Heiko Schulze, CEO, Juffali Industrial Products Company (JIPCO) & National Automobile Industries Ltd. (NAI) • Interview

With its optimistic predictions for the economy in the mid to long term, JIPCO believes it is a great time to invest and remain ahead of the wave in Saudi Arabia.

Did JIPCO benefit from the government stimulus to ameliorate the effects of the shutdown?

We applied for government support, which has helped us greatly. The Saudi government executed the right measures to cope with the pandemic effects. Today, we are operating even better than normal. We had a strong start to 2021, which is a solid positive economic signal. Whenever there is rising demand for trucks and commercial vehicles, it is a valid indicator of a growing economy and vice versa. We are benefiting from the realization of Saudi’s megaprojects, which is causing increased demand in the construction segment. We also see high demand in the overall logistics sector.

Have you seen a significant change in JIPCO’s customers and their demands and use of your products?

We witness a level of further professionalization. Purchase criteria are changing, and costs of operations are becoming more important. As a consequence of last year’s lockdown, JIPCO decided to set up an e-commerce channel for spare parts and will launch this in 2021. Initially, this will target our customers who run their own workshops and require spare parts for their trucks and commercial vehicles. Placing an order is a matter of the right part selection, availability, and delivery terms. Currently, the majority of parts business is conducted by sales agents, who visit customers or authorized resellers. Apart from COVID-19, the generational change also changes the way people want to do business. Even if the founder of a business has the power to make decisions, the children often have different ideas about how to run the business and what the priorities should be. This is a change we see in our industry.

Are spare parts a significant part of JIPCO’s annual revenues?

Spare parts are an important part of JIPCO’s revenues, though they do not contribute significantly to our profits. Mercedes-Benz Trucks have been the market leaders for decades, and accordingly, the number of Mercedes-Benz Trucks is the highest among all brands in the Kingdom. These trucks result in constant demand for spare parts. As this market is huge, one can find Mercedes-Benz truck parts in every corner. This is positive for the customer but challenging for the distributor. We face stiff competition from several suppliers offering spare parts for Mercedes-Benz trucks. Unfortunately, from our perspective, not every customer requires genuine Mercedes-Benz parts. Other OEMs, distributing parts, also take a share, all of which makes it a competitive environment. It is tough to generate profits out of spare parts sales in the Kingdom, and the customer benefits from this competitive situation. The attractive spare parts pricing and availability is one of the arguments to decide for Mercedes-Benz trucks.

What are your expectations at JIPCO for 2021 and 2022, including your e-commerce ambitions?

In terms of overall business development, I am extremely positive about 2021. There is a certain dynamic in the market and demand. Therefore, I am extremely optimistic for this year, as well as for the mid and long term for the Kingdom. Everything described in Vision 2030, with all the ideas contained in the megaprojects and the initiatives being realized, for example related to Riyadh City, will all have a positive impact on the country. Because of our positive mid to long-term view for the Kingdom, JIPCO also made the decision to build a new factory in KSA. Our current production facility in Jeddah is nearly 50 years old, and rather than renovating the old factory, we decided it was better to invest in a completely new one. This will give us the opportunity to not only produce and assemble Mercedes-Benz trucks locally but also do the same for other products from Daimler Trucks, which also owns the Mitsubishi Trucks brand. In line with Vision 2030 and the requirement to localize more, it is an advantage for us in the long term to offer trucks assembled and localized in the Kingdom.

“We are benefiting from the realization of Saudi’s megaprojects, which is causing increased demand in construction segment.”