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The traditional approaches to do business will not work soon, so we need to be ready for big changes


02.04.2020 (№ LDaily #10)

The traditional approaches to do business will not work soon, so we need to be ready for big changes

Oleksandr Sanin, the Director of Volvo Ukraine LLC – the company with foreign investments – told us about the near future — electric and autonomous trucks, the dominance of used vehicles market in Ukraine, and readiness for an incredible future that awaits us.

: Volvo Group is a huge company which covers many areas in commercial vehicles and financial industries. Are they all represented in Ukraine and how many investments have been made over the 20 years of activity here?

O. Sanin: Volvo Ukraine is 100% owned by the Volvo Group. The structure of Volvo Group’s divisions includes Volvo Trucks, Renault Trucks, Volvo Construction Equipment — construction machines, Volvo Penta — industrial and marine engines, Volvo Financial Services — the captive structure that finances our products, and Volvo Buses. There are also Mack Trucks, UD and Eicher, but not all units and brands are equally represented in Ukraine, as we have no suitable conditions and the market. For example, we still have “marshrutkas” prevailing in public transport, while advanced countries and cities are now fully electrifying their public transport, including buses.

As for investments in the Ukrainian subdivision, first of all, it is necessary to agree what to consider as investments. This is the company itself and what we have done in this period of time, it is the main assets of our company. In 2001 we built the first Truck Center in Kyiv. In 2014 we doubled its capacity and this site alone is estimated at about €7 million. We have our own financial company that finances our sales since we are engaged in commerce. This can also be considered as investment, and we have probably financed for more than €200 million over the years of our time in Ukraine.

: How many trucks do you sell per year? What market share in Ukraine do you have?

O. Sanin: For 20 years our company has always been among the market leaders. Today, our market share is the fourth in Ukraine, and this is due to the way we structure the customer portfolio and which segments we are going into. Naturally, our desire is to be the first, but when it is too expensive or not quite profitable for the company, we prefer quality to quantity.

: Are you doing individual orders of trucks? How long does it take?

O. Sanin: As we deal with B2B, almost all our orders are individual. We work in different industries and segments, so it is very difficult to meet the demand of customers from different areas with only one standard product. Our business is very different from the business of passenger cars, when you can go to the showroom, choose the right car and leave with it. Our client is very picky about the choice of specification, and like children they want to dive into the process of putting their own truck together by themselves, so they “assemble” their truck as a designer: try different variations of specification and features and choose the best options for their kind of activity and type of transportation in order to use this technology with maximum efficiency. Depending on the work load of the plant, on average one truck can be assembled in 2-3 months from the order.

: What do you offer in the market that your competitors do not have?

O. Sanin: There is a tendency now that the competitors are close to each other from technical perspective, so everyone can provide a product that more or less meets modern requirements. Our product differs from others in providing the customer with a comprehensive solution. We are not talking only about technology, but also about the benefits of the business partnership, and this is the product itself: financing, after-sales, training and all sorts of soft offers that enable the client to maximize the benefits of investment. These are usually fleet management systems and tools that allow you to use the transport unit efficiently and monitor the driver’s performance in terms of safe and fuel-efficient driving.

: How much time do you need to provide qualified assistance, if the Volvo vehicle fails on the road?

O. Sanin: We work according to internal standards, so assistance should be provided within 6 hours. In our case, this is basically a difficult task due to the distances. Ukraine is a rather big country territory-wise. What we have to work on in the coming years is the development of the service network to fill the map of Ukraine with a sufficient number of service centers. We now have 8 service centers throughout the country: Kyiv, Kharkiv, Dnipro, Kramatorsk, Odessa, Lviv, Lutsk and Kovel.

The modern trucks provide also a remote diagnostics possibility. We can remotely check some of the parameters and recommend visiting the service before the breakdown, if a client gives us permission to access the equipment.

: Can you compare the Ukrainian market with the European one? I guess, there are less trucks sold in Ukraine than in Poland, for example.

O. Sanin: Unfortunately, there is almost nothing to be proud of. Today is 2019, and the market has not yet reached the level of development of the pre-crisis period. According to statistics, if we take for comparison the entire volume of the market of European heavy trucks of more than 16 tons, in 2008 it was 3300 trucks. This was a record year. In the past 2018 we did not even reach 2000. These are all European brands together. Comparing us as a country with a population of 42 million people with Poland, for example, twice less in territory and with population of 37 million, they sell 27 000 trucks per year, that is 13 times more.

: What are the reasons for that?

O. Sanin: There are many reasons: the general state of the economy, difficult geo-political situation, borders, financing, and the imperfection of environmental and technical requirements for transport. The peculiarity of the Ukrainian market is the prevalence of used trucks import. Compared to the sales of new trucks, the market for used trucks is six times larger and amounted to 12000 vehicles in 2018, most of which are older than 10 years. As long as we fill our country with old trucks, we surely cannot even dream of clean air.

: Which industry representatives are your biggest customers?

