All set for a lift
The demand for hydraulic cranes in India is now steadily picking up. The industry too is gearing itself at all levels for another overdrive. Shyamal Asangi reports.
Highly competitive and fragmented, the Indian hydraulic crane industry currently is estimated to be over Rs1200 crore. This market too was affected by the economic turmoil that started in mid 2008 but now there have been signs of revival.
Commenting on the overall scenario, Rajesh Sharma, associate VP, marketing & sales, Escorts Construction Equipment Ltd says that the demand for cranes is heavily linked to the activity levels in infrastructure, construction and the industrial sectors.
Sharma reminds that the industry had been in overdrive for almost a decade till the recession hit and witnessed a dip in demand there after as the projects in the application sectors were stalled, scaled down or postponed.
The impact was more enhanced in private sector projects, he says. Of course, he is quite optimistic now since the market has started showing signs of recovery from January this year.
Boom before the bust
As mentioned earlier, the demand for hydraulic cranes was very high before the slowdown started. This high demand was mainly due to the amazing growth rate of nearly 100% witnessed by the three main industries where hydraulic cranes are mostly used i.e. construction, mining and infrastructure.
Huge investments and intense activities in the infrastructure industry, especially in the power sector generated the demand for material handling equipment such as hydraulic cranes.
The Indian market has been dominated by the ‘pick and carry’ cranes due to the familiarity of the concept and the fact that these cranes provide a cost effective and versatile lifting solution.
However, the fast changing dynamics – on account of up-scaling of projects and heightened emphasis on safety – are opening up the opportunities for technologically upgraded solutions such as telescoping slewing cranes of various varieties like yard, rough terrain (RT), truck and all terrain.
The market has over 90 players but it is primarily dominated by the big three players Escorts, Voltas and Tractors India Ltd.
For Escorts the major thrust area is mobile cranes. The company offers a complete platform of solutions in mobile cranes through manufacturing and distribution routes. The company claims to be India’s largest manufacturers of hydraulic mobile cranes.
Escorts under an exclusive marketing tie up with Zoomlion, one of the large manufacturers in the world, distributes their entire range in India, which include truck cranes up to 200T and all terrain cranes up to 400T.
The Escorts range includes hydraulic mobile ‘pick and carry’ cranes, telescopic yard slewing cranes and rough terrain slewing cranes, truck cranes, all terrain cranes, boom trucks and truck mounted knuckle boom cranes.
- Hydraulic mobile pick and carry cranes: In capacities ranging from 5T to 23T
- New generation pick and carry cranes -TRX series: The next generation, high reach high lift cranes come with features like unrestricted visibility, fast operations, maneuverability, longer distance runs, high lift duties, etc. for higher productivity and versatility.
- Yard cranes, rough terrain of capacities 8T-40T: They have compact dimensions, low set up area and high reach.
In addition, the company also markets articulated boom cranes (ABCs), of 1TM-80TM from one of the world’s largest manufacturer, Faso Gru based in Italy.
According to MM Shahane, VP, M & C E & MHED, Voltas Ltd: “The company’s design of the RT and other cranes is different from other competitor makes in the Indian market. These cranes have an optimum load lifting capacity to overall weight ratios and have sleek proven designs.
Our crane technology is highly reliable and the quality of the manufacturing is at higher level. Many cranes supplied by Voltas over 20 years back are still in operation. This is also due to our excellent parts and service back up where we support the cranes all over India.
The combination of high reliability, good productivity and overall economical cost of operation makes Voltas’ cranes a very good proposition for customers in India as compared to other players in the market.”
The Voltas Materials Handling Business Division (MHBD) manufactures a variety of cranes like:
- RT cranes from capacity of 18-50 metric tonnes
- Truck mounted cranes from capacity of 18-50 metric tonnes
- Yard cranes from capacity of 8-16 metric tonnes
- Pick and carry cranes from capacity of 8-14 metric tonnes.
