With bus market heating up, Ikarus tries to hold its own
"Everybody is here these days, Mercedes, Scania, Volvo, which makes the Polish market even more competitive than in Germany," said Krzysztof Olszewski, owner of Neoplan, a Bolechow-based bus maker that moved into the market in 1995 when it won a tender to provide 75 buses for the city of Poznan.
That looks like bad news for Ikarus, which has been in the Polish market since 1951. Even after its markets shrank in the early 1990s, it was able to sell cheaper buses to cash-strapped Polish cities.
Now, however, Western bus makers are getting competitive on the price front just when cities are willing to spend more after discovering municipal bond markets and other financing techniques. While cities such as Warsaw as recently as 1996 had fleets that were 95% Ikarus made, this is likely to change, bus makers said.
For new companies on the market, Poland is especially attractive. With 831 new buses purchased by Polish cities last year, this is one of the largest bus markets in Eastern Europe, according to the Public Transport Economic Chamber.
Still, Ikarus believes it can hold its own against these Western competitors. "We are not afraid of quality competition on the market," said Laszlo Rakasz, a representative of Ikarus in Poland. "We have been selling kneeling buses for three years now."
Except, though, for this year. Ikarus has not sold any buses in 1998. The company said this was part of its strategy for Poland. While it used to sell buses that were assembled here, it now plans to import buses made in Hungary. The company will be able to due this and still compete, Rakasz said, because import tariffs will fall in January.
"With import tariffs to be lowered to 15% by the beginning of January, as is expected, our Hungarian-made buses might be as competitive as those which used to be assembled in Poland," he added.
The company plans to start bidding again for bus contracts this month, offering kneeling buses and modernized older types produced in Hungary.
But even with lower tariffs, Ikarus is facing stiff price competition as rival makers vie for market share.
Last year, when Ikarus offered an 18-meter kneeling bus for DM 350,000 it won tenders in southern cities such as Kedzierzyn-Kozle, Katowice, Gliwice and Czestochowa. Overall it sold 230 buses. This year Volvo, which plans to double its 1997 sales of 56 buses, has offered an average price of DM 300,000 for a 12-meter kneeling bus.
"Volvo Poland wants to make its Wroclaw plant the company's production center for Western and Central Europe," said Wladyslaw Smyk, the firm's sales director.
He thinks it will be able to achieve this goal not only because of price, but because cities are increasingly looking at quality. "People in Poland demand better products, it's why they no longer buy Polonez (cars) for example," Smyk said.
Cities agreed that today quality counts. "Price is no longer the only criteria which matters," said Mariusz Horon of the Gdynia municipal transport authority. He added that in the agency's current tender for 15 new buses other factors such as maintenance costs, technical parameters and payment terms will account for 50% of the decision on who wins.
"The days of older models are numbered," Horon said. "Every year more small cities are ready to pay for the most advanced features, dearly in the hope that the maintenance will be cheaper."
This change won't only hit Ikarus, though. Polish companies that have found a market rebuilding worn-out vehicles will also have to look for new business models.
For the past 30 years, Kapena, based in Slupsk in northern Poland, has refurbished Polish-made Jelcz and Hungarian-made Ikarus buses. But now it is thinking of moving into production of nine-meter buses.
"We see a continuous 10-15% decrease in orders every year because our former customers tend to buy new buses these days," said Krzysztof Kieronczyk, Kapena's marketing director. This trend is likely to worsen because Western buses have an average road life of 12-15 years.
To counter the loss of sales in such a large market as Poland, Ikarus is looking to expand sales in other countries.
"We offer good quality buses at relatively low prices, and our orders on other markets have grown by 30%," said Rakasz. This year, the Hungarian company plans to sell 2,400 buses to Slovakia, the Czech Republic, Germany and Russia.
But Ikarus may soon find the same competitors it is running up against in Poland trying to eat its lunch in these other markets.
Neoplan, which currently produces some 300 kneeling buses for domestic buyers, is just one Poland-based company eyeing these other countries for new orders. "As we improve our plant facilities we might be ready to produce 600 buses per year and then eastern and southern markets will become the target," Olszewski said.
Still, Polish bus buyers have not ruled out the company that for so long filled their municipal transport needs.
