South Sudan, the world’s youngest nation, is distant from and very different to Lebanon in practically every respect. The World Bank estimates that the South Sudanese GDP contracted by 56 percent to $9.3 billion in 2012. According to warnings by the US State Department, the risk of violent crime is high in the capital Juba and carjacking and banditry occur regularly outside of the city. And the country’s 7,000-kilometer road network, of which all of 60 km have been paved, makes Lebanese highway infrastructure look like Switzerland by comparison.
When South Sudan celebrated the second anniversary of its independence this July, however, the country’s top officials and visiting dignitaries benefited from automotive security made in Lebanon. This is owing to the ingenuity and expertise of Beirut-based M. Special Car Armoring (MSCA), which according to general manager Christelle Yared is one of the longest-established producers of armored sedans and sports utility vehicles in Lebanon and the Middle East.
Armor fit for kings
Back in spring 2011, Yared tells Executive, MSCA got an order from the South Sudanese government to deliver 16 armored vehicles (including presidential limousines) to Juba in time for the country’s declaration of independence on July 11. “For two months up to the Independence Day in Juba we worked day and night in three shifts in order to get the vehicles ready,” she says.
At stake were the safety of South Sudan’s president and visiting heads of state who attended the birth of the new nation. Also at stake was a promising business expansion for MSCA. When the company airlifted the 16 vehicles to Juba on time by four chartered aircraft, the resulting customer satisfaction certainly widened new roads of growth for the Lebanese company.
According to Yared, MSCA has been focusing its expansion on North and East Africa for the past three to four years. “We are doing well over there,” she says, to the point that the business “has flipped 180 degrees”. Whereas in earlier years, the market used to be 80 percent Lebanon and Middle East, today 75 to 80 percent of the company’s business is generated in North and East Africa. Besides South Sudan, her current customer base on the continent includes clients in Kenya, Tanzania, Egypt and Libya.
Christelle Yared says business is good
MSCA, which started in 1973 as a family business of two partners with roots in the importation of middle-of-the-road cars, is not the only company in Lebanon that converts regular or luxury sedans and SUVs into armored vehicles that aim to provide the political and business classes with various levels of protection against property crimes, kidnappings and terrorist threats.
According to Patrick Aouad, chief executive officer of armoring company Yaka Group in Beirut, four companies competently offer the pricey conversions in Lebanon, which can easily boost the cost of owning a Mercedes S-Class car to something like half a million dollars and involve fitting the vehicle with ballistic steel panels, Kevlar and bulletproof glass around the entire passenger cell.
Elie Makadessi, managing director of Zahle-based firm Armored Car Professionals (ACP) says Lebanese armoring companies do the job for half the cost or less than the few original manufacturers offering armored sedans.
Currently only German premium brands (Audi, BMW, and Mercedes)sell special protective versions of their up-market models. A few years ago Korea’s Hyundai came up with an armored version of its top model, the Equus, and last year presented one to Korean-born UN Secretary General Ban Ki-moon, but the armored Equus sedan is reportedly not yet broadly available.
The logic of protection
It might seem almost natural that Lebanese companies should have acquired export-grade expertise in the armoring of vehicles seeking to protect exposed persons against attacks. Far too many memories of terror in Lebanon — the ones that are not related to military invasions and paramilitary violence — involve vehicular bombs, and the number of victims has been far too large.
Most recently, with the indiscriminate terrorist car bomb atrocities against civilians in South Beirut and Tripoli, any passing traveler faces an increased danger of becoming a casualty of hideous and cowardly attacks.
Car bombs have been the primary weapons that have exacted high death tolls in Lebanon up to today; many (but not all) high-profile victims of car bombs in Lebanon were attacked while they were traveling in cars.
What is surprising, then, is that the Lebanese car armorers have their main markets outside of the country and have not actually seen massive growth in local demand over the past few months. Yaka Group’s Aouad tells Executive that he delivers to clients in Libya, Iraq and Afghanistan, has large contracts coming up in Egypt and Saudi Arabia and has regular orders from the French, Algerian and Chinese governments to provide vehicles to diplomatic missions, but he says his market in Lebanon is “very small”.
Makadessi, who took his work experience with the armoring division of Mercedes Benz back home to build a production and trade business in armored cars from Zahle, says he converts up to 20 cars a month but has “zero” focus on the Lebanese market and any business he has here is accidental. His list of clients includes companies in Germany and the United States, he enthuses, along with buyers in Iraq, Nigeria and Afghanistan. “The market is good,” he says.
Among the main reasons why Aouad and Makadessi don’t see much business potential in Lebanon at this point appear to be the market’s fickleness and fleeting demand. On the days following any recent security incident, the phones ring off the hook with enquiries but it never lasts, says Makadessi. “In Lebanon this happens: A bomb blows and I get 100 phone calls [from people] saying, ‘we need an armored car’. When they are scared, everybody asks for an armored car. The second day, nothing.”
Aouad concurs, saying his local business amounts to perhaps 10 cars a year and the inquiries he receives after security incidents are numerous but hollow: “There is a lot of demand. No one is buying.”
MSCA’s Yared, though, claims a different experience with local customers. Having introduced a basic protection package to the market in November 2011, MSCA has sold some 130 of these packages until now. Yared says she serves a stable clientele of highly exposed persons in Lebanon, namely political and business leaders, at the top end of the market. When people call to inquire about the details, they are usually serious, she claims. A very high rate, around 85 percent, of the inquiries result in closing a deal.
