Paving the way: The region's lucrative road market
PMV explores the steady appetite of GCC road and airport projects for equipment that grades, paves and compacts
The road-building sector is a market segment unto itself, with an extremely limited cross-over between its products and those of other segments. This does not make it a minor sector, but rather ensures it is all the more fiercely fought over by the specialised companies that have staked their claim on it.
Standing at the apex of the industry is Wirtgen, the German group heavily specialised in road-building and mining. Armed with the figures to prove it is Asif Khan, GM for plant and equipment at GENAVCO, the official distributor of Wirtgen in the UAE.
He notes: “For the past four, five years the road-building sector has been steady. Like everybody, we had the best year in 2008, but we have seen steady progress year after year in the segment and last year was a record year for us in terms of market share. We achieved a market share of 86% in road-paving equipment, and for road-milling machines we had 100% market share — not a single unit was sold by the competition. With Hamm, which is the roller manufacturer, we had 42% market share for the rollers business.”
The Wirtgen Group’s equipment is split across five brands, including the group’s eponymously branded road-milling machines, Vögele pavers and Hamm rollers. Benninghoven produces asphalt plant and was acquired by Wirtgen in 2014 from another German company, while Kleemann is a slightly older acquisition (dating back to 2006) that produces crushing and screening plants. The point to observe is that the group’s entire range fits within the road-building vertical.
Globally, the market share figures are no less impressive. Khan expands: “Worldwide, in the milling business, they have 72% market share. They are number one by far, and for number two you will see a single digit. For the pavers, it is 37% market share worldwide, and for rollers it is 19% market share worldwide.”
As might be expected of such pre-eminence, GENAVCO has supplied an impressive list of projects with its Wirtgen product, including both roads and runways — for which the requirements of the concrete or asphalt paving machines are little different. Khan notes: “The Ghweifat road expansion has been going on, as well as the Al Maktoum Airport project. The expansion project for Al Maktoum Airport was awarded in Q4 2015 and the contractors have started working on it, and we’ll be delivering more product to them. The road projects in the Northern Emirates, where the government is investing money are also going on.”
The borderline monopoly of Wirtgen in certain segments and markets comes down to one simple quality measure for road-paving: the ‘IRI’ or international roughness index.
Khan reports: “When customers or consultants know that Wirtgen equipment is being used on a project, they are relaxed, because they know that they will achieve the IRI that is set by the authorities.”
GENAVCO’s customers achieve an average IRI of around 0.6, when even the requirements of the Dubai Roads and Transport Authority is only for an IRI of 1.0, which 0.6 is comfortably below. Indeed, the World Economic Forum officially reported the UAE as having the world’s best roads in both 2015 and 2016, which necessarily lends a degree of credit to GENAVCO’s Wirtgen distribution.
Outside of the UAE, GENAVCO does not hold the distribution rights to Wirtgen — no doubt because local companies have clung jealously on to this most lucrative of product lines, where business is all but guaranteed.
In Qatar and Oman, the company instead distributes Volvo CE road-building equipment.
Volvo CE offers a range of road equipment in the Middle East, including soil compactors, asphalt rollers and pavers. Shahir El Essawy, regional business director for Volvo CE, notes that the brand has noticed a clear increase in demand for road machinery in the region.
He explains: “Volvo CE road products are in high demand in all GCC markets at the moment due to the sheer number of ongoing and planned infrastructure and road products in these countries. Projects that are using Volvo CE road machinery include Al Batinah Expressway in Oman and the New Orbital Highway and Truck Route in Qatar.”
Volvo CE recently launched the new and enhanced C-Series generation of pavers, as well as its B-Series soil and asphalt compactors.
El Essawy adds: “SDLG’s motor grader was launched in the Middle East in 2015, and the dealers have received excellent feedback on the quality on the product.”
Filling in the gaps
The graders, pavers and rollers of the road-building segment do not act in isolation, however, and are supported by the usual medley of construction machinery, from excavators and bulldozer to backhoe loaders and dump trucks, and, depending on the project, compact or specialist equipment.
