Today, the market script reads quite differently following entry and dominance of Chinese buses, which have taken the industry by storm, eclipsing formerly popular makes and entirely driving others out of business.
Both foes and fans of the Chinese bus dragons concur that their dominance of mostly upcountry passenger transport started about four years ago with those promoting them saying they have been a force to reckon with in the sub-sector since late last decade.
Trending Chinese models, which are giving rivals sleepless nights, include Golden Dragon, Zhongtong, Higer, Bonluck, YoungMan, Kinglong and Yutong, which sectoral sources say is currently market leader.
Once upon a time, British model Leyland was the king of the road but for many years the top bus supplier in Tanzania had been Sweden’s Scania AB, whose quality and durability are nostalgically missed in the industry today. Other former major brands that were once very visible on local roads are Volvo of Sweden and Japanese makes Nissan and Isuzu.
Top Market in EA
Due to their popularity among both bus operators and travellers, Tanzania is now the leading market for the Chinese models in the EAC bloc. According to the Sales Manager of Zhongtong buses in the country, Ella Lu, Tanzania is far ahead of other EAC member states in importing buses from China.
“Currently Tanzania is the leading market for Chinese buses since more than 200 vehicles are imported into the country annually. Tanzanians are our major customers in East Africa and we promise to supply them with new and more luxurious buses, Lu told Smart Money recently.
She said hardly 80 buses are exported to Kenya and Uganda in a year. Lu said factors behind Chinese models failure to quickly penetrate the two markets include existence of established bus assembling factories in both countries.
Apart from being a ready market, she said Tanzania’s strategic location in the Great Lakes region has been another decisive factor for Zhongtong to do business in the country. Another aspect that influenced the company’s investment here is the Dar es Salaam port, which is the gateway to many countries in the region, including Kenya that also as a big port on the Indian Ocean.
“The main challenge for us so far is the high import duty rate of 25 per cent for clearing the buses at the port. This is too high. Another is the prevailing sluggish business environment. For almost 18 months now business has been sluggish and the level of liquidity in the economy has deteriorated compared to about two years ago.”
On why Chinese buses have become so popular, many sectoral stakeholders pointed out the low price factor but also said the prevailing hard economic times was another influential aspect. The few who mentioned quality of the buses were mostly those involved in importing and servicing them.
Tanzania Bus Owners Association (TABOA) chairman Enea Mrutu said Chinese models are sold between 200m/- and 320m/- inclusive of VAT compared to up to 1bn/- for the other brands, plus additional costs in tax charges of about 120m/-. He said under the current austere economic conditions, bus operators are forced to go for vehicles from China regardless of quality considerations.
Tanzania Bureau of Standards and sectoral regulator Sumatra said they have no qualms with the quality of Chinese buses.
Those missing the quality and vitality of Scania buses and the other former top models, include the leader of the drivers’ lobby group – UWAMATA – Majura Kafumu. According to him, what makes Chinese buses the first choice of many passengers was the value for money they get in terms of comfortability.
Representatives of Yutong said the brand is not only certified internationally but its quality and safety have been proved beyond doubt in many markets such as Saudi Arabia where they are also very popular. According to them, key parts of the bus such as its engine and gear box are sourced from the same suppliers who manufacture the ones in European models.
“Timely and regular maintenance are important for all vehicles whether they are made in China, Europe, Brazil or anywhere else. Apart from the affordability competitive edge, it is undisputable that our buses are more luxurious than the competition around and have added values for passengers’ money in terms of services such mobile phone charging systems, TV screens and air conditioners,” they asserted.
Victim number one of the Chinese dragons’ invasion has been Scania Tanzania, whose officials told Smart Money that the company is now fully prepared to regain its lost glory in the business. According to them, the comeback strategy is strongly backed by Scania’s unrivalled goodwill in the market and anchored on a competitive pricing mix but which does not compromise the quality and durability attributes Scania buses are famous for across the world.
Globally, the giant carmaker offers sales and services in more than 100 countries where it has been successfully doing business for more than 125 years. The subsidiary in Tanzania was registered in 1973 and by September 2013 it had sold more than 5,000 vehicles in the country.
Confirming the thorough beating Scania has had from the Chinese, the Managing Director of Scania Tanzania, Lars Eklund, gave figures showing the company having lost substantial market share in the last four years. He however dismissed claims of no bus being sold during the period but sales figures he gave show a bus business slump of between 77 and 80 per cent.
He said before Chinese models beat them on the price terrain, Scania was selling between 50 and 90 buses in a year before the sales plummeted to between 10 and 20 units. Under the market recovery game plan to be backed by an unprecedented marketing blitz, Scania target sales to jump to 50 buses by next year and already a new model has been introduced as part of the showdown with the Chinese rivals.
“It is not true that our buses totally disappeared from the market, we have been around but cheap Chinese buses made things tough for us. Our new product is competitively affordable and retain the same high quality virtue Scania buses are famous for all over the world,” Eklund told Smart Money in a recent interview.
“We are going to intensively promote the new model throughout 2018 and the target is selling more than 50 buses annually starting in 2019,” he added, noting that the company is also considering further lowering the price of their buses to between US$175,000 and US$200,000, including VAT to better compete with the Chinese.
Promoter of Transport Sector
Eklund said Scania is currently working with a local bus body builder for two demo buses, which will be introduced in the market in April.
Scania has a rich history of promoting the transport sector in the country, which started with supply of tipper trucks to help the construction of Tazara railway. In the 1980s, it partnered with the government for a joint venture in Tanzania Automobile Manufacturing Company, which began operations with a capacity to assemble more than 2,400 truck and bus chassis per year at Kibaha, Coast Region.
In the mid-1990s, Scania withdrew from the enterprise and handed over the assembly plant to the government. A reduction in subsidies for vehicle assembly in the country made the venture less viable and since then Scania has been importing assembled units.