Polish bus maker Solaris expands beyond Europe into India, Mideast

By bne IntelliNews July 10, 2007

Patricia Koza in Warsaw -

Poland is a country of start-ups, with 1.8m small and medium-sized enterprises operating across the country. But relatively few of the 14,000 SMEs that export their goods or services compete directly with major European rivals on their home turf. Solaris Bus & Coach is one of them.

The company traces its origins to 1996 when its founder and president, Krzysztof Olszewski, bought a factory owned by Germany's NeoPlan Bus in the town of Bolechowo, north of Poznan, to market city buses to Polish operators. Within three years it had developed a new low-floor city bus that became a hit domestically, and it began to export the model in 2000. A year later, the company changed its name to Solaris while focusing on a strategy of offering high-quality stainless-steel vehicles fitted with components provided by the best European producers.

The family-run business - Olszewski's wife, Solange, is vice president - celebrated its 10th anniversary in 2006 having racked up total sales of more than PLN1bn (€264m) in Poland alone. It is now the market leader there with a 33% share, ahead of Germany's MAN and Mercedes, domestic producer Jelcz, and Scandinavian companies Volvo and Scania.

It was a successful year for exports as well, with 367 buses sold in 2006 against 212 domestically. In fact, Solaris is battling Mercedes and MAN on their home grounds, and now holds a 12-16% share of the German market depending on the segment. Other prime foreign customers are Switzerland, the Czech Republic, Norway, Hungary, France, Slovakia and Lithuania.

Overall, net profits were down from 2005, due partly to heavy investment. Net profit was €13m on sales of €135m in 2006 versus net profit of €41n on sales of €164m the year before. Export sales also fell to €80m against €122m in 2005, a dip partly attributed to the introduction of new EU-wide exhaust emission levels.

"Our most important market is Europe," Olszewski, told bne in a phone interview. "It's a huge market of 40,000 units, old and new, for very high-quality buses. And they are not cheap."

That's why some analysts are questioning Olszewski's latest plan to build a bus plant in India, something no other European bus company has tried.

Road Raj

India is a big market – some 10,000 buses are sold annually, compared with 1,300 in Poland. But the buses are cheap – the market price is about €70,000 per unit – and they last five years, compared with 15 years in Europe. Solaris wants to produce nearly 1,000 buses a year, financing organic expansion by local sales just as it does in Poland.

Why is Solaris, a company that has built its reputation on high-quality buses, targeting India? The answer lies partly in what the company considers one of its key advantages: a manufacturing flexibility that enables it to react quickly to satisfy market demand. Its team of designers and engineers is constantly developing new models and upgrading its existing range, which includes low-floor city buses, trolley-buses, local buses and tourist coaches.

"I think providing such a bus is absolutely possible," says Olszewski. "It has to be a completely different design, without a low floor, without the high quality like in Europe. My team is there, looking for new technology. If we don't find it, we have to buy it. The question is always the same: how much?"

The initial goal was to have the factory operating by the end of 2007, but negotiations "with two or maybe three partners" have stalled, Olszewski says. "Business in Europe is very simple: when you say 'white,' it is 'white;' in India, it is many shades of gray."

Even so, its business in Europe does not always run entirely smoothly.

The quality issue surfaced again recently when the city of Bratislava temporarily removed 22 new gas-powered Solaris buses from service after one caught fire. The company says an investigation determined that the fault lay with a tool used by city maintenance workers to measure gas leakage, and the buses were exonerated.

And then there's what Olszewski describes as "the Dracula tender," in which Solaris' offer to supply 500 buses to Bucharest for €108m was undercut by a €105m bid from Mercedes' EvoBus.

"It was a very big surprise for us that Mercedes was the cheapest," he says. "We can't understand it."

Bucharest City authorities are expected to decide on the tender in July.

Meanwhile, Solaris is pushing beyond European borders into the Middle East. It won a €203m tender with MAN to supply 620 buses to Dubai, and it's in talks with Israel. And then?

"We are a very young company, only 11 years old," Olszewski says. "When our work is done in Europe and the Arab countries, the next step can be North America."

Send comments to Patricia Koza

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