In addition to this, the company also offers imported truck cranes from XCMG up to 250 metric tonnes. The thrust areas for Voltas MHBD are in segments like the truck cranes, pick & carry cranes as well as in developing higher range of RT cranes.
Impact of steel prices
Shahane of Voltas believes that the impact of the steel price increase has been quite adverse on the crane industry.
He points out that during 2008 the steel price increased by as much as 40%, leading to huge increase in material cost for crane manufacturing.
“In many cases, the manufacturers already had orders on hand for supply of cranes where it was impossible to get any price increases for the increase in material cost. Further, the scope for any price increase from customers was also very limited due to the competitive nature of the crane market,” he explains.
It is obvious that any major changes in steel price do impact the costing of cranes, which impacts customer end prices too. The companies find that they are unable to recover cost if the steel prices go up after the orders are in hand and the commitment has already been made on end prices to customers.
In addition, what could be passed to market also depends on the levels of demand and competition. Sharma is of the opinion that if steel prices remain volatile and keep fluctuating from quarter to quarter, then it is obviously a difficult situation for the industry.
“In 2008, prices kept going up until June 2008 and by the time manufacturers could start recovering by passing it on to the market, recession hit the demand, which also resulted in crash in steel prices.
Therefore, it was simply not possible to go for any upwardly revision in prices. This led to erosion in margins. Overall, it is in the interest of the industry and customers that steel prices remain stable at least on a 12 months horizon,” Sharma adds.
Other pain points
States across the country follow different VAT, octroi and sales tax structure and the multiple tax structure on different equipment is hurting the hydraulic mobile crane business. Both the suppliers and the customers have to incur additional costs apart from the hassle of paying taxes at various points.
Shahane feels that the taxation levels in India are also much higher. “We pay almost 25% to 30% by way of various taxes like excise, VAT, octroi, entry tax, etc. All these, in addition to the higher interest cost in India make manufacturing of equipment more difficult and the government needs to support the industry to overcome the above and make this sector more competitive,” he adds.
Although Indian manufactured cranes have several operational and safety related features, they apparently fall short on when it comes to certain advanced features like high-end digital controls, which the imported cranes have.
Further, the imported cranes also give better features related to higher horsepower, better ergonomics and aesthetic in cab design with features like air conditioning etc.
However, Shahane feels that these features can be made available in the Indian machines also but would cost higher and can be incorporated if the customers are willing to pay the extra price for the same.
Other key challenges faced by the Indian crane manufacturers include the inadequate patent protection laws, unrestricted and unregulated import of old cranes (unlike China where import of used equipment was banned 10 years back to boost demand for the new cranes) and the acute shortage of skilled operators and service manpower.
Sometimes manufacturers of cranes and customers often resort to importing old equipment, which do not adhere to safety norms and are under-invoiced. These low cost but highly unsafe equipment dumped in the country are eating into the market of Indian companies.
In the last decade, the crane industry in general and the hydraulic crane industry in particular witnessed a huge rise in its top-line due to the boom in the construction sector. There were spate of new and sophisticated models of cranes launched and distribution agreements signed with foreign companies.
The customers were demanding not only highly safe and fully mechanised equipment but also in a shorter time. This trend is expected to continue as the economy slowly recovers and construction activity starts accelerating.
Since the market is highly fragmented, the companies will need to deliver a good multi-featured product of international quality. After sales services, obviously gain prominence. Customers will expect good and prompt after sales service to see that their equipment is in top condition.
In addition, the government has come up with regulations that require regular maintenance and periodic inspection. This requirement has resulted in the mushrooming of repairing and maintenance companies. This is of course a good sign since it takes care of the safety aspect for the customers.
There is a huge demand and supply gap in the Indian crane market. Moreover, with the newly elected government’s declaration of focusing on the infrastructure sector the demand for the cranes is expected to go up substantially.
Besides, as soon as the economy recovers construction sector is bound to see a lot of activity fuelling the demand for hydraulic cranes. Sharma of Escorts is naturally optimistic about the market. “The demand is steadily picking up and we believe that recovery will be much faster in the second half of this fiscal year,” he signs off.