Stuart Jones talks to Michael Thielmann – CEO of EvoBus UK
Michael Thielmann – CEO of EvoBus UK
SJ. Please can you tell me a little about yourself and your career prior to becoming MD of EvoBus UK?
MT. My commercial career started with Daimler in 1984 working on the commercial vehicle side. With the exception of the last four years prior to my assignment here I have not left the commercial vehicle operation.
I’ve done various jobs in operative and strategic planning; from 1990 to 1993 I was the assistant to Werner Lechner one of our board members and the head of Commercial Vehicles at that time, after which I was part of the bus team that evaluated the merger between Mercedes-Benz bus business and the Karl Kassbohrer-Setra business, at which time I worked with my pre-predecessor in the UK, Oliver Moekesh. From 1995 to 2001 I was responsible for bus sales in South East Asia based in Singapore, introducing the bendibus on the 0.405 chassis and later the Citaro over there. After that I took over the ‘Overseas’ business focused on Africa, South Africa, the Middle East, Asia including China and Australia, handling that for about 11 years. Some years we sold over 2,500 vehicles from this region alone.
Most recently I was responsible for Mercedes-Benz Accessories Sales & Marketing. With a little bit of restructuring in the bus organisation I was offered various jobs outside the sales side that I was not really keen on focusing on, which is why I took over the sales and marketing board role at the accessories business – a separate limited company. It was the first time in my career working with passenger car topics and I found it lacked a little of the fun part of talking to customers and distributors and really getting the immediate story of success or failure. The passenger car headquarters is more focussed in planning and steering rather than in operating business. And this was not my fun. I was absolutely enthusiastic when this job came up and I am still.
SJ. What was your perception of the UK beforehand and what, if anything, has surprised you about the operation in the UK?
MT. I had had a liking for the UK from my early days. My first internship was in 1982 at Mercedes-Benz United Kingdom, at that time still based in Hayes near Brentford and close to Heathrow Airport before the move to Milton Keynes. I have been in the UK a couple of times since for vacations. I enjoyed staying on the outskirts of London with the advantage of being able to visit the city at weekends. Still today I don’t need a map to find my way around in London.
I was part of EvoBus sales executive team and therefore I was well aware of most of the business in Europe, so therefore it wasn’t a big surprise what was happening in the UK. What I maybe had a wrong impression about was the organisation as a whole over here. Being away for four years I was still thinking about the body/chassis situation being different to how I experience it now. If you had asked me before joining EvoBus UK I would have said, ‘OK we’ll go for the chassis business and the whole problem is solved’. I still had this in mind but it has changed dramatically.
SJ. Managerially there have been a large number of changes in a short period of time. How have you coped with this and are you happy with how things are now?
MT. I’m absolutely happy with the set up as it is now. We have the right structure, we have the right product set up which was obviously more complicated in the past and we have the right people here working with me. Wherever you go within this company you find people who are dedicated, who know their jobs and what is necessary to take the business forward.
I know there have been a lot of changes but I think some of the drastic decisions had already been taken in the past, for example, phasing out the competitive situation with Mercedes-Benz and Setra in the coach segment which is currently helping us in focusing on one product and getting the best solution for the customer rather than internal discussions. From the history it would have been very difficult to make a decision 20 years ago for a market like the UK that focuses on one brand only. Watching the development over the years I think it was the right decision not to run the two brands in parallel but it was not an easy one to take.
SJ. Mercedes-Benz has an extensive minibus range but PSV sales of the Dortmund built conversions were minimal until recently. Why have they taken off now and how much further scope is there?
MT. Minibuses are a success story for the time being that was generated before I started. Last year we sold almost 90 units and we are continuing on that path.
The UK is the biggest minibus market in Europe anyway and we just have to find the segment of the market where we want to position ourselves. There are a lot of cheap products that people want to have for simple operations, but there are more and more people wanting a more sophisticated tailor made product and will invest in it if it helps them to do the job better. With the public transport operation moving in to various sizes of vehicles the Sprinter and the Sprinter City is finding its rightful place.
In the past EvoBus was always organised how Germany thought business should be done. We currently do what the truck and van guys are now trying to imitate, working on customer focus with the customer getting one partner who knows the details.
SJ. Are there likely to be any additional right hand drive minibus options introduced?
MT. We’ve got quite a full range already and, other than this, I think for the time being there might be a variation here and there, a few adjustments, but we’re not going to introduce something completely new.
With the current development of the UK minibus business it is pretty clear that our comments are falling on more positive ground in Germany than they used to be in the past. If we say this could sell or this couldn’t sell, they are listening much more closely than they used to do. But that is focusing on future development.
