This year, many Ukrainian companies participated in Eurosatory 2024, one of the largest international military exhibitions held from June 17 to 21 in Paris. For at least three Ukrainian manufacturers, this was their first time presenting products at such a prestigious event. Among them, the heating and air conditioning systems manufacturer Thermo Projects Ukraine returns home not empty-handed but with new cooperation agreements.
Defense Express spoke with Yuliia Yasnohorodska, Chief Executive Officer of Thermo Projects Ukraine LLC (TPU), about the exhibition, the attention Ukraine received, and the nuances of the European defense industry from the perspective of a Ukrainian military equipment manufacturer entering the international market.
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Ukraine at the Exhibition
On the first day of Eurosatory 2024, chief organizer of the event Charles Beaudouin noted that this year, the show takes "the full measure" of Ukraine's experience in its war against russia. Did you feel any sort of particular interest in Ukrainian manufacturers?
I wouldn't say a "particular" interest but Ukraine is definitely perceived now as a serious partner on the international market. We shared common space [with other companies] at the Ukrainian stand and saw many visitors interested both in our developments and the drones exhibited nearby.
Moreover, I can say that when it comes to the entry of big defense manufacturers into Ukraine with localization of production, there are many more companies showing interest in such prospects on an unofficial level than is known from official statements.
Defense Express reminds that so far, three defense industry giants have officially announced their plans to open factories in Ukraine, including Northrop Grumman, BAE Systems, Rheinmetall, as well as a multitude of smaller companies.
Overall, the exhibition exceeded our expectations in terms of the number of inquiries and the interest shown in Thermo Projects Ukraine's offers. We received requests from a few very big manufacturers of armored equipment whose names are renowned worldwide.
At the moment, I cannot tell their names but the list includes giant enterprises from France, Germany, and Canada. Now we are starting the work by signing a Non-Disclosure Agreement and are ready to proceed once we get the Scope of Work document. In addition, there were inquiries from enterprises working on the modernization of Soviet equipment currently stationed in the countries of Europe and Africa.
When asked to detail what kind of equipment TPU is going to work with, Yasnohorodska replied: "Land-based armored vehicles."
TPU's Exhibition at Eurosatory 2024
What exactly caused the interest of these potential partners and what kind of partnership does your company offer, specifically?
The foreign customers were impressed, first of all, by the quality of our products. We had brought with us two units of an integrated air conditioning system, the Kyiv 50 and the Kharkiv 90, and each time we found them wondering if those [products] were actually of our own design and were made in Ukraine. Then, we heard positive feedback, they said it looked very professional and high-quality. Often, we got questions like, "Why didn't you offer your products abroad sooner?"
The TPU website says, you also represent European manufacturers of climate control systems. Did you receive any proposals to become a dealer in Ukraine?
Yes, we did, but we are very strict about who we're representing, especially in terms of quality. We need to be sure our products, just as our components, adhere to the proper level of quality and comply with standards. For example, we want to stay independent from Chinese spare parts, instead, we prioritize companies with full European localization of production.
When we receive new offers, we look into what kind of quality guarantees this company can provide, and pay attention to its reputation as well, if it's ready to stake its name on its products.
The European Defense Industry and the Industrial Echo Chamber
Speaking of your niche, namely, climate control systems, how big is the demand on the international and European market in particular, based on what you saw at the exhibition?
In our field, what's important to understand is that many manufacturers, including European ones, are in an echo chamber of sorts, where they delegate the making of air conditioning systems in their vehicles to local or trusted partners. It's a very unique niche, within the European Union, for example, everybody knows everyone and they often cooperate. Although there is an unspoken rule that one should look toward domestic product in the first place, nonetheless the absence of customs borders and simplicity of logistics facilitate the partnerships between EU countries. Only when there are no suitable offers on the local market, do they start looking for offers on the international market.
In that regard, Ukraine is at a disadvantage, as we are not yet a full-time member of the EU, still, foreign manufacturers are already willing to do business with us. As for the issue of the border with the EU, I think it's temporary, and should phase out with Ukraine's accession.
Nonetheless, you say, you received inquiries on partnership. Does it mean Ukrainian manufacturers are competitive?
Speaking of TPU, our advantages in the European market are quickness and flexibility. Many European enterprises in the climate solutions market refuse to create new customized solutions for their customers each time, instead offering standard off-the-shelf products they have in stock. Commonly, these products come in plastic [casing] used in the civilian vehicle market.
This is the problem defense manufacturers face because their equipment differs and hence requires units with modified designs, it takes much time and money to make such things in Europe. Alternatively, the manufacturers have to promise or order a large batch — in the military, this is often impossible because production depends on successful passing of tests and whether someone has placed orders. Sometimes, a project may remain a prototype for five, ten years, sometimes may remain but a prototype forever.
Instead, we design individual solutions and products that will be tailored to the specific customer needs as to how they will be placed inside the vehicle, without a 100% guarantee for a batch order. For example, if the vehicle doesn't pass tests or doesn't get commissioned en masse, our customer won't be obliged to pay a huge price for the project we developed or buy out at least 100 product sets.
