七妹导航

THERE have been some challenges facing the construction industry, which the government seems keen on addressing. For example, there has been a delay in infrastructure projects due to time and cost overruns. Shortage of funds, environmental concerns and delay in government clearances have added to this. Project delays have been caused due to land acquisition challenges, in turn causing major investment deferrals by companies. There is also a lack of structured regulatory and policy framework for PPP models which needs to be addressed, says AM Muralidharan, President, Volvo CE India. According to him, the road construction industry is showing considerable promise, with the Government of India planning to expand highways by 36,000 km. The government has set a target to get at least 47 per cent of the investment in road construction from private sector during the 12th Five Year Plan and that amounts to almost Rs 3.9 lakh crore. The road transport and highway ministry is planning to achieve the target of 20 kms highway construction per day during the first half of 2014-15. Muralidharan says, "There has been no major effect on construction equipment market due to this slowdown. The market slowdown for equipment manufacturers is due to the recent government policies in mining. However, we consider this to be a temporary hold and we expect mining to revive this year."

Says Amit Gossain, EVP - Marketing, Business Development & Corporate Affairs, JCB India, "Owing to the overall slowdown in the Indian economy, we witnessed a de-growth of around 15 per cent in the market in 2012 over 2011. The construction equipment industry is a derivative of the pace and growth of the infra sector and therefore any slowdown has a direct impact on demand of construction machinery. However, the construction equipment industry will gain momentum if the government starts implementing the delayed projects and carries out active review and monitoring to ensure timely completion."

"After three years of augmenting growth, the construction equipment industry seems to be passing through turbulent times. Then again, the boom seen in the Indian economy at the beginning of the last fiscal is, fortunately, not heading towards gloom. The Indian juggernaut is moving ahead but at a slower pace. Various regions facing ban on mining issues, inordinate delays in infrastructure projects and lack of visibility and uncertainty of end user requirements and plans lead to demand supply mismatch and loss of opportunities. Companies have shown lower participation in projects due to which business models based of built-operate-transfer (BOT) are finding it difficult to secure funding," says Dheeraj Panda, General Manager - Sales & Marketing, Hyundai Construction Equipment India.

Anil Bhatia, Director Sales and Marketing, Case New Holland Construction Equipment India had this to say, "Factors like slow land approvals, high interest rates, a weak rupee and slowdown in mining industry have a affected the market and the market has registered an almost flat growth over 2012. While the construction equipment market looks challenging in the short term due to policy paralysis at the executive level of the government, the medium to long term growth story of this industry is intact."

According to Rohit Punjabi, Assistant Director - Strategy and Marketing, LiuGong India, market sentiments are not very positive at present; however, he believes that we could see a quick return of growth as the government is taking concrete measures to encourage growth. Rohit says, "Any slowdown in the infra sector will have an unswerving impact on construction equipment manufacturers. Nevertheless, the strategy for Liugong India has been to focus on strengthening our sales network and capacities to be prepared when the market revives. We will invest further in our world class manufacturing plant at Pithampur near Indore and will also invest in upskilling our people to ensure that we maintain our leadership position in the market."

Says Yogesh Khurana, AGM - Market Support Department, Kobelco Construction Equipment India, "There is a substantial impact on the industry as many existing projects are practically stalled, new projects are awaiting environmental clearances/ financial tie-ups, and planned projects are not seeing the light of day. This is in co-relation with the prevailing political climate in the country. Bank interest rates are a further dampener, as buyers foresee their costs soaring beyond viability. Equipment purchase decisions are getting deferred leading to a big drop in demand as the overall market is going through a negative growth phase. It is a tough battle for market shares and companies are coming up with innovative strategies to woo customers."

According Prabhat Kumar Tiwari, Business Head, Sany Heavy Industry India, the economic slowdown has hit drastically in almost all the construction equipment segments. There is a double figure dip in excavator market, compared to same period last year. Short-term prospect looks grim with the market closing at lower levels than last year. He adds, "We are hopeful for the mid and long-term prospect of the CE industry as for India to be developed, as we have huge infrastructure projects to be carried out in various segments like road, railways, port, airport, ports, etc."

