Saudi Parts Center seeks to balance profit, growth; eyes remanufacturing plant

The company’s sales are characterized by being not limited to specific customers, as its five largest customers do not exceed 7% of the total sales. Although 51% of H1 2021 sales are directed to the contracting sector, the firm is strongly able to maintain its cash and debt control, where cash sales constitute at least 85% of the total sales. This is considered another advantage, especially as the firm provides its services to business-to-business (B2B) companies.

Q: Can you give us insight about the heavy equipment and commercial vehicles spare parts sector in Saudi Arabia?

A: According to our estimates and other studies, the market of heavy equipment, commercial vehicle and car spare parts is valued at nearly SAR 26 billion annually, of which heavy equipment accounts for almost SAR 5 billion annually. Commercial vehicles make up for nearly SAR 9 billion annually of the market size, excluding the repair, maintenance and service markets for commercial vehicles and cars.

The heavy equipment, commercial vehicle and car spare parts market is fragmented in Saudi Arabia, as there is a large number of competitors of small and medium sizes. There are also direct competitors, which offer similar products, and other indirect competitors, such as specialized shops, which sell a certain type of spare parts. 

These markets are unique for competitiveness, as no single company can hold a controlling market share. However, such markets allow larger opportunities for innovation and disruptive business models.

Q: Can you give us more details about SPC’s general strategy about expansion in the repair and service of diesel engines, and equipment?

A: The spare parts industry covers several aspects such as the repair and maintenance services, and remanufacturing. These markets are not less important than the spare parts markets, as clients finally look for their equipment maintenance and repair. This solution includes spare parts and the technical repair services. Many times, clients also seek solutions to save more time and money with respect to repair and maintenance. Taking into account, the market size and based on our strengths, SPC found that it is important to have presence in this market. However, this does not mean that SPC will expand by opening new maintenance centers in various districts. The company will rather focus on business models that allow it to expand operations with the least parameters.

SPC is one of the top providers of repair and maintenance services, as well as turbine spare parts in the Kingdom. It has three maintenance centers, and this business is one of its high-profit segments. Accordingly, we started to conduct a feasibility study to build a specialized plant for the remanufacture of spare parts - for heavy equipment, commercial vehicles, or even cars. The global market of spare parts remanufacturing is valued at nearly $53 billion and is expected to reach $91 billion in 2026.

In the European Union, remanufacturing of spare parts employs more than 32,000 people, of which the car market accounts for the largest part, using remanufactured components to save up to 85% of materials and energy, when compared to new parts. Therefore, major companies, such as Renault, Nissan, Mercedes, Caterpillar and Cummins adopt spare parts remanufacturing programs.

On the other hand, the spare parts remanufacturing initiative will not be the last target of SPC in the service and maintenance field. The company will aim to invest in and acquire platforms that provide technological solutions for various sectors, including equipment, commercial vehicles and cars, which help it expand operations and market share.

Q: How do you see SPC future within the next five-ten years?

A: I expect SPC to be a leading provider of integrated solutions for equipment, commercial vehicles and cars using modern technology through its branches, segments and partners. It may own a full-fledged platform for the service of customer fleets, including equipment, commercial vehicles such as light, medium or heavy-duty trucks, buses or even cars.

The platform will link the providers of services and spare parts on one hand, and clients on the other. It will also offer modern methods to track fleets and costs, using artificial intelligence (AI) and internet of things (IoT). To this end, the company will seek to balance its growth and

profitability and will follow a revenue and profit growth approach through its central business activities, including heavy equipment spare parts, trucks, and remanufacturing through a strategy for normal growth.

SPC will shift to the multi-channel approach that allows clients to get the company’s services and products through various communication media, such as the company’s branches, online store, contact centers, e-seller services, social media, etc.

SPC aims to grow its central business activities through acquiring peers operating in the same sector to grow its market share and get better profitability and growth opportunities. SPC will also make use of its infrastructure, including human resources, as well as the technical and administrative systems. It will also buy start-ups specialized in providing various solutions for the target sectors.