Pricing the armor
Cost plays a definite role in turning immediate fear into buying decisions, of course. The basic packages that MSCA trademarked as “Hijack ByeJack” are lightweight and can be implemented in most makes and vehicle sizes for about $20,000.
This type of armoring can help against an accidental bullet hit or peripheral impact from a blast that happens at some distance or against a pistol-toting wannabe carjacker or kidnapper who may shoot at a driver with a handgun or swing a hammer to smash in the car window, Yared says.
More serious protection is available in different categories, from resisting conventional magnum caliber bullets up to withstanding some armor-piercing munitions. Vendors commonly describe these safety levels with a combination of letters and numbers, such as VR4 or B6/7. According to the armoring companies, prices vary greatly and increase from one level to the next. Aouad cites an SUV B6 armoring as going for $45,000 to $60,000 and Yared says this can climb to $250,000 for a high-end sedan with the highest available, “presidential-level”, shielding.
The price tag for a high-end conversion is still lower than the cost of buying an equally armored version from the original manufacturers. The purchase of a 2012 S-Class Mercedes Guard can cost 450,000 euros ($607,400) according to Makadessi.
The core reason for the high cost of locally armoring a luxury sedan lies in the materials, says Aouad. Steel and glass that meet the highest specs make up “80 percent” of the cost to convert a vehicle.
The reason for the price differentials is not only that the European models have more complex cost structures which come to bear heavily on the special models, but when importing a manufacturer-armored vehicle into Lebanon, there is also the not-so-small matter of extra customs duties.
As customs and excise duties are levied at a rate of close to 60 percent on the value of the luxury vehicle including armor, the state share in the expenditure on automotive protection is particularly hefty. Even members of parliament, who can import one car per legislative term free of customs, prefer to have their armoring done locally, Yared says, arguing “which deputy has only one car?”
Trust and Relationships
At least for the Lebanese armorers, the marketing of their vehicles is not according to a page in the manual for transparent tendering. Trust and relationships are usually what creates the business.
The relative lack of checks and balances in who Lebanese companies are allowed to export their products to may have some positive impact on their international demand.
On the downside, the lack of distance between Lebanese people and products made in Lebanon makes it too cumbersome for a company like ACP to convince the small local market of its products, claims Makadessi.
Lebanese tend to trust products that come from Germany or the United States and some want to buy only non-Lebanese products, he says, and so he supplies his armored cars to dealers who are based in Europe or the US, with delivery to the free zone at Beirut Port.
However, he’s sometimes amused to discover one of his products later on rolling on the streets of Beirut with a Lebanese license plate or even arriving at his workshop for maintenance.
On the upside, the Lebanese prowess at developing and maintaining cordial relationships helps the local producers to connect with buyers of their armored vehicles. Having success in finding customers “is mainly a matter of relations, and being at the right place at the right time,” says Aouad.
According to Yared, one argument working in favor of Lebanese armorers is that they produce vehicles that are fit for the security conditions of countries in turmoil and for driving on poor roads. Africa and the Middle East are regions with higher security risks than Europe or the US, she says, so armor installed in Europe, which tends to rely on lightweight and composite materials, is less suitable than the ballistic steel and other shielding favored by Lebanese armoring companies.
Operating an armored sedan in the African or Middle Eastern terrain means “you need big engines and reinforced suspensions and braking systems. What makes us experts is that we know the roads and the types of ammunitions and explosives used in the region, and even our run-flats are suited to the asphalt used on our roads,” she explains.
Beyond this experience-based knowledge, she puts great emphasis on investing in both pre- and post- sales efforts. This means that she and her team consult with their clients, study the roads they are using and the security threats they are under, have extensive meetings with them and their security experts, and “give strong recommendations” advising them on the appropriate protection that MSCA recommends.
After sales Yared maintains strong relationships with her clients. She includes complementary maintenance visits in her contracts — MSCA experts traveled to Juba about once every three weeks during the past two years, and makes sure to tune in to high-profile clients when they deliver public statements on television, calling them the next morning if she thinks that the tone and content of a speech means that the current level of their vehicle’s armoring is no longer adequate to the threats they have to expect. To her mind, the responsibility of protecting client lives makes her role all passion and not just work. “It is a continuous job with after sales service which I love to do.”
The business reach of the Lebanese armorers with production staff in the dozens and monthly output capacities of perhaps 100 units between them is not huge. Larger armoring companies with outputs in the hundreds of vehicles per month serve Arab and African markets from the United Arab Emirates and it is hard for the Lebanese to compete against the advantages that the free-zone locations and labor markets of the emirates provide to producers there.
If Arab and African emerging markets were characterized by growth instability, low crime and dwindling corruption, the use of an armored sedan with its high acquisition and operating costs and comparatively low lifespan would be a poor investment decision. As this is not the state to describe the region today, however, it is to be expected that the expertise and products of Lebanese armoring companies will have a growing market in Africa, and very probably also closer to home, for years to come.
As Makadessi observes, the market for armored civilian vehicles in Iraq was minimal when the war raged in 2003 and 2004 but demand skyrocketed in 2005. Syria today is as yet a market that is limited and where being a supplier is complicated by political issues, but, he says, “Usually, when a war calms down, and things get stable, there are requests for armored cars.”