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Uncertain future for Russian forklift industry


Thursday, 4 Dec 2008 ( #389 )
Special Feature
Red Square
The Russian economy has not escaped the current economic crisis unscathed and increasing fuel costs and the falling share market have affected the country.

The Russian forklift industry is in a state of uncertainty with many local companies experiencing downturns in orders. However, international companies see this market as an opportunity to build their businesses in the region.

Ivan Pavlushkin, import and sales manager for forklift spare parts, sales and service company MultiKar Co Ltd, believes the effects of the world economic crisis are not so obvious in the Russian market.

"As for the impact on MultiKar, I cannot say that we have faced the crisis. Of course, we realise that it is only the beginning. Many companies that use forklift trucks will surely disappear and as a result, we will lose our profit," Pavlushkin says.

Fatkulina Dilya Ildarovna, head of sales at forklift and road-building equipment company Petrolift, says there is currently little demand for forklifts in the medium price category. "Shipping and customs costs are forcing light-duty forklifts to pull out of Europe."

Dmitry Dubrovsky, deputy director of Soyuz Komplekt Avto Trans (SKAT), the exclusive distributor of Hyster forklifts in Russia, says sales of forklifts in Russia have stopped. "In September 2008, all forklift manufacturers received 34% less orders from Russia and in October, the forklift market in Russia dropped by 57%.

"Many big manufacturers, especially from the metallurgical, aluminium, car manufacturing and construction industries that are interconnected with this industry, are only working three days per week, or four hours per day."

Dubrovsky says some have stopped operating completely. "Banks are reducing financing and credit lines all over the market, and some banks have stopped credit altogether," he says. "The crisis in Russia is much deeper than what you have seen on TV."

Michael Hauger, head of communications and investor relations for Kion Group, says any outlook for the Russian materials handling equipment market is extremely difficult. "The financial crisis seems to have (had) a significant effect on the Russian economy with implications on investments into infrastructure and material handling equipment.

"For the time being, the … market is seen to be very volatile. According to World Integrated Trade Solution (WITS) in October 2008, the Russian market was down almost 60% compared to October 07.

"The Russian market was still up by around 10% compared to January to October 2007. The short- and mid-term outlook is clearly negative. Nevertheless, in the long run (and I really mean ’long’), the market will continue to grow faster than mature markets."

Dan Peter, Hoist Liftrucks’s director of marketing, notes that during a recent trip to Russia, the dealers he spoke to were concerned about the global financial crisis, "but they were still booking orders at a normal pace".

"The Russian government has committed significant investment into port areas and infrastructure that inherently require forklifts. The impact on our organisation has been minimal, as we are just starting to expand into the international market."

Henk Huisman, export sales manager for Cascade Corporation, says since August, business in Russia has being slipping. "However, the first half of the year was very good." Cascade has an agent based in Moscow.

Dennis Babushkin, regional manager and representative for Hans H. Meyer in Russia, the Commonwealth of Independent States (CIS) and Baltic States, says the crisis has definitely affected the Russian market. "Our sector (forklifts, attachments and spare parts) felt a dramatic drop in orders in October," he says. "The market went down 40 to 50% in October.

"In November and the beginning of December, the situation is better and the number of orders received has increased. "

Maxim Korotkov, Russian sales manager for Kalmarind, agrees the global economic crisis has affected the industry. "Up to 40 to 50% of forklifts were bought with the help of leasing companies. Now some of the leasing companies have problems with money and are not giving leasing contracts to all clients.

"Leasing companies are afraid that if the client cannot pay them over the next few years, they will not have enough free money to give it to buyers," he explains. "Some clients have postponed their projects to see how the situation develops."

Jungheinrich anticipates Europe’s materials handling equipment market will experience a downward trend in the fourth quarter of 2008 and in the 2009 financial year. In its recent third-quarter report, the company says Eastern Europe has expanded quickly, increasing by 16%, with the Western European market shrinking by 3%.

Current state of the forklift market

The Russian forklift market is developing at a steady pace with the majority of machines coming from China and Korea. Many of the major players – Toyota, Komatsu, Doosan Infracore, Linde and Jungheinrich – have representatives or dealers in the country.

