Ever since the Union Budget 2014, most players in the construction equipment industry are perceptibly relieved. The slew of construction and infrastructure projects announced, not to forget their size, is definitely going to see some action among manufacturers of construction equipment. When a country’s infrastructure woes are as acute as India’s, it is generally accepted that it’s only a matter of time before the government wakes up to announce a slew of mammoth projects.
For some time, the construction equipment industry has been lagging due to the lack of infrastructure projects. Most manufacturers are closely exploring the possibilities of how the product integrates with the new demand transition which is also an equally challenging proposition.
What the industry finds vexing is the shift in the customer profile. Many large corporate who were active in road and infrastructure segment purchased their own equipment. Over the last few years, most of these companies have shifted to contracts and now prefer to have the contractors purchase the equipment on their behalf. This has given rise to a retail market, which in turn has led to the entry of new players. AM Muralidharan, president at Volvo Construction Equipment, says, “When the market bounces back, a large of it is expected to be in the used equipment market. This is because the dull market last couple of years have seen too many idle machines lying around.”
Simultaneously, more companies have had the luxury of time to look into their products keenly and come up with innovations. Most manufacturers now have developed machines that reduce power while increasing its lifespan.
Rajesh Srivastava, GM (marketing), Terex Equipment, says, “The industry is optimistic about growth. India has a huge potential. A part of it is waiting to be tapped through innovation and indigenisation of technologies while some part is stuck up in latent demand, which can be unleashed by effective governance and project execution by the government. The truth is that there is a massive amount of work to be done in every sector, and this will call for large volumes of equipment. How large those volumes will be dependent on key stake holders working in sync with each other. The government, private players, financial institutions, environmental and social specialists need to work towards effectiveness in facilitating project execution and addressing the key impediments.”
Muralidharan of Volvo CE says that his company is seeing an improvement but it’s not enough.
Amit Gossain, EVP – sales, marketing and business development, JCB India, says, "Given the complex nature of projects and tight timelines, demand for technologically advanced and versatile construction equipment is on the rise. Companies are now looking for fuel efficient and innovative products which will help in speedy completion of tasks. Increasingly factors such as productivity, fuel efficiency, reliability, innovative safety features etc. are taking a lot of importance."
Gossain hopes to see movement by the second half of this fiscal. However, a lot depends upon the implementation and monitoring of new initiatives/reforms. "We can expect a turnaround in equipment demand only if project execution picks up. Moreover, to ensure long term growth the government should focus on increasing investments and building up investors’ confidence," he adds.
Srivastava says that government investments in infrastructure are sure to pick up to meet the ambitious growth target that the nation has set for itself. With infrastructure investment set to go up, demand for the construction equipment, especially the versatile backhoe loaders will surely rise further. The market for the loader backhoe has registered a decline since 2010, but now the market is expected to hold steady from 2014 onwards and notch up double digit growth numbers. There’s a general consensus that the market is well poised to grow by around 8% in 2014, and witness a higher 10-14% expansion during 2015-2016. The market structure has remained more or less unchanged for the past five years, but vast differences are noticeable while evaluating the performance of individual products. The share of the most popular product, backhoe loaders, grew from 38% in 2009 to 50% in 2013, while crawler excavators, considered to be the most important machine for infrastructure building, declined from 20% to 18% during the same period.
Abhijit Gupta, MD, Case New Holland Construction Equipment India, says, "The equipment uptime and fuel consumption are the major factors that customers consider while deciding on the machine. Time-bound projects need reliable machines and manufacturers are trying to innovate and adapt latest technologies."
Case has recently introduced CASE EX Series of backhoe loaders with Fiat Power Technologies engines which are highly fuel efficient and reliable. They have a unique feature of an charge air cooler which increases the density of air entering the combustion chamber. This results in extremely low fuel consumption.
The Indian earthmoving equipment has significantly evolved last few years. Most equipment is now even designed in India, largely because of the peculiarities of the domestic demand and applications. End-users in India put the machines through more rugged use as compared to any other developed country. So products have to be rugged and reliable. It’s also imperative that spares and quick after-sales service form an integral part of a dealer’s USP.
Recognising the scope of the Indian market, several MNC vendors are shifting production to India as well. Foreign players looking to achieve a strong footing in the Indian market in the long term are cultivating India as a sourcing and manufacturing hub. Speaking about the excavator and the wheel loaders market in particular, Muralidharan is a tad doubtful. This is because the excavator market in India has witnessed a steep growth over the last few years, which have now slowed down since the last quarter of 2012. The year 2014 didn’t start off well either for the industry. This is because wheel loaders are used mainly for wagon filling, asphalt loading and block material handling. However, on the contrary, backhoe loaders are used for small trenches, laying pipes, clearing rubble and digging. Both the products are separate and have different applications. They cannot be compared as the application for them is incomparable.