Equipment India tried to find out whether there is over-capacity created for earthmoving equipment. According to Samir Bansal, General Manager, India, Off-Highway Research, manufacturing capacity is created to meet the long-term demand of the market. Samir points out, "Reviewing past trends, the total construction equipment industry, which was only 12,982 units in 2003, expanded to 50,656 units in 2007, and 72,164 units in 2011. Sales could not be sustained at this level in 2012, and declined by eight per cent to 66,170 units. However, in view of the infrastructure development needs in every sector and the government's massive and investment plans, Off-Highway Research forecasts the Indian construction equipment market will grow to over 100,000 units by 2017. Further, India is also developing as an attractive manufacturing base for export of construction equipment, which also supports capacity creation. In view of the above, I do not feel that over-capacity has been created for construction equipment in the country, despite the current temporary slowdown."

Kairas Vakharia, Senior Vice President - Innovation and Business Head -Construction Equipment Mahindra Construction Equipment had this to say, "Currently the scenario in the CE industry is challenging, with no growth; however, India's equipment penetration level relative to our population is far below global levels. Hence we believe India continues to be a high potential market for construction equipment and M&M's investment in this segment will continue as planned originally. "

Says Yogesh, "Considering the earlier growth projections, most companies had ramped up their capacities. However, they now have a lot of idle capacity. Some are even looking at using their India base for exports to nearby countries as well as to the Gulf and Africa. While most overseas investors and industry watchers remain positive on the growth potential of the Indian economy, the growth rate remains a concern. There is no denying the scope and need for infrastructure building as well as up-gradation, which shall continue to be the main drivers. This gives confidence for a positive long-term outlook but the boom continues to be like a mirage."

Speaking on long-term growth prospects Rajinder Raina, General Manager, Escorts Construction Equipment had this to say. "One thing is for sure, nobody can stop the growth of this country. I still say that we have slowed down but there are certain things which compulsorily we will have to do and some infrastructure development will happen. Coal has been a problem for the last one year. It has to be dug out. There are so many projects which are on hold but there is so much pressure from the industry, ultimately they are not going to lie low for long. We have come to those days of 15 per cent plus growth per annum. In the next year, we will be talking about more than 15 per cent growth. By the last quarter of 2014, we will have a clear idea how the industry is picking up and it will pick up to same 15 per cent growth thereabouts."

Demand-supply equation

Says Muralidharan, "The demand- supply ratio for road construction equipment has been stable, we have enough capacity in India for the next five years, even if the average growth rate is 15 per cent for all the products listed. However, while major manufacturers have improved their capacity, the concern still lies with component suppliers. There is a need for them to invest more in growth."

Says Dheeraj Panda, "The excavator market has been predominantly driven by the 20-tonne class excavators acquiring 50-55 per cent of the pie. This is followed by 7-14-tonne class excavators attaining 25-30 per cent of the total excavator share. The 30-tonne class machine has seen a steep drop in the demand due to the ban on mining activities and project irregularities across India. However, the market is expected to revive soon but the growth of mining sector looks sluggish."

Rohit says, "The market is continuously driven by the 20T excavator with over 50 per cent market share in its class. Over 30 T and above, the market has slowed down due to the various mining contracts that are delayed due to the various reasons. But this segment is definitely expected to grow in the near future as the overall excavator segment will grow with CAGR of 30 per cent during the next five years." According to him, the wheel loader market is currently 2,000 units per annum and it is expected to grow based on the infrastructure and construction segment growth. The market will also depend on the growth of the cement industry as well as port handling. He further adds, "As India continues to focus on its infrastructure requirement, the demand for motor graders continues to grow. NHAI continues to set aggressive targets of road construction per day, resulting in multiple road projects being awarded on a monthly basis. Our state government's focus on roads as an asset and its ability to promote inclusive growth are also positive growth enablers for the motor grader industry."

"Government investments in infrastructure are sure to pick up to meet the ambitious growth target of the nation. With infrastructure investment set to go up, demand for construction equipment will rise further. The market for loader backhoes has registered a decline of almost five per cent so far but the market is expected to hold steady for rest of the year. Graders in the horsepower range up to 150 HP will continue to dominate the segment for some time in the future. Graders are needed for road construction and have a direct co-relation to the actual execution of road projects. The higher horsepower graders will be in demand as the size of jobs increase and government gives approvals for mining," say Anil Bhatia.