SJ. Is there any likelihood of the tri-axle Sprinter 77 for the UK?
MT. The competition in the segment that the Sprinter 77 reaches into is definitely dominated by partners in the UK that provide something even more tailored to the UK market than the Sprinter could ever be. It is a niche product in Europe.
SJ. The demise of the Setra brand in right hand drive is an emotive issue for many operators. Can you explain why it was necessary and can you give Setra owners any reassurance about the future?
MT. Starting with the reassurance, it is definitely clear that they will get aftermarket support until the very last Setra is taken off the road. Until the very last minute we are going to support this product.
Nevertheless the decision was taken that we focus on one brand because the segment for top class coaches in the UK is quite a limited one and if you talk about integral coaches it is even more narrow a segment that we are focusing on. Having an internal competition which will always end up with some bad mouthing about the internal competitor is not acceptable for the UK. That is why the previous management took the decision to phase out the Setra product and at the same time, and this is working to the advantage of the customers now, they got the approval that all executions that were possible with the Setra product, like seats, curtains and other special options are all now available for the Tourismo.
For the operator, from an interior point of view and a coach passenger point of view they get a product that is the same as a Setra. The only difference is the exterior design of the coach, which is now uniquely the Tourismo, rather than having two possibilities. I think this was one of the major achievements with this product focus. So far it has been convincing for most customers. You can’t get a Setra on the outside but you can on the inside.
SJ. Does it mean you can get options on a Tourismo in the UK that you cannot get elsewhere in Europe?
MT. That is absolutely right. It’s a frustration to some of my colleagues in Europe that walk round the factory and see things that they cannot have. It is definitely happening.
You can now get a Tourismo in a basic execution but also in a TopClass execution with a difference of about £50-60,000.
In my past career, there was a decision making process about what options were available on a Mercedes and which on a Setra. The brand managers, Michael Gopfarth (Mercedes-Benz) and Werner Steib (Setra) were always pushing about which were their executions to support the different brand values.
SJ. Can you explain your strategy for the coach market and for retaining Setra customers? How is it going?
MT. Our strategy is to have one proven technical product that offers the variety to the customer enabling him to make his own choice on where he wants to position it for the passenger. This gives the operator the assurance from the operational point of view that he doesn’t have a problem service wise and with an aftersales organisation and at the same time he has a proposition that he can put forward to his customers.
As we have created a broader product variety and a broader range of stock that we keep we are managing to keep both ends of the market pretty happy. There is not a special strategy that we are focusing on with the Mercedes customers. It’s about activity in the market whether it is an existing customer or a conquest customer.
SJ. The Tourismo has been available for some years but its popularity has increased markedly of late. Why do you think this is and how many sales do you think can be sustainably achieved?
MT. We were the first to introduce Euro6 into the market and people have understood that this introduction is not a test run, Euro6 is something that Mercedes-Benz has tested and proved on the truck side and at the time that we introduced it in the bus it was already absolutely stable. This helps us right now with our argument in the light of the low emission ideas. If you look at London where Euro6 will be compulsory there is not even a discussion about whether you want Euro6. It’s done and they know they are not the first to try it out.
When we started discussing strategy, market share, volumes and all of these things, I put all of these number parts aside because I really wanted to understand where we can go and how far we can go. Our current experience is that this year is dramatically better than last year. We have not yet really understood whether the volume that we will hopefully achieve this year is either the absolute peak of possible sales volume or something we can sustainably keep for the years to come. We are proud of where we are developing towards. Some of the competitors have been struggling to introduce Euro6 and therefore we don’t know whether the sales performance is something that is unique or something sustainable, it is still very blurred. It is an unusual market this year. With the ULEZ, people are catching a cold that bought Euro5.
From my point of view I took over at the right time. I am putting a question mark behind my personality in all of this success story right now. A lot of decisions were taken early on and we are now harvesting the fruit of hard work based on a clear strategy that was decided. It is very clear that we have the most active and most pushy sales force right now and it is paying off.
SJ. What are your forward plans for the chassis market?
MT. If you had asked me a couple of years ago I’d have pushed quite hard for the chassis sector. For the time being, on the city bus side it wouldn’t make sense at all because the market for 18-tonne city buses is that small that we would create internal competition for the Citaro with, most probably, not that dramatic a price advantage on the chassis and body combination.
Talking about the coach segment we don’t have any body manufacturers right now having a special focus on Mercedes, they’re all linked up with Scania, Volvo etc and therefore it’s not a huge opportunity to go into chassis. There are still customers asking about our chassis and we are happy to sell them to them but it is not something that, from a strategic point of view, we are pushing.
