The FINANCIAL -- Due to increased construction activities in Georgia, in particular in Tbilisi, Bosch has decided to start operation of a new warehouse in Georgia. The new 1,600 sq.m Bosch warehouse will be opened on 16 December. The warehouse is located near to Tbilisi International Airport on a base belonging to Gebrüder Weiss, an Austrian company involved in logistics. The warehouse will store construction power tools.
According to the number of Bosch dealers, Bosch in Georgia holds the leading position in terms of market share. “The company’s turnover has tripled from 2012 and the sales outlet has increased six-fold,” said Gerhard Pfeifer, Bosch President of the Eastern Region. In the whole region, the company had EUR 16 million turnover in 2012 and out of this number EUR 9 million was from Georgia. The remaining EUR 7 million was divided between Armenia and Azerbaijan. “Sales in the Caucasus reached EUR 16 million in 2013 and in Georgia – EUR 3.3 million. The bestselling Bosch products of 2014 in Georgia are construction tools, especially tools related to working with concrete and metal,” he added.
“Wider construction activities are expected in Georgia which will require assistance with high quality products. An ‘Olympic’ residential complex is being built and several hydropower stations with which we are also involved. We see that a construction boom is going to be starting soon in Tbilisi and throughout Georgia. New hotels are coming, and new residential houses and business centres will be getting built which will all need construction power tools. That is why we are opening a warehouse to be involved in the construction activities in Georgia. This warehouse will be located on the base of Gebrüder Weiss, which is an Austrian company distinguished by its high quality service in logistics. Jointly we will help the region. The warehouse will be serving well-known international companies. The year 2015 has been declared the year of our warehouse,” said Pfeifer.
“We need to grow, we need volume to justify our investments. We see quite a good framework of economy in the region and especially in Georgia; as well as availability of natural resources. Your neighbour Azerbaijan has high purchasing bio power due to the availability of oil and gas there. The affluence of Azerbaijan has a positive influence on Georgia. Therefore we are confident that the investment in Georgia is absolutely justified and we will develop further. It was also the right step to start in Georgia, because Georgia still has a very good economic framework. The country fought successfully against bureaucracy and corruption and attained a positive investment climate. Plus I see increased construction activities especially in Tbilisi which is very encouraging. Because of the construction a lot of Bosch divisions are benefiting - whether it be security technology or thermo technology, and especially in terms of using power tools. In general, the Southern Caucasus is a promising region for us and Bosch will further develop this market by enlarging its sales network,” Pfeifer added.
Q. How has the Russian-Ukrainian crisis affected Bosch’s sales in the region?
A. Due to the economic slowdown in the region, we will not achieve our plans for this year. The automotive market in Russia is particularly weak. Vehicle production in Russia dropped by 4 percent and passenger car production - by 20 percent. This also reflects on our numbers. Additionally, the Ruble is very weak. It has lost about 45 percent against the Euro since May 2014. However, sales in Rubles are slightly higher than they were in the previous year.
Belarus and Kazakhstan were doing quite well in 2014 and I would evaluate this year positively for these markets. But our business in Ukraine has been suffering. We do not trade from Ukraine to other countries and from the countries of our region into Ukraine. More than 80 percent of our products sold in the region are imported. They mostly come from Western Europe and then into our region directly into the markets where they are sold and then distributed through our sales channels, through our partners to the final customers. Therefore, the situation in Ukraine does not reflect on the situation in the Caucasus area.
As for the situation in our region, we have finished the construction of our new headquarters in Moscow, Russia and moved in there last summer. In these EUR 120 million-investment headquarters we have so far employed about 700 people. We have also inaugurated a new factory in Engels for thermo technologies for heating systems for domestic and industrial purposes. More than EUR 20 million was invested in this project. We are continuing our build-up offer of a pure automotive plant in Samara, which will start operations in 2015. This plant received an investment of more than EUR 50 million and will employ 500 people.
Q. You mentioned that Bosch will not achieve its plans this year in Russia. Is this due to the sanctions as well?
A. Bosch products are not directly touched by the sanctions from Western countries. This is because our products, such as consumer goods, heating systems and automotive equipment, are not listed among the products of concern. But indirectly of course we are suffering as the sanctions weaken the economy as a whole.
The Bosch team is going to purchase the last 50 percent share of the Housecrater company and the second is ZF steering systems in which we so far have a 50 percent stake and want to take over 100 percent. Both acquisitions will strengthen our positions in the respective business sectors and will significantly increase sales numbers next year. Both acquisitions will add about EUR 13-14 billion in sales and another 60 thousand people.
Q. Georgia has signed an Association Agreement with the EU and accordingly, Georgia has been given the opportunity to enter Western markets. Taking this fact into account do you plan to establish some plants in Georgia to produce certain products here as well?
A. First of all, the most important principle of the company is what we call “local for local”. That means, when we build a plant we need market size which then also consumes at least the majority of the products which are produced in that plant. If there are significant cost advantages in that plant, then of course we export the products to other countries. Bosch is in favour of every form of free trade, but for building up a factory we need a big and strong local market. We will be very glad if one day Georgia becomes a big and strong market and then we will build a plant here with pleasure. But today it is not on our agenda.
Q. How innovative are Bosch products and how important is it for Bosch as a company to be an innovator?
A. We are investing about 10 percent of our annual sales, so that means more than EUR 4 billion, into research and development alone, and we generate 20 patents a day. We are the most innovative company in Europe in terms of the number of new patents every day. We generated 4,400 patents last year.
We are innovators in a lot of fields. We have sold 15 million IXOs for example. We invented the IXO screw driver, which is now included in the Guinness Book of World Records. Bosch is certainly one of the frontrunners introducing cordless power tools into the world market. Especially in the field of batteries; with the lithium ion battery we are now able to do power tools which were never thought possible without a cable. The ‘power hammer’ is another innovation of the Bosch company.
We will see a significant share of electric cars on the roads by the end of the next decade. In the meantime those systems which make driving safer, more comfortable and more efficient are being focused on for the moment and also, we are in the middle stage towards achieving fully autonomous driving. Bosch is working very hard on this direction.