"At present, the demand has declined due to the economic slowdown. We have higher manufacturing capacity than demand, remaining unutilised is putting pressure on costs. Sany being a new player is building infrastructure across India, we see a positive long- term prospect in India, which is why we are investing even during the slowdown," says Prabhat Kumar.

Product and technology trends

Emphasising the very philosophy of innovation, Raina had this to say, "When competition heats up and that too, amongst equals, you try to be more equal. Today, with international technologies in the country in earthmoving equipment, we have the best in business in India. So every product has to now become a product with deliverables and unique selling features. Products have to be improved as far as deliverables are concerned from customer point of view. The product should provide ruggedness, long life, higher production par, lesser fuel consumption. So, whatever you bring in, ultimately it has to bring value to customer and then only will your product be positioned the way you want it to be for you to get your market share. To that extent, all products are evolving and in the last 2-3 years, for the first time we are talking of looks, ergonomics and the paint. Until four years ago, it was only operator comfort. Now we are featuring these factors, which show that we are trying to evolve on all fronts and not just on technology alone. We are trying aerodynamic, aero-comfort and deliverables. Technology is taking the shape from the customer's point of view, becoming more customer-centric and customer-friendly."

Samir says, "The backhoe loader is still the most popular construction equipment in India and is used for a variety of applications, which should be using specialist equipment like crawler excavators and wheeled loaders. However, with increased competition and decreasing timelines, there is a definite shift towards use of specialist equipment for the job. Therefore, in future, the demand for crawler excavators and wheeled loaders is expected to grow at a much faster rate, compared to backhoe loaders. Sales trends also indicated a shift towards use of more efficient latest technology products that provide higher productivity and reliability, even if the initial purchase cost is a bit higher, these machines provide better return to the contractors over the long run."

Says Dheeraj Panda, "The excavator market has seen a new growth-transforming trend of developing India-specific machines that meets the price sensitivity and qualitative demand of the value-conscious and demanding Indians. Manufacturers are trying to develop machines that are technologically advanced and at the same time, increase the productivity while decreasing the operational cost. Understanding the need of the hour, Hyundai's seasoned technical development team comprehends the diverse specification of clients and offers the most desirable range of construction equipment."

According to Rohit Punjabi, the advancements in technology attained today have escalated the mechanised drive in the earthmoving and construction equipment (ECE) industry. Rohit says, "A major shift has been attained from manual to mechanised equipment operations. The earthmoving and construction equipment industry being a vital element of the infrastructure progress, is also not isolated from this and is witnessing widespread automation. One amongst such major additions is the implementation of electronic and telematic features in the equipment."

Says Anil Bhatia, "The equipment uptime is one of the major factors which customers consider while deciding on the machine. Time-bound projects need reliable machines, and considering this fact, all equipment manufacturers are trying to innovate and adapt latest trends and are in continuous process of improving the productivity of the machine. Case 851 the backhoe loader in 96 HP category has dual stage pump with load sensing system which results in higher productivity with fuel efficiency. The four-wheel drive version of this model has gained much acceptance in the tough hilly terrain of the northeast and Nepal due to higher wheel torque and force."

Kairas Vakharia had this to say, "Customers will look for high levels of fuel efficiency, highest levels of reliability but at costs far below global levels. Advanced electronics features for machine control and maintenance diagnostics will become very prevalent. Styling, safety and operator comfort will also become increasingly relevant in the customer's choice. The big challenge for OEMs will be to offer products of contemporary technology at prices that are the lowest in the world."

Off-Highway Research is optimistic about the future growth of the construction equipment industry in view of the high potential that exists in the country. The simple truth is that there is a massive amount of work to be done in every sector, which would require large volumes of construction equipment.

Samir sums up the situation on a positive note. "The government is working on speedy clearances of stalled projects due to environmental or forest clearances, and the land acquisition bill is also being reformed to suit infrastructure development needs. Long-term alternate financing solutions for infrastructure are also been worked out through development of bond market. In view of the problems faced by the economy currently, Off-Highway Research forecasts the market for construction equipment will remain flat in 2013 but expects it to grow in the subsequent years to peak at over 100,000 units by 2017."