Trucks jan2014

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Qatar

ON THE ROAD AGAIN

The influx of infrastructure projects in the Gulf region and Qatar has pushed the demand for trucks up.

While this is good news for truck dealers, does it translate into business for the truck owners?

By Rajeev Acharya, Doha

The bulk of any nation’s economy rolls on eight to 18 mighty wheels. Trucks move products of agriculture, raw materials, intermediate goods and spare parts to manufacturers; and ship finished goods from factories to wholesalers and retailers. In Qatar, a country that imports via land, sea and air, most of its products in the absence of self-sufficient manufacturing or food industries, the trucking industry however, doesn’t figure as a barometer for measuring the economy’s health. In fact, ever since the Asian Games in 2006, trucks continue to be given short shrift.

At the peak of construction activity during the exciting build-up to the Asian Games, a sudden and feverish surge in demand for trucks led to a mad rush among individuals as well as smaller companies to procure the vehicles to make a fast buck. Some did make money but the opportunity attracted a few swindlers as well who took advantage of the situation, made their millions and fled, taking innocent investors for a ride.

One such company, that sprang from nowhere, announced it was taking trucks from whoever could supply them on a monthly rental basis so they could provide fleets to construction and contracting companies that were badly in need of vehicles due to the massive projects they were working on. The company even paid monthly rents in advance through post-dated cheques to truck owners to make the whole business seem legit.

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They had investors, mainly Qatari and some expatriates, who had no exposure to the construction or contracting sectors but were swayed by the so-called truck-renting company and saw this as a venture that could make them some money. The company’s cheques were honored for two or three months, as some victims would reveal later, but began bouncing in the months that followed. For the clients, truck owners and investors who trusted the company, it was already too late for the fly-by-night operators who duped them couldn’t be traced.

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familiar with the intricacies of the construction transportation business the chances of that happening this time are remote, if not entirely ruled out. “That was more because of market hype,” says Abdul Rehman*, the general manager of a large construction company, referring to the incidents surrounding the Asian Games. “People acted like sheep and were driven by this herd mentality.” He, however, admits there was high demand for trucks and trailers at the time as many key construction projects were being completed on a fast-track basis to chase deadlines. “The

projects this time are planned well in advance so fast-track completion is unlikely,” says Abdul Rehman.

Added pressure on services The construction boom has a cascading effect on other businesses as well as imports of all kinds of goods, from building raw materials, foodstuff, medicines, and household items, to name a few, rise. Besides, the population increase fuelled by a heavier influx of foreign workers for the development projects puts added pressure on food and housing supplies as well as utilities and other basic services.

With the massive urban transformation of Doha underway resulting in road closures due to construction, traffic snarls are now a daily occurrence. Many residents point fingers at the number of trucks on the road but considering that of the 879,039 ** vehicles in Qatar end of 2012, only 5% ** were trucks and trailers that does seem like the blame is a tad bit misplaced. Trucks are also banned from the roads from 6am to 9am; 12:30pm to 3:00pm and 5:00pm to 10:00pm, each violation costing them a fine of QR500 and penalties in points. If trucks do happen to be on the road during these times, they have the necessary permissions from the traffic department in place.

Construction vehicles will be in high demand this time round too, as construction work will continue to be huge with a string of mega infrastructure projects being launched one after another

During this mad rush, there were also individuals who couldn’t afford new trucks and bought used ones. They took out loans to buy these trucks hoping for a financial windfall in the form of a regular and lucrative rental income. But in the end losses and debts left many of them devastated. Most of these truck owners were expatriates who ran small businesses and have yet to recover from the financial losses they suffered.

Lessons learned As building activity picks up in the country again ahead of the coveted FIFA 2022 World Cup, many in the construction sector and outside wonder if they will see a repeat of what happened during the preparations for the Asian Games. But if we believe those

demand wasn’t, as much as it was made out to be though.”

Industry operators say the demand for construction vehicles this time around has yet to pick up because only some mega projects have been awarded to some segments only.

“The effects of these deals need to be felt by the entire industry for businesses to start getting active and that might take another year or so,” says the general manager.

Construction vehicles will be in high demand this time round too, as construction work will continue to be huge with a string of mega infrastructure projects being launched one after another. But the demand, if we believe industry operators, is likely to be spread out over time instead of it all coming together as was the case during the Asian Games. “All the

Trucks and trailers (that transport cement, among other things) usually command daily rentals of between QR500 and QR700. The restrictions imposed by the traffic department on the movement of trucks within the limits of Doha city and its suburbs seem to have little impact on construction vehicles since most big-time projects are located outside. The vehicles that are most affected by the timings are those that carry imported goods from the Doha Port.

The ban times, truck owner Francis Quadros says, used to be difficult to work with, especially given the delays at the borders, but since that process has been bettered over the past couple of years, as well as the option to ply trucks during the ban with the right paperwork in place, the situation for them has improved vastly. While customs procedures at Qatar’s only land border in Abu Samra have improved, an online clearance system that would end paperwork is yet to be put in place.