O. Sanin: We work in almost all transport segments. First, when the company was established, we were dealing with only one segment — international transportation. For many years this segment has been dominant in our portfolio. A very good signal is that today not only international carriers, but also customers from the domestic segment, where most of the fleet is much outdated, have become interested in high-quality equipment. The domestic segment is enormous: these are the regional distribution trucks, the construction segment, agriculture, and special equipment… We see, for instance, that the communal trucks require urgent renovation, because there are still many soviet trucks still working there. In this segment, city and regional authorities have to do a lot in how they approach this business, and we as manufacturer have experience and technology that will improve the quality of these services for the population.

: What innovations have you introduced in trucks and what are your future plans? We know that you already have autonomous vehicles.

O. Sanin: Yes, the motto of Volvo Trucks is “Driving progress” and, of course, we position ourselves as a company that provides advanced and innovative solutions. Our innovations may be in different areas. Some are safety related, some are associated with maximum efficiency. You are right, we are moving to the future which will be different from what we see today. The company has decided to pay much more attention to completely new solutions — electric and autonomous vehicles. This is not just a statement, our company is promoting these solutions already now. There are existing projects: Volvo Trucks has signed a contract with the Norwegian company Brönnöy Kalk AS for the supply of its first commercial autonomous solution for transporting limestone from a quarry to a nearby port. Six autonomous trucks Volvo FH will carry for Brönnöy Kalk AS the limestone through a five-kilometer tunnel from the mine to the crushing complex. This innovation is not so much in the use of autonomous trucks, but in the approach to the business, and is the continuation of successful automation projects in the field of mining, sugar cane harvesting and garbage collection. If today we provide our client with working tools, maybe in the future our company mission could be providing transport solution to any industry,. I cannot say that this is already a trend, but these are two areas we develop for the near future.

: When will we see Volvo electric trucks in Ukraine?

O. Sanin: The mass production will start already this year, but frankly, I do not see the prospect of their appearance on the roads of Ukraine in the next few years. Why? This is today the best solution for urban public transport and distribution within the city. However, it will be an expensive solution, as the production volumes are still too small, but the cost of the solution is high. Developed countries pay attention to the electrification of transport and are already restricting the use of vehicles with internal combustion engines in some city districts. Today they introduce electrification of public transport, and tomorrow it may spread to commercial transport. Ukraine needs to work on the concept of development of public transport and the communal sector in general, on the creation of infrastructure and, above all, the conditions for the emergence of such transport.

: How do you deal with harmful emissions?

O. Sanin: We produce our trucks in accordance with the strictest European and international standards for the content of harmful substances in exhaust gases. I cannot say that the most stringent requirements are in Europe and we could be limited to them. We are a European manufacturer but we sell trucks all over the world. For example, in some states of the USA, there are even stricter limits on the content of harmful substances in exhaust gases than in Europe. We absolutely meet modern standards. Also, every year, according to the same rules, the methods of control and guarantee of regulating content of harmful substances in exhaust gases are changing. This also requires some effort and investment in product development to meet these up-to-date requirements. For example, quite recently, before the legislation came into force, we began to manufacture Euro-6 standard trucks with a Step-D engine, and not only we, but all European manufacturers have started to do so. However, we are trying to do this much earlier in order to comply with the new rules before they enter into force. Regarding the latest changes in European legislation, they are not mandatory for compliance in all European countries, many of them are not mandatory in Ukraine. For example, the Euro-6 norm was introduced in the EU countries back in 2014, and Ukraine still has Euro-5 norms. We would like our generation to breathe clean air today, so our government should take a closer look at this issue

: Tell us about the social projects in which you participate, please.

O. Sanin: In the SBA, I talked about a project that has received international recognition. It is called “Stop. Look. Wave”. This is a program that was developed by Volvo Trucks employees and is being implemented for children in schools. The program involves training of children in basic technical features of trucks and specifically in behavior next to trucks. Since the truck is an active participant in road traffic and is dangerous for children on the road, it is extremely important to tell them what they see and how drivers see them. This program was presented in an interactive form all over the world. Since 2015, more than 100000 pupils have been trained in truck-specific behavior and have completed this program.

: Tell us, please, what technologies do you use in terms of drivers’ safety?

O. Sanin: I’m proud to work for Volvo, because in 1959 Volvo presented the world a three-point safety belt that saved millions of lives. Since safety is the core value for us, the development work is constantly on-going, and both active and passive safety systems are being developed. Among the solutions applied in our trucks for a long time and now is a part of a standard equipment, is adaptive cruise control which regulates a safe distance between vehicles to ensure sufficient distance for braking. There are also collision warning and emergency braking systems, even when the driver has no time to react, the truck “reads” the road situation and switches on all the braking systems to prevent collision with any object. This system is supposed to prevent the most common accident on motorways in Europe, when a truck crashes into a stationary vehicles in a traffic jam or a slow-moving lane. We offer our customers to switch from standard cruise control to adaptive cruise control, which automatically brakes the truck in case of a certain road situation. As for other systems, it is worth noting that they are almost the same as those on passenger cars, but some are specific for our industry. For example, Volvo Dynamic Steering, which works to prevent the skidding of a semi-trailer or the so-called jack-knifing. The workplace of a modern truck driver may be today even more comfortable than the workplace of a passenger car driver.

