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KUWAIT
Kuwait City at sunset
Abdulla A Al-Zahem, Chairman, Al-Zahem Industries
Kuwait – Infrastructure Projects Bring Retreading Boom
Kuwait is situated north east of Saudi Arabia at the northern end of the Persian Gulf, south of Iraq. It is slightly larger than Hawaii. The low- lying desert land is mainly sandy and barren. Interestingly, only one retreading company has been operating for more than two and a half decades in Kuwait, Al-Zahem. No one has challenged the dominance of Al-Zahem in this small oil-rich Arab nation for a long time. It has lot to do with the perception of retreading, or even the complete misunderstanding of the concept. “It is not easy to get a licence to open a retread plant in Kuwait. We got the license a long time ago. The government has not granted any new licences since then,” informed Soliman Yahia, Plant Manager,
Al- Zahem.
Interestingly, the government has recently granted a license to one more company. The move may be an indication from the government that it has started looking towards retreading more positively. It may
bring competition, more retreaders and a good market for global brands in this cash rich nation in the years to come. If retreading becomes popular in the future, it will be much easier to tap the whole market in this small nation compared to a bigger nation as there are just a few large fleet owners operating a large number of trucks.
The small country on the Persian Gulf has a new tyre market of
about 120,000 truck and bus tyres annually. “The retread tyre market is around 20,000 tyres annually or about 16 per cent of the new tyre market,” Soliman stated. 70 per cent of the new tyre market is controlled by Chinese brands, which are not considered suitable for retreading. Even in a rich country like Kuwait, transporters increasingly prefer cheaper tyres or tread. “The demand for cheaper tyres makes Chinese tyres popular in this market and we are also being forced to look for price competitive products like Vipal,”
said Soliman. However, Bandag’s
continued presence over a long time is an indication that the transporters have the money to pay for high- end products and that there is scope for a few more international brands in this market.
Although Al-Zahem is conscious of losing business due to the withdrawal of US troops from Iraq, it is equally optimistic about the new infrastructure projects announced by the government.
The majority of its clientele belongs to the logistic companies supplying goods to the US troops stationed in Iraq. Recently, the Kuwait government announced new projects to the tune of US$ 200 billion to be spent on building the infrastructure for the next five years. “The projects include the
construction of a new city like Bubiyan Island and Mubarak Al Kabir port, besides construction of hospitals and roads etc,” said Soliman. He strongly believes that these new projects will uplift the market in the next year.
Interestingly, sentiment about retreading is positive in these smaller countries. The idea of retreading is spreading all over the Middle East. The concept is spreading from Kuwait to Bahrain and from there to Qatar, which shows that the market is developing due to the increasing prices of tyres and petroleum globally. People have started realising that retreading could be a suitable option compared to new tyres to make sizeable savings. Meanwhile, Al-Zahem is also planning to set up two plants in Bahrain and Qatar by the end of 2012 to overcome the slowdown in the domestic market. “The anticipated slowdown in the domestic market has given us time to focus on two more plants, spreading
our influence in the whole region,” he said.
The company is overtly upbeat about the two new projects. “Retreading is picking up in this region. Moreover, transporters are realising the money they could save due to retreading,” said
Abdulla A Al-Zahem, Chairman, Al-Zahem Industries. He further said, “We have almost 20 years experience in the retreading industry and our partners are content to have us on their side.” The retreading plant has grown almost four fold in the past 10 years. According to Al-Zahem, it retreaded around 4,481 tyres in 2004 and production reached 20,000 tyres annually in 2009. Some of its notable clients are Agility Logistics, Almadah For Trasportation, Alrehal, City Bus, El-Hoss Engineering & Transport Co, Kharafi National and Combined Group RMX. Al-Zahem Industries has an annual turnover of KWD 3 million. Interestingly, this growth is an advantage to Marangoni in the region as it has not only got a new opening in Kuwait but also in Bahrain and later in Qatar. It is also equally interesting to remember that these markets are cash rich and transport companies have spent money on quality for all these years. Al-Zahem survived in the market on the strength of Bandag quality. Moreover, after parting ways it has not opted for a cheaper product but has gone for an equally high priced product from Marangoni. It has also added Vipal to extend its range and reach out to cater to the price sensitive clientele as well. Therefore, it is a win-win scenario for both of the partners; Marangoni has got the much required opening in the market, while Al-Zahem continues to cater for its clientele with global quality product. The good quality, high value product also brings the good margins essential for surviving in the business over an extended period.
24 Retreading Business
Al-Zahem to Set- up Plants in Bahrain and Qatar in 2012
Retreading has a more than two decade long presence in the city-state of Kuwait, regarded as one of the richest countries in the Middle East. But it has never really grown as the Kuwait government has not granted further licences to allow the opening of new units in this small country. Al-Zahem Industries has remained the sole retreading company in Kuwait since 1987, when the plant opened as a Bandag franchise. Things were moving smoothly till Bandag sold out
to Bridgestone. “We found it easier to work with the Americans before it was sold to the Japanese. We found the style of working and policies changed after Bandag sold to Bridgestone,” feels Yehia Soliman, Manager, Retread Division, Al-Zahem Industries. Therefore, the pioneer retreading company in Kuwait elected to part from its two decade relationship with Bandag. Bandag’s loss is, however, Marangoni’s advantage.