The market is moving toward integral. With ADL and Wrightbus the former bus body manufacturers are becoming integral manufacturers and it would be difficult for us to turn the wheel back.
SJ. Since the demise of the Tourino you have not offered a midicoach option from Coventry. Are there any plans to change this and, if so, what with?
MT. As you are aware there is no midicoach product in Europe any more and they are not going to come up with anything for the UK as an alternative. We’ve had experience with the Citaro K in the bus market which fits length wise but is not a vehicle people are pushing for. I think we might have the same problems with a shorter Tourismo.
The Atego is an interesting product but it is not part of our product responsibility. Selling a coach mounted on it would bring us once again into a situation where we would be selling a chassis together with a body manufacturer and discussing who was going to market this product, under which brand and with what kind of liability as far as product. From a product liability and a Mercedes-Benz safety point of view it would be difficult to work with body manufacturers in Europe if we were selling something out of one invoice.
SJ. With increased coach sales, the number of used vehicles taken in will presumably increase. You have experienced overstocking issues in the past. What steps have you taken to ensure that it does not become an issue in the future?
MT. We are currently being quite cautious in promising prices for used vehicles and don’t want to use used prices to support new sales. We sorted our problems four years ago. Other manufacturers have been through the same and sorted theirs since and they are now more realistic to make sure that they are not in the same position again.
It may be that some people do deals because they want to keep a customer or something like that but from an economic point of view we would rather let go than try and compete along that road. We have taken the lesson. All the vehicles we are taking in right now are finding a customer where we are still happy to do this business. We don’t want to make a fortune in profits from used but it should be on a proper balance. I think if you talk to the people who have bought from us and those from whom we have taken part exchanges, they are pretty comfortable.
SJ. How do you see the UK bus market currently and in the future. What is Mercedes-Benz’s place in it?
MT. Our product range is a given; there is not much that will come out of the current Citaro range that will be available for us, therefore we have to stick to the customers that are focusing on heavy duty and heavy capacity operation which we are currently doing quite well.
It is still a niche market and a niche volume compared to the roughly 2,500 buses that are sold, but this is definitely something where we don’t have much choice from EvoBus UK’s point of view.
SJ. Do you take any comfort in the fact that an increasing amount of the other bus manufacturers are offering Mercedes-Benz engines?
MT. We have been discussing this with headquarters. The Wrightbus product philosophy is not something we see as competition to our vehicles, though it is from a customer point of view.
Customers have to make a choice between lightweight with a certain limitation as far as lifespan is concerned and a heavy duty product. In the lightweight section we don’t have anything with which to compete yet. The limitations are given and this is something we can’t change. We are trying to make the best of it by clearly addressing customers who have the same understanding on products that we have. We are the only people with a premium 18 tonne integral, high capacity city bus. Our glass is definitely half full.
It is demanding because we are selling two here, three there and five there which is more complex than dealing with the big fleets, but they have a different product expectation than we can provide. Our customers want to have a heavy duty vehicle, they want to have a three pointed star on the front and their customers to say ‘I am travelling in a Mercedes.’ These customers are there, not in the numbers of the big groups, but for this year we will be very disappointed if we do not double the volume of Citaro sales that we achieved last year.
Our customers like the product. If you talk to McGills, they say, ‘We have a long distance route, our buses are running 10,000km a month and this is why we want to have a reliable product and why we want to go for Citaro.’ They are one of our strongest ambassadors for the product.
SJ. Do you anticipate any broadening of the bus product range and will you be able to grow your market share if it isn’t broadened?
MT. We will get back the possibility to offer a right hand drive articulated bus. It will take some time but it has been decided. There is a demand for it. Since London bendibuses have been looked at strangely and we hope to change this again.
It doesn’t mean re-educating the public transport operators in the UK, but once again focussing on a niche segment and providing a solution.
SJ. What opportunities do you see in contract maintenance? What percentage of what you supply are currently on such schemes? Do you see a difference between the bus and coach markets in this respect?
MT. Currently we are more successful in offering service and maintenance contracts on the bus side than we are on the coach side but it’s definitely part of our strategy to put a stronger foot on that side. With the advantages of the life cycle costs of a Mercedes-Benz product there are still a lot of opportunities to go for.
