At a time when there is no shortage of headwinds for the industry, the UK’s largest bus and coach manufacturer, Alexander Dennis Ltd, continues to invest – new coach models are in the pipeline and international business continues to grow. Gareth Evans reports
Scarborough seemed appropriate to be the location of ADL’s now twice-yearly media briefing last week – for the Yorkshire coast resort’s coach and bus ‘big name’ Plaxton is 110 years old in 2017. This year also marks 10 years since ADL acquired Plaxton.
“In those 10 years, which also coincide with my time in the bus industry and at Alexander Dennis, I believe you’ll find a very vibrant business,” enthused ADL CEO Colin Robertson.
“Plaxton has a rich history as a coach builder, but it’s always had bus tendencies too. Approximately 20 buses a week are produced here. We’ve also doubled the workforce to 660 here compared to when we acquired it. Therefore, rather than ‘the Scots buying it and closing it down’ as some predicted, I think we’ve proved to be a responsible business partner.”
Performance
“In 2016, we exceeded £600m of sales – a number I’m proud of, the second year in a row we’ve done that,” Colin said. “We had a superb UK performance of £360m vehicle sales on the back of DDA compliance, particularly on double-deck.”
In terms of volume, in 2016 ADL produced 2,465 units and in 2017 it will manufacture [wlm_nonmember][…]
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Acknowledging the international growth, Colin said: “The UK remains the bedrock of our business. In the UK and Ireland, Alexander Dennis had a 54% share of the double-deck market in 2016, having sold 1,004 units. With the end of the New Routemaster production, we now see London as a more vibrant market.
“We continue to invest – our engineering spend last year was around £20m, roughly half of which is in developing new products for existing and new markets. For example, we will be building Enviro200s for North America from next year. In Canada we launched our first SuperLo Enviro500 last year.
“The on-going investment in engineering and NPD (New Product Development) is necessary to build a resilient and sustainable business. In 2016, we invested £20m in NPD and engineering, which represented 75% of ADL’s profits. In 2017, we’ve increased that investment by 10% to a record level of £22m – which is 91% of our forecasted profit.
“We’re never going to be all things to all people, particularly when it comes to drivetrains. We’re excited about our recent partnership with BYD, as well as our long-standing relationships with other world-class organisations such as Scania, Volvo, BAE Systems and Cummins.
“With the focus on air quality, we need to ensure we can offer the right products. One of the quandaries for me is that diesel may ultimately become obsolete, but it remains a very important part of our market in the bus world. Equally, we see emerging growth in hybrid, full electric and gas.”
The proportion of diesel buses ADL manufactures is falling slowly. In 2015 the figure was 94%; it was 91% in 2016; and in 2017 that figure will have reduced further to 88%.
As for the challenges, Colin said: “We’ve had positive growing pains in North America – we can’t build enough buses quickly enough. That’s meant building some vehicles in the UK, which has been good as it’s kept people busy. The UK remains a huge hotbed of innovation, but it’s also highly competitive.
“Revenues were broadly flat year-on-year. A 4% operating margin, a 3% net profit is alright for some, but it’s not good enough for me. We’d like to get our operating margins to 6 or 7%. We continue to be under huge pressure.
“Post-Brexit, clearly the operating companies are in different places, with share prices under pressure and some have different appetites for investment.
“A strong Euro is bad for bus parts. A 10 to 15% shift from Euro to Sterling can literally wipe out our profit. If our business is under that pressure, the same can surely be expected from the industry, certainly our domestic competitors.”
In terms of commercial pressures, Colin said: “We were quite smart 12 to 15 months ago as we forward-bought Euros, but we’ve now spent most of those. The reality of inflation and a much weaker Sterling is impacting on our cost base – as it is on customer buying behaviours and on our supply chain. We are seeing cost pressures – less so steel, but glass and aluminium are rising. The cost of aluminium and tyres has reached a three-year high.
“From pre-Brexit to today, there has been a €0.21 movement in value vs. Sterling. The cost of a £50,000 basket of parts has increased by 19%. For the industry, I believe it’s a pretty tough place – particularly when the operating industry is under pressure from the likes of Amazon and Uber.”
Explaining the impact of the Euro currency fluctuation on ADL, Colin said: “Approximately 20% of an Enviro200 is ‘Euro content’ and 40% in an Enviro400.