We also work with small commissions, it could be 10 or 20 vehicles.
We are adept in so-called rapid prototyping: just three months after the project started, the first prototype is ready to be installed inside the vehicle. Abroad, it would take half a year or more, usually a year. Meanwhile, in that year we can already pass the tests as part of the vehicle and enter mass production.
European–Ukrainian Defense Cooperation and Bureaucratic Obstacles
For TPU, this is the first time participating in an international exhibition and a sort of debut in the foreign market. What kind of difficulties a Ukrainian manufacturer faces when trying to expand on the international level?
First and foremost, certification, that's because not everyone on the European market recognizes Ukrainian certificates of quality and conformity. For instance, we were undergoing European certification and for that turned to Ukrmetrteststandart (Kyiv-based testing center - ed.) but the only country that recognizes the results of tests in a Ukrainian laboratory is Slovakia. Though the government is currently working to close the gap between Ukrainian standards, particularly the DSTU, and the European standards as well as on a unified certificate of quality that will be recognized in Europe.
Besides, the border with the EU does affect the business, for example, we i.e. Ukrainian companies need to prepare export documents, while they i.e. European manufacturers have to get import papers ready. Many of them got so used to working within their echo chamber that their people have simply forgotten how to do such paperwork. We even opened a special office in Oberhaching municipality, Germany, to ease these processes for our clients.
Are you planning to participate in other exhibitions?
Actually, we now have some serious prospects of cooperation with the European partners I mentioned earlier, we didn't even expect such a demand. Currently, we are at the stage of signing the Non-Disclosure Agreement, without it they don't even want to hand us the scope of work materials for their projects.
We do see our entry into the international market and strengthening our brand awareness beyond Ukraine as an important goal. So we consider participating in any important event that could help us gain a foothold in the international arena. But our priority is to preserve our current advantages, that is, the quality of products, quickness in processing our clients' requests, and flexibility in decision-making.
For now, we are analyzing the results of Eurosatory and we see prospects ahead of us. We want to take our time with every inquiry we are receiving and work on it diligently, therefore chasing quantity is not our priority right now. We are growing, developing, and we'll be looking for such a balance that ensures our reputation is unwavering, and so that our partners can rest assured of productive cooperation and adherence to all agreements on our part.
If we do decide to attend an exhibition after all, then it will be the next Eurosatory or Kielce. Another option we are looking forward to is Abu-Dhabi, because whoever wants to expand into the Middle East, surely must attend it*.
Here the Director refers to the yearly International Defence Industry Exhibition (MSPO) in Kielce, Poland, which usually takes place in September, as well as the International Defence Exhibition & Conference (IDEX) which is organized once every two years in Abu-Dhabi, UAE, the soonest one is scheduled for 2025.
Stereotypes about air conditioning systems
When it comes to conditioners in armored vehicles or tents, the feedback we sometimes hear is as if we were talking some kind of luxury item for the rear, not a vital necessity on the frontline. Your thoughts on that?
Overall, I have been lobbying the topic since 2016, that it's not a luxury in any way but a basic need. I remind you, it's quite a common situation where in combat conditions the surface of an armored vehicle heats up to 50 °C.
Now there's significant progress with this issue. Modern Ukrainian standards require that all vehicles come equipped with appropriate air conditioning systems, and generally, there's already an understanding of how important it is. Because it's not just about comfort but about health, too.
Though it's still a long way from being perfect, for example, we don't realize that a field camp should be heated not with firewood but with proper systems featuring CO2 regulation so that the military personnel don't suffocate at night while they sleep. Meanwhile, the so-called potbelly stoves are still commonplace.
Bits of Advice
Lastly, please share a few tips, what should Ukrainian military equipment manufacturers pay attention to when they enter the international market for the first time?
First of all, and I emphasize, one should take care of certification in time because it takes a lot of time and money. If you have a product and it proved itself in real field conditions or on a battlefield, that is, surely, splendid, but not enough on the European market — you need to have certificates to confirm the quality.
Secondly, you need to prepare in advance all the marketing collateral in the English language: from brochures to the website. It's also important when coming to an international exhibition that your specialists can provide qualified consultations to potential clients in English.
Of course, we took a long time preparing for Eurosatory, we've done a huge job, from creating printed promotional materials in English to the release of a new website which also has an English version.
Once again, the biggest challenge was the certification of our products according to European norms. We received European certificates of quality and the CE marking* for our products. The money for certification was allocated by the German government as a grant to support Ukrainian enterprises and their initiation of export operations.
For reference: here Yasnohorodska speaks about documents called the Declaration of Conformity (DoC) and a special marking known as Conformité Européenne which a company uses to mark its products that have undergone the procedure of evaluating their conformity with European directives and requirements regarding the safety of use and the EU harmonized standards.
Read more: Ukraine at Eurosatory 2024: Magura V5, Online Raybird Piloting, TPU Conditioners, And More