MultiKar’s Pavlushkin says there have been no major innovations in the market over the last two years. "Chinese trucks came to our market, but there are problems with spare parts for them.

Multikar's range
"Ten years ago, there were only a few manufacturers performing in this market, but now we have a variety of different brands. Most of them are from Komatsu, Jungheinrich, Linde, Toyota and TCM."

Pavlushkin adds, "According to the majority of service companies, the market is growing. All the famous producers are trying their best to present their products here in Russia. The last exhibition proved that fact."

Petrolift’s Dilya Ildarovna also notes the increase in Chinese brands appearing on the Russian market. "The Japanese and Chinese brands almost replace the European brands.

"However, the supply of parts from China is very difficult due to lack of a unified database."

According to forklift and load-handling distributor NTK Forklift, in 2007, the market for internal-combustion engine forklifts increased faster than the market for electric forklifts in Russia. ICE forklifts had 1.84% of the electric forklift market share compared with 2006.

NTK is also the authorised Russian distributor for STC forklifts, Hangzhou forklifts and Ningbo Ruyi Joint Stock electric pallet trucks.

Cascade has noticed more customers in Russia are starting to use more attachments, with side shifters becoming almost standard features.

Huisman says that 10 years ago, the local Balkancar brand dominated the Russian market. "Now Balkancar is nearly gone and the Japanese forklifts really dominate the market," he says. "There was no local production. Most of the imports used to come from Bulgaria and are now imported from Japan, Korea and Europe.

SKAT’s Dubrovsky agrees, "The main models 10 years ago were Balkancar forklifts, and Japanese and European forklifts had only just come onto the market.

"According statistics, there were 395 Japanese manufactured forklifts sold in 2000 in the CIS market," he says. "At the end of 2007, there were 27,186 forklifts from Europe, Japan and the USA in the market.

Babushkin says the Russian market now has more suppliers and dealers offering attachments. "Ten years ago, the Kaup brand was the only one represented.

"The Russian and Commonwealth of Independent States (CIS) market is huge; one of the biggest and it promises further development," he adds. "All (forklift) brands are represented on the market with dozens of dealers, well-organised sales and service networks in all industrial regions."

Babushkin comments most of the equipment is being imported and the most popular brands are counterbalanced forklifts produced by Toyota, TCM, Hyster and Jungheinrich.

Jan Kaulfuhs-Berger, trade officer with Jungheinrich, says Russia is one of the fastest growing markets for his company. "We sell forklifts and logistics systems in Russia through our representatives in Moscow (headquarters) and branches in St. Petersburg and Ekaterinburg."

Korotkov says he is not sure of the exact number of Russian forklifts of all brands sold, because there are so many different ones, "but the market is growing approximately 25 to 35% per year.

"Kalmar imports all its products. However, there are a small number of Russian forklift producers.

"The most popular Kalmar brands are 12- to 37-tonne forklifts and the most popular in other brands are the 1.5- to 2-tonne forklifts."

International representation

A number of materials handling companies have been moving into the country to capitalise on recent growth.

Hoist Liftruck is in the process of finalising agreements with two Russian dealerships. Peter says Hoist hopes to make an official announcement by the end of the year. "With investments committed to improving its infrastructure, Russia has potential.

"Hoist hopes to make an impact with our P-series pneumatic forklifts and new empty container handler (ECH) into port and intermodal areas of Russia," he says. "The new modular design that will be seen on the ECH will allow units being shipped to be easily containerised and assembled."
(Forkliftaction.com News #388).

He says the new dealerships will be Hoist’s first foray into the Russian market. "Years ago, Hoist had sold a handful of older units into that market direct from the factory, but that was about it."

NACCO Materials Handling Group (NMHG) changed Russian distributors in July. SKAT became the exclusive distributor for Hyster. Dubrovsky says the agreement between Hyster and SKAT is a serious step and will change the face of the Russian materials handling equipment market.

Hyster's European offerings
"This new alliance has a great chance for success," he says. "It is a partnership of a large western manufacturer and an experienced Russian company." SKAT has eight offices and 15 service offices in Russia.

