customer Confidence
“We are an action company,” said Mitch, echoing the company’s stand in “getting basics right” and “getting things right with the dealers”. The latter point is crucial as the dealership / workshop is the brand’s frontline and face to the customer. This is where the brand’s philosophy and aspirations are in contact with the customer.
And because of the company’s goal to provide the “best uptime” and “best ROI” to its customers, it sees results like Multimodal Freight Sdn Bhd which owns a fleet of 200 Volvo, and only Volvo, trucks. The Volvo team hopes to capitalise on this by making continuous improvements to its operations and focusing on being closer to the customer and being an integral part of the customer’s business.
According to Mitch, Volvo Malaysia had set slightly lower target for 2020. This is because the company is taking into account the expected softer economic conditions as well as product life cycle. Its sales projection however, was done before the COVID-19 outbreak grew in prominence. The company is not looking to revise its projection yet but will continually monitor the situation.
The following passages are not just related to Volvo but the commercial vehicles industry in general. How slow or small the prime mover market is here is not reliant solely on factors like a virus pandemic. The growth potential of Malaysia as a logistics hub can be substantial provided the relevant policies and regulations are in place to spur growth rather than inhibit it. Things like legacy regulations from time immemorial which are not suited to the modern world will need to be revised.
Malaysia, as a production hub for trucks is also a possibility, provided there is a large enough local market to justify the setting up of production facilities here. In a market with less than 2,000 units of prime movers sold annually, how does one build a successful business case to the shareholders to spend millions of dollars if the potential is to only sell a few hundred? There also needs to be proper support and roadmap from the authorities. Truck companies are at the forefront of technology (be it autonomous driving or safety or emissions) by virtue of the risks involved with a large commercial vehicle, but as we have noticed, very little attention is paid to them by regulatory agencies. There are things that need improving and we have the capabilities to improve them, but do we have the will to?