There’s a general consensus that loaders are largely used as a complementary product for material re-handling in construction and mining applications. Over the years, the market for wheel loader was majorly in unorganised rental business area and demand for them increased into mining activities due to the increase in the global demand for mining. Just like excavators, a comprehensive maintenance and service support would be critical for the success of the wheel loader business.
The range of full-size backhoe loaders, with digging depths of 14 feet or more (as compared with compact models with lesser digging depths), provides buyers with a spread of machine capabilities and purchase prices that allow tailoring these machines to the user’s budget and typical job-site tasks. Models in the 15-foot class are grabbing market share globally where the added size, performance, and hydraulic capabilities of these models provide a suitable argument for replacing mid-sized excavators. The backhoe does less damage to the ground, is more manoeuvrable, easier to transport, and provides the lifting capacity of about a 7-ton excavator.
Srivastava of Terex says that their backhoes perform faster while digging and loading at lower operating costs, with durability through quality and technology innovation. “Simply put, our machines owning and operating costs are the lowest. The powerful TLB 844S is designed for fastest digging and loading in the toughest strata. The reliable and efficient TLB 844S will confidently beat any competitor in a match of digging, loading or dozing while SmartUC hydraulics on this machine helps save diesel even while maximising work output,” he adds.
In general, larger backhoe loaders, those with digging depths of 15 feet or more, provide expanded capabilities that appeal to a certain segment of the market. Larger backhoes are purchased by heavy construction and highway contractors who might choose them for greater dig depths, heavier lifting capability, or the ability to handle larger tools — such as hydraulic hammers. Users who need the versatility that the backhoe loader provides, but who also require front-bucket lifting power equivalent to that of a comparably sized wheel loader, might opt for larger backhoe loaders. These machines typically differ from their smaller counterparts by incorporating heavier structures and heavier axles, as well as more capable hydraulic systems. Generally, but not universally, larger backhoe loaders are equipped with variable-displacement, load-sensing, piston-type pumps in their implement hydraulic systems, providing a higher level of hydraulic efficiency and fuel efficiency than gear-pump systems that might be used on smaller models. Some manufacturers, however, opt to use variable-displacement hydraulic systems on their complete range of models.
For buyers investigating available backhoe loaders with an eye toward increased attachment use, features that should be considered include the availability of couplers (both front and rear), the availability of auxiliary hydraulics (both front and rear), and the availability of parallel lift for the front linkage to simplify fork operations. Some manufacturers offer tool-carrier versions that typically have a hydraulically activated coupler at the front and parallel lift linkage. The key to productivity when using powered attachments is to make sure the machine’s auxiliary hydraulic flow is matched to the attachment and is capable of handling both single- and double-acting hydraulic cylinders.
Muralidharan of Volvo CE says that in terms of overall construction equipment, we are at the end of the lower most end of the cycle. In terms of quantity it is 20-30% lower than other equipment. His expectations are that investments will happen and some projects will get started and the industry could see a growth of around 10-12%. And further growth will happen only after 2017-18. “Construction equipment business is cyclical. Business takes four to five years to pick up but this time it has been shorter. India has lots of supply but less demand. Backhoes are standing and there’s little for them to do. We do see a boom in the real estate sector happening soon. We do see an increase in demand for wheel loaders mainly coming from ports. The ports import coal and iron ore. Many companies import coal and iron ore for use in steel plants. So demand for wheel loaders has gone up by about 5%,” he adds.
For manufacturers like Volvo whose core value is safety, the company constantly works at various levels of safety measures. In fact, Muralidharan says that the seat belts used today was created by Volvo several decades ago. In terms of wheel loaders, the company has three levels of safety measures. Operator safety is when it works on the cabin structure, seat belts, filter changes, hydraulic pressure checks, among other things where the operator need not jeopardise his life but conduct all service checks standing on the ground. Then there is the training provided for the operators on maintaining safety. The third part is the equipment safety wherein Volvo ensures in case of a part coming loose, it does not harm anyone.
Indian wheel loader makers are also looking at fuel consumption. Muralidharan says, “We consider total cost of ownership and that is how we sell our machines. We ensure our machines have low maintenance cost and fuel cost. Though the initial cost of is high, the cost of running the machine per hour per tonne is the lowest.”
The company also offers features like broom suspension on wheel loaders. Broom suspension helps in softening the jumping effect faced by operators carrying load. When one moves the vehicle having a broom suspension, it will reverberate only on the buckets and doesn’t pass it on to the operator. Concern for operators is exhibited by manufacturers when they installed air-conditioning in most of the vehicles. However, viewed from the long-term prospective, existing brands with wide market base will continue to connect their names with product support, an initiative which they will now be making stronger than before for higher brand recall.