Warsaw's municipal public transport authority plans to buy about 120 buses this year, said Kazimierz Kulig, head of the agency. The city will need to purchase 130 new buses annually in coming years and Ikarus isn't out of the running for those contracts.
That looks like bad news for Ikarus, which has been in the Polish market since 1951. Even after its markets shrank in the early 1990s, it was able to sell cheaper buses to cash-strapped Polish cities.
Now, however, Western bus makers are getting competitive on the price front just when cities are willing to spend more after discovering municipal bond markets and other financing techniques. While cities such as Warsaw as recently as 1996 had fleets that were 95% Ikarus made, this is likely to change, bus makers said.
For new companies on the market, Poland is especially attractive. With 831 new buses purchased by Polish cities last year, this is one of the largest bus markets in Eastern Europe, according to the Public Transport Economic Chamber.
Still, Ikarus believes it can hold its own against these Western competitors. "We are not afraid of quality competition on the market," said Laszlo Rakasz, a representative of Ikarus in Poland. "We have been selling kneeling buses for three years now."
Except, though, for this year. Ikarus has not sold any buses in 1998. The company said this was part of its strategy for Poland. While it used to sell buses that were assembled here, it now plans to import buses made in Hungary. The company will be able to due this and still compete, Rakasz said, because import tariffs will fall in January.
"With import tariffs to be lowered to 15% by the beginning of January, as is expected, our Hungarian-made buses might be as competitive as those which used to be assembled in Poland," he added.
The company plans to start bidding again for bus contracts this month, offering kneeling buses and modernized older types produced in Hungary.
But even with lower tariffs, Ikarus is facing stiff price competition as rival makers vie for market share.
Last year, when Ikarus offered an 18-meter kneeling bus for DM 350,000 it won tenders in southern cities such as Kedzierzyn-Kozle, Katowice, Gliwice and Czestochowa. Overall it sold 230 buses. This year Volvo, which plans to double its 1997 sales of 56 buses, has offered an average price of DM 300,000 for a 12-meter kneeling bus.
"Volvo Poland wants to make its Wroclaw plant the company's production center for Western and Central Europe," said Wladyslaw Smyk, the firm's sales director.
He thinks it will be able to achieve this goal not only because of price, but because cities are increasingly looking at quality. "People in Poland demand better products, it's why they no longer buy Polonez (cars) for example," Smyk said.
Cities agreed that today quality counts. "Price is no longer the only criteria which matters," said Mariusz Horon of the Gdynia municipal transport authority. He added that in the agency's current tender for 15 new buses other factors such as maintenance costs, technical parameters and payment terms will account for 50% of the decision on who wins.
"The days of older models are numbered," Horon said. "Every year more small cities are ready to pay for the most advanced features, dearly in the hope that the maintenance will be cheaper."
This change won't only hit Ikarus, though. Polish companies that have found a market rebuilding worn-out vehicles will also have to look for new business models.
For the past 30 years, Kapena, based in Slupsk in northern Poland, has refurbished Polish-made Jelcz and Hungarian-made Ikarus buses. But now it is thinking of moving into production of nine-meter buses.
"We see a continuous 10-15% decrease in orders every year because our former customers tend to buy new buses these days," said Krzysztof Kieronczyk, Kapena's marketing director. This trend is likely to worsen because Western buses have an average road life of 12-15 years.
To counter the loss of sales in such a large market as Poland, Ikarus is looking to expand sales in other countries.
"We offer good quality buses at relatively low prices, and our orders on other markets have grown by 30%," said Rakasz. This year, the Hungarian company plans to sell 2,400 buses to Slovakia, the Czech Republic, Germany and Russia.
But Ikarus may soon find the same competitors it is running up against in Poland trying to eat its lunch in these other markets.
Neoplan, which currently produces some 300 kneeling buses for domestic buyers, is just one Poland-based company eyeing these other countries for new orders. "As we improve our plant facilities we might be ready to produce 600 buses per year and then eastern and southern markets will become the target," Olszewski said.
Still, Polish bus buyers have not ruled out the company that for so long filled their municipal transport needs.
Warsaw's municipal public transport authority plans to buy about 120 buses this year, said Kazimierz Kulig, head of the agency. The city will need to purchase 130 new buses annually in coming years and Ikarus isn't out of the running for those contracts.