“We’re working on a steady diet of self-help to mitigate that. In the year to date, we’ve taken out £3m from our payroll. Sadly, that’s a consequence of ensuring the books can still be balanced. We’ve focused on build hour and operational costs improvements. We’re now building a double-decker in under 700 hours. There is a lot we can do to make this situation slightly better, but we’re not good enough to cover all those pressures. To recover foreign exchange impact, we foresee the market will drive a price increase of approximately 4%.”
Asked whether there are plans to introduce the tri-axle Enviro500 for UK, Colin replied: “Frankly to take an Enviro500 out of Hong Kong, it’s not necessarily the homologation expense, the challenge is engineering it to make it work at the right commercial point.
“You have to ensure you have the right product baseline – so do you take an Enviro500 and strip it or do you stretch an Enviro400, so perhaps there’s greater fleet commonality? Historically, whether it be open-tops or higher capacity double-decks, we’ve not had enough physical resource to develop every product for every market. It’s not so much the money – capable bus and coach engineers don’t grow on trees.”
Concluding, Colin said: “We do see a tougher landscape at the end of this year into next year. The UK is a fiercely fought market, but I believe that’s a good thing as it keeps raising the bar in terms of quality, delivery performance and value for money.”
It remains Colin’s target for ADL to achieve worldwide turnover of a £1bn by 2020. As he pointed out: “If you don’t grow, you die. We need to have ambition and we believe we are doing the right things.”
UK coach update at Alexander Dennis
Two new coach models are to be launched in 2018, representing a significant investment by ADL in the Plaxton coach range. Details of one will be announced in due course, but Mark Ballam, Commercial Manager – Coach confirmed the other will be a low-entry, 14.5m tri-axle. Based on a Volvo B8RLE, its model name remains to be confirmed – but delivery is due in April 2018.
“We’ve secured an initial order from Stagecoach. It runs a number of inter-urban coaches, but they’re conventional high floor, many of which have lifts in. Listening to the needs of its passengers, Stagecoach understands that not everyone needs to use a lift, but they do struggle with stairs. Therefore, we’ve come up with a concept that has a good level of lower saloon area, then some steps up into the rear saloon.
“The new coach seats 53, with a permanent wheelchair bay to reduce the time taken when a wheelchair user boards. There are 17 seats in the lower saloon.” As for Plax
ton’s existing range, Mark said the Leopard was “definitely what the market had been waiting for” when it was launched in 2013.
He added: “In the first year we sold 60 – and it remains the vehicle of choice for that sector. We’ve now sold over 170 Leopards.”
He said repeat orders were being received for the new Cheetah, which was launched in 2015.
“We’ve made a number of upgrades to it since its launch – including modifications to the entrance steps in response to operator feedback,” he continued.
“The 2016 launch of the B8R Panther Exec has proved to be a superb addition to our range, helping us to win much more of the retail market sector. We’ve now built around 190 Panthers on the B8R chassis. The Volvo B8R chassis has been great for us for the Leopard and Panther alike.
“We’ve recently delivered the first 12.2m Panther Exec to Cooper’s and one for McCarthy’s is in the showroom. It’s an extremely versatile coach. We’ve also fitted a second emergency door, which for most of the vehicle’s life will remain shut – but crucially, it allows the demountable toilet to be plated over and the coach to be upseated, allowing an additional six seats to be fitted. We’re always trying to think about the vehicle’s whole life, rather than its initial role.”
Mick McElhone, Head of Coach Sales, agreed: “Plaxton coaches are highly versatile. As well as longevity, a Plaxton has the ability to cascade and upseating to 70 thanks to the demountable WC; it lends itself to touring and contracts; and it enjoys high residual values.”
Turning to Plaxton’s retail coach sales, Mick said: “We decided we had to have greater stock availability in 2017 – and more importantly, for it to be available at the right time.
“In previous years, I believe we’ve built fleet orders at a prime time when the independent tour market wants vehicles. After reaching agreement with fleet operators, we’ve moved build slots, so we’ve been able to fulfil the retail market at the right time. That has resulted in orders.
“We understand we need to be flexible in our dealings with customers – but also we need to take in the correct stock in the right condition and turn it over quickly. By far our preferred option is Plaxton as we know we can sell it.
“At the half-year, we’ve seen a 50% increase over our full-year result for 2016 – and we’re on target to show a 100% increase. In 2016 in retail terms, we sold 60 new coaches.”
Highlighting some customers, he said: “In sales, we all get a buzz when we do a deal and we’re disappointed when we lose business of course. A great feeling too is when we win the customer back – including Dhillon, DJ Thomas, Pulhams and Stanley Travel.”
