Blue elephants in Russia
Every year, about 7,000 – 8,000 million tons of cargo are transported by road vehicles in Russia. The German company Schmitz Cargobull AG makes a significant contribution to this volume. The company’s logo, which features a blue elephant, started appearing on Russian roads a long time ago. Although judging by the name of this leading European manufacturer of trailers and bodies with a turnover of over 2 billion euros, a bull would also be a good representation of the brand – this was the plan in the very beginning. But the owners of the company, which manufactures over 65,000 vehicles a year, decided that the elephant was a more powerful animal. Mile Mishevski, the CEO of Schmitz Cargobull Russland, talked to Capital Ideas about the German blue elephants in Russia.
Mr. Mishevski, German companies in Russia are usually headed up by either Germans or Russians, but you were born in Macedonia. Could you tell us how you became the CEO of Schmitz Cargobull in Russia?
This story started over 20 years ago. The thing is that I have been working in the transport sector for a quarter of a century. At first, I was with DAF Trucks in Macedonia. We worked closely with other transportation companies, including Schmitz Cargobull, and our paths happened to cross. I worked on markets like Macedonia, Romania, Serbia, Slovenia, Turkey, Moldova, and Russia. That’s how I ended up as the CEO of Schmitz Cargobull in Russia. But it’s worth pointing out that I am also the Director of Sales in Kazakhstan, Uzbekistan, and adjacent regions, including the Caucasus region.
Schmitz Cargobull first appeared on the Russian market back during the Soviet Union.
Yes, that’s exactly right.
This year, the Russian branch is celebrating its 20th anniversary. What brought the blue elephants to Russia?
Schmitz, which is the shorter version of our company’s name, came to Russia primarily because it’s becoming a very big and important market. And of course, the fact that this market is constantly growing in spite of its fluctuations, also played a major role in our decision.
Who was the company’s first client in the USSR and when were the first vehicles shipped here?
Our first order of refrigerators came from the Soviet company Sovtransavto over 40 years ago, back in 1978. And it’s worth noting that these were the first shipments of technology like this to the USSR at that point in time.
The establishment of Schmitz Cargobull Russland, headquartered in Moscow, was an important step in the development of the company’s cooperation with Russia. Why was it established and how many employees do you currently have?
Schmitz currently has two locations where we carry out our operations in Russia. One of them is in the village of Dukhanino outside of Moscow, and that’s where the company’s manufacturing facilities are located. This is where we assemble vehicles, store and service used trailers and have warehouse.
The other location is our head office in Moscow, which opened in 1999. We currently have a total of 73 employees in Russia.
Are these primarily Russian citizens, or are there foreigners as well?
We have foreigners as well – me! (laughs)
What kinds of vehicles do you offer in Russia?
We offer the full range of products our company manufactures. Our three key products are reefers, curtainsiders and tippers.
Do you provide the same products in other countries, or are your vehicles in Russia modified for the local market?
There are no special modifications: we’re talking about trailers that is the same for Russia and for the West. The only differences are in the requirements imposed by the laws in different countries. This concerns the length of the trailers. Because of the differences in legislation, we can offer products in Russia that we can’t offer to our clients in Europe. For example, in Russia we offer and sell trailers that are 16.8 meters long. The dump trucks that we supply to the Russian market have enhanced suspensions.
What place does Schmitz Cargobull Russland occupy on the Russian market of trailer vehicles? You have competitors, both foreign and Russian, right?
According to the numbers, we are in the lead, including in terms of the number of trailers that are on the market right now. Suffice it to say that there are currently over 120,000 trailers manufactured by Schmitz Cargobull on the roads in Russia.
As we know, Russia responded to the Western sanctions related to the conflict in Ukraine by halting imports of a number of food products from the EU. This, along with the low ruble and an economy in crisis, must have affected cargo volumes. Has the demand for Schmitz Cargobull vehicles in Russia dropped because of this?