Joe Lahoud, GM of the Construction Machinery Center (CMC), notes: “We complement what the big guys do in the market in terms of equipment supply. So we’re not into the heavy segment, like most of our competitors: Caterpillar, Komatsu, Al-Bahar or Al-Futtaim — these guys. Having said that, we have some heavy equipment, like the Terex backhoe loaders and dump trucks. However, we complement what the contractors require in terms of compact or light machinery.
“We are market leaders when it comes to concrete machinery, because we have the dealership for Schwing concrete pumps, and we recently acquired shotcreting concrete pumps from Italy under the brand name Turbosol, which is also one of the best in Europe.
“With Wacker Neuson, we have a massive range of equipment, starting from small vibrators up to 15t excavators, and we have rollers. Now have a bigger range of rollers because Wacker has made a joint venture with Hamm — so Hamm will be producing Wacker rollers with a bigger capacity.
“Wacker Neuson also has a compactor range, tower lights, and vibrators of all types, as well as an extensive range of road dumpers. We also have a big range of transit mixers for construction sites with Silla as well, and a lighter version of road dumper with a lower, very mechanical specification.”
A case in point
Case Construction Equipment supports the road-building industry in the Middle East with a range of motor graders, bulldozers and rollers.
Steve Ryder, field marketing manager for the region at Case, notes: “The B Series motor graders have been meeting with increasing success in the region, while the M Series dozers deliver highly competitive drawbar pull and are strongly built to perform in harsh environments. Case will soon be expanding its soil compactor line-up with the introduction of the renewed 1107 EX vibratory soil compactor.”
The model will be available by the end of the year, and, according to Ryder, will raise its productivity and fuel efficiency up a level with an S8000 engine designed by FTP Industrial. With over three million units at work across the world, the S8000 engine has built a reputation for reliability and low fuel consumption.
Ryder notes that demand for road-building equipment can be seen across the entire GCC, where infrastructure development is “a key growth enabler for these markets”, and that Case has products to support these needs.
Joining the dots
He explains: “Road-building contracts by their very nature are generally completed in remote locations, connecting cities or urban developments — so it is critical for customers to ensure the equipment they choose is of the highest quality standards, ensuring reliability and the highest possible machine uptime.
“The Case range of products delivers this and of course, when there are any problems, a strong dealer support system to ensure that the problem is fixed as soon as possible with trained technicians and guaranteed genuine parts.”
Ryder highlights that the Case dealer network in the GCC is backed up by the Case manufacturing team headquartered in Dubai.
GENAVCO also has a dedicated aftersales team for Wirtgen who are available on hotline, and Khan notes that all of the customers know those numbers in case of emergency.
He explains: “That team has been trained at the factory, sometimes for months, to carry out the technical and application training. The application training is even more important here, because you can deliver a very high-quality piece of equipment, but if it is not applied properly on the jobsite by the operators or the customers, then it will not deliver the quality. We have frequently found that problems arising that are not problems with the machines but with an operator who has not been trained properly. If you train the operator well, then you eliminate a lot of problems.”
For the CMC Group, Lahoud comments: “We have three branches in the UAE. The main office is in Dubai, and then we have facilities in Abu Dhabi and Al Ain, and these are 4S branches — so sales, service, spare parts and survey. We also have a lot of export operations, and we have another company in the free zone that handles export operations.”
Lahoud adds: “Rental is of course a big factor, and maybe 15% to 20% goes to rental. When there is a crisis, people rent; they don’t buy — although this doesn’t hold true for compact, because the capital investment is relatively low.”
Ryder notes: “Road-building contracts are naturally medium- to long-term and, therefore, it does make sense for the larger contractors to invest in their own fleet of equipment.”
Essawy comments that the majority of the road machinery market involves sales to end-users, but rental and leasing is also present.
Khan highlights that compactors have applications across sectors and therefore are more popular for rental than more specialist road-building equipment. He adds that while contractors in the sector do lease equipment among themselves, they are a narrow clique.