Business model

So that it can fully cater to the needs of material handling customers worldwide, the KION Group’s business model covers every step of the value chain: product development, manufacturing, sales and logistics, spare parts business, truck rental and used trucks, system and software solutions, plus financial services that support the Group’s core industrial business. The KION Group operates a multi-brand strategy involving the four international brands Linde, STILL, Baoli and Egemin Automation plus the three national brands Fenwick, OM STILL and Voltas.

The KION Group earns most of its consolidated revenue – 54.5 per cent in the year under review – from the sale of industrial trucks. The product portfolio includes counterbalance trucks powered by an internal combustion engine or electric drive, warehouse trucks (ride-on and hand-operated) and towing vehicles for industrial applications. It covers all load capacities, from one to 18 tonnes.

Worldwide research and development activities (R&D) enable the KION Group to consolidate and extend its technology leadership. The Company plays a pioneering role in hydrostatic and diesel-electric drive systems and in innovative energy-efficient and low-emission drive technologies. As at the end of 2015, the KION Group employed a total of 1,056 developers, of whom 299 worked in Asia. Details of the Group’s R&D activities can be found in the ‘Research and development’ section.

The KION Group operates a total of 17 production facilities for industrial trucks and components in nine countries. These include the new plant in Stříbro (near Plzeň in the Czech Republic), where production commenced in January 2016, and the two Egemin Automation production sites in Belgium and the USA. Owing to the particular requirements of its business, the KION Group manufactures major components itself – notably lift masts, axles, counterweights and safety equipment – in order to ensure security of supply and the availability of spare parts for important components. Other components – such as hydraulic components, electronic components, rechargeable batteries, engine components and industrial tyres – are purchased through the KION Group’s global procurement organisation. > DIAGRAM 003

The KION Group offers customers tailor-made solutions and makes trucks specifically to order. More than a third of new trucks are fitted with technical components developed especially for a particular order. Advantages for customers in terms of total cost of ownership (TCO) underpin the Linde and STILL brands’ premium positioning. The trucks’ hallmarks are cost-efficiency, high productivity, comparatively low maintenance and high residual values.

The KION brand companies have an extensive sales and service network comprising around 1,400 outlets staffed by approximately 14,000 service employees in over 100 countries. Approximately half of them are employed by the KION Group. In other cases, the Company relies on external dealers. The sales network in western Europe consists of exclusive dealers and Company-owned dealerships. In China, Linde has built up a broad network of more than 100 proprietary sales and service outlets. By contrast, distribution partners in Asia and South America usually offer more than one brand of truck.

The worldwide vehicle fleet, which comprised around 1.2 million industrial trucks at the end of 2015 and continues to grow, provides a stable basis for the spare parts, maintenance and repair business within the KION Group’s integrated business model.

The service business – spare parts, rental and used trucks, system and software solutions, and financial services – helps to smooth out fluctuations in consolidated revenue and reduces dependency on market cycles. In the reporting year, it contributed 45.5 per cent of consolidated revenue. This business also strengthens customer relationships, thereby helping to generate sales of new trucks. Extensive supplementary services are mainly offered for premium products. However, the proportion of service business is continually increasing in the other price segments too.

Financial services support new truck business in many markets, forming another pillar of the service business within the integrated business model. Approximately 50 per cent of new trucks are financed via the KION Group itself or via external banks and dealers. Offering financial services is therefore part of the truck sales process, and end customer finance is generally linked to a service contract throughout the term of the finance agreement. In the main sales markets with a high volume of financing and leasing, financial activities are handled by legally independent financial services companies. These activities include long-term leasing to customers and internal financing of the brand companies’ short-term rental fleets.

There are also individual orders for repairs and maintenance work as well as for spare parts. In addition, the KION Group looks after entire customer fleets, using special fleet management software to monitor the trucks in the fleets and to enable customers to efficiently manage their fleets.

The brand companies also have extensive used truck and rental truck businesses, allowing peaks in capacity requirements to be met and customers to be supported after their leases have expired. Once a lease has expired, the used truck is serviced at a reconditioning centre and can then be rented on a flexible, short-term basis, for example. The used and rental truck business is integrated into the Linde Material Handling (LMH) and STILL segments in terms of its operations, and its fleet of well in excess of 50,000 trucks is financed internally by Financial Services.