Yes. Of course, the sanctions are having a serious impact on our sales. But we are in the same situation as all other manufacturers. In any case, the sanctions are having a negative impact on the market.
Are we talking about significant losses?
We’re not talking about a major drop on the market, but it’s still noticeable and tangible. We haven’t wrapped up our fiscal year yet – it’s at the end of April, and we’ll know the exact numbers then.
What is the current trend: is the number of orders growing or shrinking? It seems that economic cooperation between Germany and Russia has been a bit better recently, and German companies are actively investing in Russia again…
It’s difficult to say for sure. The market isn’t following a linear growth path – it goes up, then comes back down, for example, the sales volumes dropped to around 5,000 vehicles after 2014. Then, they climbed to 11,000-12,000 units. Over the past two years, we’ve seen a more-or-less stable situation, but we were not at the very peak: sales remained at around 11-12,000 units, maybe a bit more.
We’re monitoring the developments, but all suppliers working in Russia are doing this, not just Schmitz. It’s difficult to make specific conclusions right now. Still, we can say that compared to two years ago, when major Russian companies were placing very good orders, the situation has changed a bit, and not for the better. These companies used to purchase our products in large batches, but now they are waiting things out and making smaller, incremental purchases gradually.
What is Russia’s share of the total Schmitz Cargobull turnover?
Let’s wait until the end of the fiscal year. Last year, in 2017/2018, we placed second in terms of order volumes. It was a historical achievement for us. That year was our best one in terms of supply volumes to our customers.
Schmitz Cargobull has ambitious plans for the current 2018/2019 financial year: the manufacture of over 67,000 units of equipment and a total turnover of 2.4 billion euros. How many of these trailers could be sold on the Russian market?
Yes, you have the right numbers. In terms of sales in the RF, they could comprise about 6 percent.
The blue elephants have their own manufacturing facilities in Russia. When were they established, where are they located, and what do they make? What are your manufacturing volumes like?
The company’s first plant in Russia opened in 2013, in Leningrad Oblast. Then, in 2016, the plant was relocated to the village of Dukhanino, in Moscow Oblast. This is where the assembly of curtainsiders and tipper trailers takes place. The total area of the assembly shop is 1,200 square meters.
How many Russian transportation companies are there among your clients? What are some of the big names?
The more significant ones are the Magnit supermarket chain, Х5 Retail Group – a leading retailer, the Lenta hypermarket chain, the transportation company Delovye Linii, and the online retailer Wildberries.
Do small and medium-sized Russian enterprises purchase your products as well?
Yes, of course. We try to sell our trailers to large companies in big batches, but we also sell to smaller clients, you could say we sell retail. Our sales infrastructure requires managers that operate in different regions in Russia. This is done to ensure that we’re closer to our retail customer. So there is about a fifty-fifty split for our products: big corporate clients account for 50 percent of our sales, while small and medium-sized businesses account for the other 50.
Obviously, not every small enterprise is able to fully pay for the purchase of, say, a refers or a curtainsiders. Does Schmitz Cargobull Russland have a financing program for the purchase of vehicles, is there an installment sales practice?
Yes, we offer these options. We have a subsidiary – the financial company Schmitz Cargobull Finance, which offers leasing. We offer renting with the option to subsequently purchase our trailers. Clients can also get installment plans to purchase our products.
How many sales centers does the company have in Russia, and where do they operate?
We have ten sales centers like this. It’s a fairly extensive network that operates, among other locations, in Siberia and in the Volga region. We cover the whole territory of Russia.
What is the situation with service and maintenance for your semi-trailers in Russia? Who does this?
At the moment, we have over 90 authorized service partners servicing our equipment at our disposal, which covers the entire territory of the Russian Federation. In addition, in we have a warehouse of spare parts in Moscow Oblast, and we ship parts to our regional offices from there.
Do you live in Moscow permanently or do you come here for work trips? Do you like the city?
Yes, I live here with my family. I already feel like an active city resident (laughs). My children go to school in Moscow. And I really like the Russian capital.