Kalmar has launched a new generation of ECF50-90 electric forklifts onto the Russian market. Korotkov says only a very small number of producers can offer such big and modern electric forklifts.

"Kalmar has also launched a new generation of terminal tractors - TT618i, TR618i, TRL 618i, TT612i and TT612d - that set new high standards in industry. These models are the first on the market to use CAN-BUS technology," Korotkov says.

The Bolzoni Auramo Group is focusing on sales activities in Russia. Jorma Rikkilä, Russian area sales manager, says in a statement, "The group supplies all major Russian forklift distributors with a full range of attachments.

"We make efficient direct deliveries from our factories in Finland and Italy, to the growing Russian market of spare parts, a fleet of rental attachments, as well as new paper roll clamps, fork positioners, side shifters, appliance clamps, rotators, lifting tables and single double pallet handlers."

Mitsubishi Heavy Industries, Ltd. (MHI) announced it would establish a forklift manufacturing company in Dalian, China, specifically targeting emerging markets such as Russia. MHI considers demand in the Russian and Chinese markets to be a long-term increasing trend.

Komatsu Ltd has invested USD69.27 million in a Russian facility at Yaroslavl that will produce forklifts, construction and utility equipment. This is its second Russian plant. Kraneks International Co Ltd, a manufacturing joint venture for metal works, was established in Ivanovo in 1998.

Komatsu plans to start production of PC200 hydraulic excavators in June 2010 and of internal combustion and electric one- to two-tonne forklifts in 2011. Production of skid steer loaders will follow.

A spokesperson says demand for construction and mining equipment has been expanding steadily, totalling about 18,000 units for seven major equipment types in 2006.

The Yaroslavl plant will produce 7,000 forklifts and 3,000 hydraulic excavators annually.

In August 2008, Hyster announced a new distribution partnership with SKAT, the largest forklift service business in Russia. Rainer Marian, Hyster’s area business director for Central and Eastern Europe, says, "This is a strategic move to ensure that the Hyster brand is supported by a strong Russian partner with a solid infrastructure spanning this country."

Kaup is another European company eager to grow its business in Russia. Holger Kaup, managing director, says the forklift truck industry in Russia "is growing rapidly and opportunities in the whole of Eastern Europe are extremely promising".

Toyota Material Handling Europe (TMHE), meanwhile, "aims to provide the Russian market with best-quality solutions in sales, service and support functions".

"Our approach to the Russian market is one distribution channel for two brands; with Toyota counterbalanced forklifts and BT warehouse equipment.

"Today Toyota Material Handling offers customers in the greater Moscow area and Central Russia one point of contact for Toyota and BT products via the Toyota Tsusho Tekhnika company. The rest of Russia is covered by the BT St. Petersburg and Sumitec companies," according to a spokesman.

Forklift industry history

The production of forklifts in the former Soviet Union was primarily for defence purposes and was considered optional. The domestic forklift industry developed to meet the needs of individual companies and not necessarily for general distribution.

According to a recent article by Vadim Aniskin, editor of Handling Equipment, the history of forklifts in Russia "is a collection of scattered, fragmented and often contradictory data, which is difficult to systematise chronologically, by industry or in a meaningful way".

Aniskin’s article suggests the development of the industry was hindered by the ‘iron curtain’ in the Soviet Union and the strict regime of secrecy over a number of enterprises.

He says secrecy prevented the country from developing the industry because domestic forklift manufacturers did not have access to technological advancements in this area.

Mainstream production of forklifts or ’electric loaders’ began in the 1950s with companies like Zavodu and Kaliningrad Car Plant producing 1,000 units per year.

By the 1960s, four plants were producing the majority of electric forklifts for the country.

Today, the main Russian manufacturers (including assembly plants) are ZIK, which produces electric and diesel forklifts, Tverskoy Excavator and Volzhskiy Pogruzchik, which make electric forklifts, diesel and gas trucks produced under license by Tailift.

Aniskin tells Forkliftaction.com News there is no statistical data about the Russian forklift industry. "The Russian forklift industry has a weak position in the Russian market, but industrial truck importation is continuously growing. There are representatives or daughter companies of most European, Japanese, Chinese and American manufacturers in Russia."
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