BY Mitalee Kurdekar
As per recent reports, the construction sector in India is slated for a compounded annual growth rate of double digit figures during the five years leading up to 2020. Considering the huge focus on and growth already being witnessed within the infrastructure space in the country, there is an ever-increasing demand for construction equipment, more so for earthmoving construction equipment. In fact, infrastructure-led demand and subsequent spending seems to be the key driver for Earthmoving and Construction Equipment (ECE) market growth. The development of new roads, highways and tunnels – often carried out in hilly terrains – means the activities of excavation, levelling and processing of materials for road-laying are going to require a lot of support from ECE OEMs to fast track these projects, while ensuring quality work in safe working conditions, managed by a trained workforce.
Of course, the evolution of the ECE market in India has been tremendous during the last 50-55 years, starting with public sector enterprise in the form of Bharat Earthmovers Ltd, primarily for defence requirements in adverse terrains. The Indian market has now shed its dependence – of the past many years – on imports of construction equipment, with the entry of many global majors, who have set up local manufacturing facilities, often through tie-ups, collaborations and joint ventures. This is going a long way in making these otherwise expensive equipment more affordable to Indian customers. Within this space, the other obvious trend is regarding the growth of the excavator & motor grader equipment segment, especially owing to the nature of the huge projects that are underway or in the pipeline, which require such activities to be undertaken and given that such equipment brings a considerable value to its users.
Path to Growth
Naturally, OEMs operating in the ECE market in India are quite bullish about the growth prospects within the construction sector, and consequently those for the ECE segment. Dimitrov Krishnan, VP and head, Volvo CE India, says, “The government continues to place priority on building roads and bridges —allocating budgets to build 35,000kms of road under phase one of the Bharatmala project, along with allocations for urban rail and airport expansion projects. The drive to improve infrastructure will unquestionably facilitate further growth in the economy and the construction equipment industry.”
On the other hand, VG Sakthikumar, MD, Schwing Stetter Sales and Services, speaks emphatically about growth rates for their products being on the rise. “The motor grader industry is booming as a result of the Government of India’s recent focus towards infrastructure development. This is mainly due to the growing number of road, rail, airport and rural road projects being awarded. Other than these, rural irrigation plans, and road-connectivity projects, will also be key factors for a boom in the earthmoving industry. We expect at least 20% growth year on year for the next five years,” he explains.
With the time and labour savings CareTrack offers, customers say they view it as an investment.
Of course, such figures are hardly a surprise in the current context of things, given that the importance of these products in these times is hard to ignore. Manish Mathur, chief general manager (marketing & product support), Action Construction Equipment (ACE), echoes this sentiment, when he suggests, “A motor grader acts as a very important machine in the automation of the road construction business. With the Government’s vision of making 41kms of roads per day, resulting in a major boom in road projects and the infrastructure industry, we anticipate a huge demand for motor graders in the coming future.”
Rural irrigation plans and road-connectivity projects will also be key factors for a boom.
The Value of Things
Most infrastructure projects in India, even in the public sector, are now being pursued with tight timelines and a lot of vigour, much unlike projects in previous years. This has changed the business requirements for ECE products in terms of productivity, safety, quality and life cycle cost management. As Ajay Aneja, brand leader, CASE India, states, “The government is intensely focused on developing world-class infrastructure, backed by its ability to facilitate quick implementation of projects, financing and simplification of procedures for project awards and clearances. Prestigious projects like Sagarmala, Bharatmala, national highway projects and rural road flagship schemes are a result of the same.”
We have introduced excavator products in larger categories in order to capture more parts of the market.
When it comes to type of products required for the job, Jasmeet Singh, head – corporate communications and corporate relations, JCB India, points out, “The project size actually determines the mix of products which are going to be deployed at the site. And the size, coupled with the fact that the project has to be completed in a time-bound manner, is now making excavators very popular.”
Agreeing with his counterparts within the industry, Surat Mehta, head, SDLG in India, says, “With the pressure of tight project deadlines, contractors will want machines that are not too complicated to use and quick to deploy. At the same time, we know that customers, while cost-conscious, demand reliability so that they can keep projects on track.”
Contractors will want machines that are not too complicated to use and quick to deploy.
Singh has an interesting take on creating value for JCB’s customers and professes, “We have introduced excavator products in larger categories, ranging from 22 tonne to 38 tonne in capacity, in order to capture more parts of the market, and we have seen a good response. We have also changed our approach from products to solutions. Thus, we are not selling just products anymore, instead we are selling the entire solution, which means you can have a product along with a product support package as well as a warranty package.”