International
Perhaps reflecting ADL’s growing international presence, Jacqueline Anderson, Group Marketing Director revealed October is going to be “a particularly hectic month” – with the firm exhibiting at key trade shows in its own right.
As recently reported in CBW, 19 Enviro500s have been ordered by Post Auto in Switzerland. Two have been delivered, while a third is to be on the ADL stand at Busworld Kortrijk, Belgium.
“ADL is exhibiting with a dedicated stand at Buswold Kortrijk for the first time, with a PostAuto Enviro500 and an Enviro200 for a UK customer,” Jacqueline enthused.
“We’ll be participating at Coach & Bus UK with Mistral. That will be followed by APTA (American Public Transport Association) a week later. We will show an Enviro500 SuperLo, a 13’6” Enviro500 for Sound Transit and an Enviro200.”
Turning to ADL’s wider international performance, Jacqueline said: “We’ve been in the Hong Kong market since 1975 and enjoyed strong market share of upwards of 80% in recent years. As predicted, the market has got tougher due to the replacement cycles. We’re in a strong position though. We’re delivering 120 Euro 5 Enviro500s into KMB and two Euro 6 Enviro500s will be going on trial in that market. Low-height Enviro400s are to be delivered for the Victoria Peak route soon – and new generation Enviro200s are due to arrive very shortly. There’s a lot to be positive about, despite a tough market in Hong Kong.
“Also in the Asia Pacific region, as you know our concept vehicle was well received by passengers and the local transport authority in Singapore. We’re continuing to have close discussions regarding the technical feasibility of that product, as well as delivering Euro 5 Enviro500s into that market – and the same applies in Malaysia.”
According to Jacqueline, ADL has enjoyed “a real uptake” in activity in New Zealand.
She added: “Last month, we launched the new generation Enviro200 in two-axle format and as a tri-axle – the Enviro200XLB – designed specifically for NZ homologation requirements. The 12.7m XLB seats 45, with 38 standees.
“We’re delivering a new model Enviro500 with three skyroof windows into Ritchies for the tour part of its business – and eight Elite coaches being built in Scarborough for Ritchies.”
Turning to North America, Jacqueline said the Enviro500 SuperLo has been long-awaited by a number of US cities.
“We’ll have it on our stand at APTA in Atlanta,” she explained. “That leads us onto some of the operational changes within North America. Our Nappanee plant has developed significantly. Following the amicable ending of the joint venture with New Flyer, a new production line for Enviro200 will be added to the existing two Enviro500 model assembly lines. We currently have the capability to produce five vehicles per week. By the beginning of 2018, that will be doubled with the Enviro200 coming on stream. There will be four variants – one and two-door versions of the 30’ and 35’ models. An Enviro200 will also be at the APTA show.”
Last but by no means least; Jacqueline highlighted ADL’s success in Mexico City for BRT (Bus Rapid Transit) Line 7, a 15km route running through the city centre.
“The buses are being built at Falkirk and shipped from Southampton. Two have arrived ahead of 88 that will be delivered before the end of the year.”
She was also enthusiastic about another South American nation: “In March and April, we had a successful six-week trial with Metbus in Santiago, Chile. Excellent feedback was received, so we’ll see what comes of that.”
UK bus update at Alexander Dennis
According to Arthur Whiteside, Sales & Aftermarket Director, Alexander Dennis has enjoyed “consistently more than 40% market share since 2011.” In 2016, that figure was 53%.
Explaining what that means in reality, he said: “Over the last three years, we’ve sold on average 700 double-deckers per annum and 600 single-deckers. We’re not complacent – we’re working hard on product support and cost competitiveness. Stop-start technology has proved exceptionally popular for us. For volume reasons, the big five operators are vital for us – and we enjoy good relations with all of them.
“London remains a significant market too. Over 150 full electric BYD ADL Enviro200s will be in service by 2018.”
“We’ve seen significant growth among independent operators” Arthur enthused. “We remain committed to the independent and retail markets. The retail market may be small in terms of volume – often ones and twos – but it’s important. As part of serving the independents, we realised we had to carry stock – they can’t afford to wait six months for a new bus order if a new contract requires it.”
Arthur confirmed ADL is still building Euro 5 Enviro200 classics as the Government has yet to mandate Euro 6: “Demand from customers remains for Euro 5 – we’d flip to Euro 6 if it dried up. Available stock across our range includes 8.9m, 9.6m and 10.8m models, with seat belted options. Rental or finance packages are available with our partner Mistral.”