: How do you work with blind spots?

O. Sanin: You need to provide an educational work on the fact that blind zones exist. It is impossible to make a modern truck with a sufficient number of mirrors to completely eliminate the blind zones. This cannot be solved with mirrors. I think that in the near future the mirrors will be replaced by cameras with a 360-degree view, and this will allow you to see objects that today appear in the blind zone.

: Volvo factories are located in Gothenburg, Sweden and in Ghent, Belgium. There is also a plant in Kaluga, which serves the Russian market. There are factories in North America, South Africa, China. Almost all over the world. Do you plan to open a plant in Ukraine?

O. Sanin: There are no plans so far. To consider this issue, there must be certain preconditions for our company, like any other manufacturer, to recognize this as economically necessary. We have just touched upon the market volumes in Ukraine and abroad, so perhaps even the presence of the plant will not create a market here. Our factories in Ghent and Gothenburg fully satisfy the demand in the growing European market. If only attractive transparent investment conditions for doing business on an international scale were created in Ukraine, if infrastructure was improved, this could be of interest to global brands to locate production exactly here, and the skilled Ukrainian workers would not seek fortune somewhere abroad.

: How many people work for your company? How do you motivate employees?

O. Sanin: Currently, Volvo Ukraine employs 80 people. I think that the success of any enterprise depends on the team. I’m proud to say that our company has very young employees, modern people who have the knowledge and the desire to develop themselves and develop business in Ukraine. Of course, the company invests in employee training: there is a mandatory minimum of training which our employees are required to pass. Each specialty has its own training courses. It is also obligatory to undergo training on modern legislation such as GDPR or anti-corruption training. We also motivate employees by providing an attractive social package, we try to create a comfortable work environment, so that people like to work with us, so that they strive to achieve good performance in a comfortable environment. We play football together on our own grass pitch, we hold other activities during off-hours.

: Is there any experience exchange among employees? Are you sending staff to Sweden?

O. Sanin: I’m proud to say that many of our colleagues went on internships in Sweden and, to our “misfortune”, were highly praised there and remained on good engineering positions. We also pay attention to talented employees: we always give them the opportunity not only to work on national scale projects, but also to participate in international ones. Even using my own example, having made the way from the sales representative to the head of the sales department, and now I am the director of Volvo Ukraine, I show my employees that everything is possible in our company.

: Do you have a shortage of skilled staff?

O. Sanin: This issue should be discussed in the light of the fact that we are engaged not only in marketing and sales, but also in service and repair of vehicles. We have faced lately that it is difficult to find qualified technical specialists: electromechanics and mechanics in general. Today, such qualifications are not prestigious among youth. There are less and less vocational and technical schools, which teach the relevant qualifications. An office worker is much easier to find than a qualified mechanic.

: Do you have training courses for staff?

O. Sanin: We are proud to have built our own training center along with the extension of our truck center in Kyiv. This is our pride. We train both our employees and the employees of our dealers. This is probably one of the unique proposals in our field. Due to the fact that our company pays great attention to the employee training every two years Volvo holds the largest technical competition in the world called VISTA, in which more than 5000 teams and 20000 participants take part worldwide. Ukrainian teams are also constantly involved, often won the regional semi-finals and went to the world finals. Last time it was 2018 year in Rio de Janeiro, where our team was among the top forty finalists in the world.

: What risks have you faced while working as a large international company in Ukraine?

O. Sanin: Our risks are probably not very different from risks of other companies. Our activity is not only sales, but also financing of the equipment, therefore, the rule of law and possibility to apply the current legislation to those business entities that violate contractual obligations is important to our country’s attractiveness for investment and business development. Our risks are also related to the geopolitical situation in the country, any other risks could be overcome.

: What are your plans for the next three years?

O. Sanin: I have been considering this question. Each manager should have plans that are greater than the current business KPIs, and absolutely different from the usual plans for the future. When I said that we are moving towards electrification in transport as well as autonomous solutions, we need to be ready that such tomorrow will come suddenly and unexpectedly. Today, I am sure that such future is already close by, the time when traditional approaches to doing business will need to be changed is not so far. We need to be aware of this now and be ready for enormous changes.

: What does the SBA membership give you? How you can benefit from each other?

O. Sanin: I like working for a Swedish company and bring the values and qualities of the company into our Ukrainian society. Here we agree that there are advanced world practices aiming to make business as efficient as possible and with the highest returns, but at the same time with respect for the environment, human life and responsible attitude towards society as a whole. The Swedish Business Association attracts us by the fact that it accumulates the Scandinavian experience of companies, their culture and philosophy, and is trying to actively promote and introduce the positive experience of these companies in Ukraine.

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