The problem of course is that we have a bus world home in Coventry only, which means any kind of service and maintenance contracts that we are going to discuss outside the Coventry area would involve of the Mercedes-Benz service partners. That makes it a little bit more complicated because a minimum of three parties are involved. It is very much customer lead. Some people don’t want it at all but for other people it is their business model. Where we do it, it is very successful. There are opportunities but they depend on the willingness of the operators and the local service partners.
Contract maintenance last year on coach was just under 10%. The bus side depends on the tender business and is around 30% on a three year average.
Operational leases are very popular on bus, coach and minibus. The driver for that is the very competitive Mercedes-Benz Financial Services offering. Also, all our products attract a strong residual value. Put those two together and our operating lease packages are good.
SJ. Are you confident in the ability of the current network to support coaches sold throughout the country without the need for the operator to bring the vehicle back to Coventry? What additional resource will be needed if greater market penetration is to be achieved?
MT. As we are currently making a positive step on the volume side, we are, in parallel, pushing for stronger support through the Daimler bus and coach network which is relying on the Daimler truck network.
We are getting operating support from Coventry to back that on technical failures or complicated repairs. Service analysis is being done by us and at the same time we are trying to motivate them with special service package arrangements and target agreements to gain their confidence in the bus business. Some of these commercial vehicle based service partners are really eager because they see it as permanent business that could help them fill their workshops, while others still need some guidance. We hope that with growing coach sales they can also be attracted to the bus side.
SJ. Is parts availability where you would wish it to be?
MT. It’s quite difficult to answer because parts availability is something that can always be improved, but on the other hand existing parts availability for the existing product range is absolutely something that we are comfortable with.
We sometimes struggle with vehicles that have not been introduced into the UK market having a technical failure within the UK, or we sometimes struggle with extraordinary failure, but the normal wear and tear and the normal repair items are all available. We have invested quite heavily in additional stock as well as optimising the stock that we keep over here, by shifting a huge amount of parts back to Germany and going more for the operative parts that are currently in demand. That helps us.
SJ. Has moving to Euro6 ahead of most other manufacturers been a help or a disadvantage? What has your experience on reliability and fuel consumption been to date?
MT. Despite having had a delivery problem for the first part of 2014 because of a right hand drive fuel tank design issue it has been absolutely positive. We have been the spearhead for Euro6 technology in the UK and customers know the product is reliable so they don’t feel that they are guinea pigs. We knew it was the right decision to be pioneering Euro6 because we knew the ULEZ was coming and we knew the drivetrain had been tried and tested in the USA and Japan.
We’ve not seen any Euro6 technical issues and we have over 200 Euro6 vehicles on the road. We’ve been massively impressed with the reliability and the fuel consumption as well as the leap forward on noise reduction.
SJ. What are your ambitions for the next five years, both personally and for the business?
MT. I’ve been here now for almost a year and I am still enjoying the business as a company. I’m still enjoying living in the UK and so is my wife. The kids are long out of school, either studying or working, so we are on our own, but we are really enjoying the UK and looking forward to seeing more of the culture and of the people over here. My wife is doing volunteer tours in Coventry Cathedral in both the German and English languages. We are trying to blend in as much as possible.
Based on the history of regular changes of Managing Director in the UK, none of my predecessors have stayed longer than three years, other than Hans Smits, and I am trying to create a little bit of stability over here. Whether I am able to stay here depends not on me but on people in Germany but I’m definitely feeling comfortable right now to head the company for quite a while. I think in the bus and coach industry a reliable partnership is only built up over the years and you need this. I hope I can provide this for my colleagues over here and to the industry as well.
I don’t want to make false promises about the duration of my stay but I will be happy if it is a lengthy one. The biggest intention I have over here is to create some kind of sustainable business for EvoBus UK. That means finding the proper balance between bus and coach, to ensure that if one or the other market is suffering, things can be brought into balance. Part of that is developing minibus so the business has a third leg to stand on. Whether this means by far more sales or just keeping the current sales volume depends how the market develops.
I don’t want to pick a market share figure or a volume figure of so many hundred units because that doesn’t make sense. There has to be a proper balance. There could be the chance to do 300 units one year and then we are suffering for two years. I am trying to keep a proper development.
SJ. Are there any other points you would like to make?
MT. What I am impressed by in all of the discussions I have had with customers so far is the professionalism that is coming along with the bus operators. This is valid for both bus and coach operators.
On the technical side the depth of understanding fascinates me; even among the most senior managers. You get the impression that they are living and breathing buses and coaches in the UK, at least the people I have met so far are. This is what I hope will help Mercedes-Benz in doing business with these companies. We have the same focus of trying to be professional and trying to be supportive on all operational and technical issues.
SJ. Michael Thielmann, thank you very much.