Colin took up the story: “Since mid-2014, every double-decker Enviro400 has been Euro 6. However, we’ve continued to build 100 to 200 Euro 5 Enviro 200s. While the demand remains, it’s definitely in decline – I expect we’ll produce less than 100 this year. Regardless of legislation, we’re reaching a point sooner rather than later where we’ll do a one-time stock build and then beyond that it will be only new model Euro 6. Euro 6 is currently order only as the majority of customers who want them tend to require more bespoke vehicles, with the ‘wow’ factor.”
Richard Matthews Sales Director, Retail Bus said ADL is on target to sell 297 retail buses this year. Highlighting recent landmark sales, including Enviro200s to the Wellglade Group, Richard enthused: “It’s taken 20 years to sell buses to Trent Barton.”
Other operators ADL has enjoyed success with in recent years include Nottingham City Transport (115), Blackpool (55), Cardiff Bus (50), McGills (53), Reading Buses (39), Whitelaw’s (36) and EYMS (26).
Richard said the recent trend towards high-specification double-deckers for private hire and contract work was a welcome development. As previously reported in CBW, such vehicles typically include 80 plus high back leather seats, with three-point seatbelts, additional ambient lighting, colour co-ordinated flooring, PA systems and on-board media.
Bundling
With enhanced features increasing in popularity, ADL has tried to manage costs for operators by bundling them together.
Keith Watson, Director Customer Development explained: “If we buy a new car, we start with a base model and bundle options to create our desired car at the price we can afford.
“This creates economies of scale for the car manufacturers as they are able to discount bundled options by leveraging the supply base. Ford has done it for years with new cars. For us at ADL, it means that by grouping features together, we can offer better value – there is a fixed price for each bundle.”
Four bundle options include City, Convenience and Safety, Ambience, and Smart. By way of example, the City bundle for the Enviro400 features: City body styling with visor front screen; glazed stairwell; sky view rear upper deck window; and three sky view roof windows with solar film. The Smart bundle for the Enviro200 and Enviro400 includes; E-cooling; Smart Accessories; Engine stop/start; and Voith DIWA transmission with a two-year warranty.
Keith concluded: “Creating the desire for ownership is one huge aspect that is extremely important to us, but creating the desire for ridership is the industry’s challenge. We need to be at the forefront of developing features and benefits to help our customers grow their patronage and revenues. This in turn will allow operators to invest in more comfortable, better looking and safer buses.”
Intelligent parts
George McAdam, Group Quality and Customer Service Director provided an update on AD Connected, which is now live on ADL Euro 6 buses in the fleets of Blackpool Transport, National Express Group and Trent Barton – and further exciting developments are due shortly.
AD Connected is an integrated on-board monitoring system, connected to Alexander Dennis, which enables constant remote checking of a vehicle’s functions in order that the operator can be informed when there is an issue that needs addressing – thus maximising uptime.
In addition to vehicle telematics, AD Connected can be used by engineers to record vehicle inspections and drivers for walkround checks – among other functions.
The cloud-based solution means there is no need for expensive hardware. Customisable for each customer, it removes paperwork and allows for high quality data metrics. Live vehicle tracking allows an instant view of fleet availability, with vehicle alerts.
The system will link to ADL’s new parts website, which is due for launch in January 2018. Following the principles of the popular websites of Amazon, Screw Fix and John Lewis, George described it as a “Totally radical approach to technical support and parts sales.” He added: “Fully integrated into ADL systems, it will include ‘people who bought this also bought that,’ associated products, technical bulletins, customer part numbers, product images, schematics and much more. It will also be available worldwide and in multiple languages.”
Highlighting the third element of AD Connected, George turned to the back office: “We all understand the power of data, but it’s a hard commodity to manage. Every business has a huge amount of data, but rarely uses it to its true ability. ADL’s approach is to change this by using our sophisticated analytics system. We take all the data we can from parts sales, AD Connected, telematics, web and the customer. From this we can help drive efficiency, vehicle uptime and parts failure predictability – and thus improve the customer experience.”
Stressing that like the latest generation of bus designs, ADL’s aftermarket support has been developed around the needs of the customer, George concluded: “We’ve spent a lot of time tweaking AD Connected after feedback during trials from engineers. As a result for example, the tablet now has an auto rotate function – not everyone wants to hold the device horizontally.
“A popular feature during our field trials has been the camera which can either take stills or video, including sound, further aiding diagnosis.”
For more information on Alexander Dennis Limited visit: alexander-dennis.com/
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