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Photo: Bosco Menezes

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Construction trucks heading into Doha

Quadros, whose company with seven trucks that has been operating in the non-construction sector for the past 15 years, says business has picked up but the impact has not been dramatic. “Demand is not outstripping supply at the moment,” says Quadros, general manager and partner of Al Amer Transportation. His company has some high-profile companies as clients, including a couple of shipping agencies, but Quadros says a new rule that trucks now cannot go unloaded to any of the neighbouring Gulf Cooperation Council (GCC) states has affected the transportation business because operators must now wait for business to come their way.

“All the projects this time are planned well in advance so fast-track completion is unlikely” Qatar’s transport master plan that includes an upgrade of 400-600 km of existing roads at an estimated cost of $20 billion is among the $150 billion worth of domestic transport projects the country plans to fund in the next 10 years. The master plan also involves the development of a $40 billion metro railway system in Qatar and long-distance and freight lines connecting the emirate with the rest of the Gulf Cooperation Council (GCC), with an estimated 1,940km rail network. All of this will transform Qatar’s transport system into a modern one, but until that happens, the traffic department will have to continue implementing ad hoc rules that ease some of the burden on the roads say residents.

Deals on these wheels

David van Graan, head of MAN Centre Middle East and vice-president of sales and marketing

Truck dealers confirm there has been a spurt in demand due to the construction boom but say the pace is yet to accelerate to match the levels witnessed ahead of the Asian Games.

Some say they are hopeful the demand should pick up considerably by next year when most mega projects for the World Cup are announced.

Local dealers of Japan’s Hino Trucks say the influx of infrastructure projects in the entire Gulf region has pushed the demand 30 to 40 percent up for their vehicles. “All of the vehicles are in demand,” NTA, the dealers for Hino and a subsidiary of Milaha Trading, say. David van Graan, head of MAN Centre Middle East and vice-president of sales and marketing, concurs: “With the construction sector being one of the main growing segments in the GCC, we have a high demand for heavy-duty construction vehicles. We have indeed noticed a certain upswing in sales which is related to the bigger construction projects, especially in Saudi Arabia where a large number of projects were awarded last year. In other GCC countries, we expect a significant growth in 2014,” says the official of Germany’s MAN Trucks.

Al Hamad Automobiles, dealers of TATA and JAC commercial vehicles, Al Attiya Motors, dealers of Renault Trucks, and Domasco, that distributes Volvo trucks, all confirm there has been a rise in the uptake of and demand for construction vehicles, “The demand is mostly for dump trucks,” points out Al Hamad Automobiles and Al Attiya. True. The massive railway project alone, for which several contracts have already been awarded, including tunneling, is expected to throw up opportunities for transportation contractors to handle excavated waste in millions of truckloads with the contracts running into hundreds of millions of riyals. Al Hamad Automobiles says the demand for dump trucks is so huge that they have had to stock up on “all the vehicles

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Photo: Bosco Menezes

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Qatar's Msheireb under construction

all the time. If all the documents (of buyers) are in order, truck delivery takes just a week,” says the company.

Survival of the biggest Industry operators say the Qatari market is so massive given the size and value of the big-time development projects, that one-truck or small fleet operators would find it hard to survive amidst fierce competition. “Those days of driver-owners are history. Construction transportation business is now big-time here,” says an industry operator*. “They can at best manage smaller projects like a residential house project but cannot hope to have a share in big ventures.”

“The structure of commercial business in the GCC as a whole is dominated by bigger fleets, unlike in the northern Arab countries like Jordan or Lebanon where you have many truck owners with small fleets or driver-owners,” says van Graan. He adds in the UAE, for instance, the average fleet size of construction vehicles is much higher at between 30 to 80 units.

One of the major problems small fleet owners face, according to Ahmad Motaleb, sales and marketing manager, Volvo trucks (Domasco), is related to late payments. “Big companies have back-up funds so they can wait for their payments, while small companies find it difficult to stay afloat,” he says. “This is evident from the fact that some companies have cut down on their transportation business or even suspended it in the past few years.”

The massive railway project alone, for which several contracts have already been awarded, including tunneling, is expected to throw up opportunities for transportation contractors to handle excavated waste in millions of truckloads with the contracts running into hundreds of millions of riyals

and even smaller fleets, nearly a year or two before the Asian Games, they struggled to recover their investment and suffered losses.

In the case of FIFA World Cup 2022, construction transporters say the event being some nine years away, they are hopeful of making enough money. “We know this is a lifetime opportunity so we won’t let it go,” is how a transporter puts it and that best sums up the optimism among them over the FIFA fixture.

With inputs from Shereen D’Souza *Names have been changed or withheld to protect the identity of the person. ** Source: Qatar Statistics Authority

The situation being this, one can guess the fate of driver-owners, most of who used to be the hardy Pathans in the olden construction days. But if community sources are to be believed many of them have grown so big over the years that they now own larger fleets. “Pathans or Pashtun people (mostly from the north-west of Pakistan and also native to southern Afghanistan) still dominate the construction transportation sector to the extent of 70 to 75 percent,” says Abdul Rehman.

One of the bitterest lessons truck operators had to learn to deal with post the Asian Games was the sudden and frustrating lull in business. Since some had bought trucks, www.bqdoha.com

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