Krishnan feels the need to improve the excavator cycle time, which includes digging, swinging loaded, unloading and swinging empty. He says, “The faster the cycle can be finished, the higher the productivity for the machine. The combination of a powerful engine, compatible hydraulics and precise controls in an exceptionally well-balanced machine makes Volvo’s EC200D capable of lifting heavier loads, which translates into higher productivity.”
Mathur suggests, “We have come up with technically advanced products. Motor graders with enriched features like high-power engines; a centralised lubrication system; and an ergonomically designed, AC cabin, gives the customer the added benefit of better productivity and ensures longer life of the product.”
Topped with Telematics
Technological advances are required for increasing productivity, reducing downtime and managing the fleet in a Cloud-based environment. Remotely managing a fleet has become an important value-added proposition for most OEMs, and their customers are welcoming the addition of such features. Sakthikumar says, “When it comes to fleet management systems, Schwing Stetter is working on introducing a dedicated server for the Indian market.”
In the case of Volvo CE, Krishnan explains, “We offer CareTrack, a telematics system that gives equipment owners access to a wide range of machine monitoring information that can help save time and money. The system generates a wide range of reports with data on aspects such as fuel consumption, operational hours, geographical location and more. With CareTrack, customers can monitor load efficiency, number of cycles, overload percentages, and identify operator training needs. With the time and labour savings CareTrack offers, customers say they view it as an investment rather than extra cost.”
Explaining a similar system available with JCB, Singh explains, “We are integrating digital technology into our products. We have developed an advance telematics technology, where our machines talk to a second server and the sever sends out messages to the owners, to the operators, and to us.”
Similarly, CASE’s R&D team is constantly looking to develop clever innovations to make equipment more fuel-efficient for reducing emissions on the environment. “The company has introduced the Eagle Eye Telematic System, a real-time vehicle tracking and communication based on GPS technology that helps deliver better value for money,” offers Aneja.
Challenges to Overcome
Despite all the advances being made, one of the issues that has plagued this industry is how to convince cost-conscious Indian customers when it comes to appreciating the value offered by modern ECE products. While the cost of technology makes the products expensive, the value they bring is equally huge. Even as some consumers are beginning to realise this, others are still wary of the high-cost of ECE products. OEMs need to put in more efforts in raising awareness, so as to improve understanding regarding placing emphasis on the acquisition cost versus a life cycle cost approach, thus helping the customer in decision-making.
At the same time, Singh suggests that the products on offer in India possess the latest technology available globally, as the technology is now highly discernible to everyone. Singh says, “Customers today travel the world, seek education and see what is available in other parts of the world and, hence, these customers demand similar technology in India. Therefore, what you see in India is pretty much at par with what you see in the rest of the world.”
Mathur states, “We take regular feedback from customers with respect to the productivity & performance of our products and try to inculcate the positives in our products through our DSIR-approved R&D department.”Implementation of innovative financing models is certainly yet another challenge for industry OEMs. The cost of ECE products mean that both vendors and customers in India have to resort to bank-supported aid or other financing models to make the acquisition cost palatable. In this context, there are other options like rentals, leasing, and buying used equipment at an affordable price as well. But the fragmentation and underdevelopment of such segments of the market in India is an issue. These segments account for 7-8% of the total market in India, as compared to 75-80% in developed countries like Japan and the US. Even in China, the figure is as high as 35%. Therefore, the Indian customer is left to the mercy of self-funding for their acquisitions.
Singh confesses, “For standard models like backhoe loaders, the rental option is a possibility, but when one moves higher up the value chain to excavators, the tendency is for the buyer to own the product, looking at the product life cycle approach and also because there are not many renting/leasing companies who could be owning these products in sufficient volumes.”
Explaining how they support their customer base, Sakthikumar says, “At Schwing Stetter, we work closely with top-notch finance companies in India who offer finance or purchase of equipment. We are offering special credit terms, clubbed with extended and special warranty terms to our customers. Also, we have partners who offer equipment on a lease basis.”
Krishnan says, “For smaller contractors, or those buying from us for the first time, we offer a range of attractive financing options through our Volvo Financial Services arm. Extended warranties and attractive lease options are also available.”
The company has introduced the Eagle Eye Telematic System that helps deliver better value for money.
SDLG also has seasonal promotions that offer reduced equated monthly instalments. “We encourage equipment hire firms to maintain stock and take advantage of these financial assistance plans,” Mehta states.
Despite the need for a more robust development of the currently fragmented market, there is no doubt that things are definitely looking up for the excavators and motor graders segment. With policy and Government rhetoric backing their growth, this industry is surely paving the way for its success.