ÿÈÕ³Ô¹Ï

Excavators will drive demand today as particularly in mining and infrastructure projects earthmoving is much larger.
Within the Indian construction equipment industry, the crawler excavator segment is the largest by value and the second largest, after backhoe loaders, in terms of number of units sold. The crawler excavator is a versatile product with applications in all types of construction and mining activities and therefore, it is very difficult to arrive at a consensus on its distribution by application. During their working life, machine applications may also vary from time to time depending on work requirements and the nature of the project. ?Historically, backhoe loaders are dominating but we see that backhoe loader products might grow at a slower pace. Excavators will drive demand today as particularly in mining and infrastructure projects earthmoving is much larger, says Dimitrov Krishnan, Vice President - Sales & Marketing, Volvo CE India.

?The demand for crawler excavators stood at a level of 2,500 units in 2003 which increased significantly with each passing year to reach 9,904 units in 2008. Thereafter, it suffered a drop of 20 per cent in 2009 but rebounded to 11,457 units in 2010 and this further increased to its peak level of 15,000 units in 2011. Due to the prevailing unfavourable economic scenario in the country, the market for crawler excavators declined to around 10,500 units in 2013. Then again, given the amount of infrastructure work yet to be completed in India, the outlook for the crawler excavator industry is positive in the long run, despite a drop in sales in the last couple of years. Off- Highway Research estimates that the demand for crawler excavators will reach a level of 23,000 units by 2017,? according to Samir Bansal, Country Manager, India, Off Highway Research.

Says Harpreet Singh Wahan, General Manager - Sales & Marketing - India, Enovation Controls India, ?Over the next 24 to 36 months excavators and wheel loaders will probably see the best growth, very close to 20 per cent YOY. There are several manufacturers with product offerings but technology will be the differentiator and decider on who gets the business. Several infra projects are on the anvil and we believe they will be executed. This will drive the growth. On the whole we see that over 12 to 24 months the CE market should have a growth of 8 - 10 per cent YOY.? As the market is slowly but steadily getting fragmented, it is the customer who is benefited with more of a choice. Fragmentation is bringing a lot of choice to the customer. As the market is growing, the number of manufacturers has also increased, thereby bringing the best of technology to Indian customers. The growth in the retail segment will be phenomenal, provided there is certainty in their earnings and they are backed up by financiers ready to fund loans for excavators and hauling equipment. Enough projects on hand are also an important factor, and this is not the case today.

The major factors which will contribute in the growth of the CE industry include rising urbanization, increasing construction spending and growing global economy. The growing global and Asia Pacific population needs more energy, water, roads, schools, housing, power systems, airports, dams. Significant investments are taking place in India in 2015 for developing ports, airports, roads, railways and real estate. To give an example of the rising demand, the Union Cabinet recently approved a declaration of about 7,200 km of state roads as new National Highways (NHs). There would also be adequate funds available for taking up improvement work on the remaining existing NH Network of 21,271 km, which is not covered under any programmes so far. Another example is a $700-million industrial town project being set up close to Chennai.

There will be a higher demand for specialized machines like excavators. Mining and quarrying are two of the major applications where tracked excavators are used, and accounts for approximately 30-40 per cent of the overall excavator market here. Roads and highways are huge growth enablers for the construction equipment market, as also growth enablers of the CE industry because they not only use the large construction equipment but also generate secondary demand in cement, steel and mining, which all require a large number of earthmoving and construction equipment.

According to Amarnath Ramchandran, President - Designate, LeeBoy India Construction Equipment, the retail segment is undergoing a massive transformation. While there is a myth that those who hire lag behind corporate customers when it comes to maintenance and domain knowledge, this is actually untrue. He says, ?The hirer appreciates quality more as he extracts maximum value from the machine. There is a paradigm shift in the way work is contracted out; it is now in terms of cubic metre of earth rather than time. So the old notion that hirers need slower and hence cheaper machines is wrong. Consider the fact that if there is three months? work at a particular site and a machine is 30 per cent quicker, it would mean that the contractor can execute the same in two months and do more work.? Ramachandran adds, ?Customers today do not want a stripped-down machine. There is an increasing awareness amongst them that true value-added features are not just about frills but actually designed to suit the local conditions and context and thereby maximise uptime and reduce maintenance costs.?

In the excavator segment, almost 50-60 per cent of customers are looking at the value additions, whereas 30-40 per cent are looking at the initial investment. Value-additions is not OEM-driven anymore, though it used to be. Today there is much more understanding among the customers on product applications and usage patterns, etc. If the earlier customers were worried about the initial investment, now there is a requirement from our customers wanting to know more about the complete lifecycle of the machine, and the long-term benefits that they can get. There is lot of awareness now.

There is an increasing demand for excavators less than 10T today where the FTBs are the prominent buyers. It is not replacing the backhoe market but finding its own niche applications in terms of 3T, 6T and 8T class; so first-time buyers are in the range of less than 10T class. When it goes above 10T, the first-time buyers need to have contracts in hand. The issues for the FTBs are not finance but lack of contracts in hand. It is not the finance part of it, rather, it is the contracts; it is connected how the FTB is going to repay, then only does the finance angle comes in. If the financiers see that there is no strong back-up of contracts, there won?t be good money flow to the first- time buyers. So as long as there are contracts, there won?t be any issue of finance for FTBs.

Mini excavators are used in niche applications like plantations and in populous urban areas where space is a big constraint. These machines are also used in agriculture applications and construction activities like foundation work, trenching, tunnel works, ditch cleaning and cable-laying wherein the machine has to work in restricted areas. With the increasing shortage of manual labour, dependency on machines will continue to rise and this will help in the growth of the mini- excavator market in the coming years.

Bansal says, ?In contrast to the more mature construction equipment markets of Western Europe, North America, Japan and China, where compact equipment accounts for a large proportion of machinery sales, the demand for mini-excavators in India has remained modest. For the purpose of comparison, in 2012, the mini excavator market stood at 43,391 units in Europe, 22,625 in North America, 24,000 in Japan and 26,650 in China, whereas it was only 363 units in India.? According to Bansal, the market for mini-excavators is expected to reach 1,000 units by 2017. Financial year 2015-16 is expected to give a growth of about 15 per cent over the previous year. Infrastructure is going to be the major grow driver which in turn will set other wheels into motion. Action on the ground by the Government, public and private funding and low crude oil prices will help the cause.

Segment-Wise Split -Up

• Rentals remain the most important end-use segment for hydraulic excavators, and it is estimated that nearly 47 per cent of the active machine numbers deployed in this sector.
• Quarry operators and aggregate producers, including sand, stone, granite, marble and limestone, account for 19 per cent of the total numbers.
• Road contractors? contribution is 11 per cent.
• Land development contractors and companies account for eight per cent.
• Coal and metal mining segments, which invariably use larger machines, accounts for seven per cent of machine numbers.
• Irrigation contractors? contribution stands at six per cent.

?We are focusing on total equipment integration solutions for our customers.? Over the next 24 to 36 months excavators and wheel loaders will probably see the best growth, very close to 20 per cent YOY, says Harpreet Singh Wahan, General Manager - Sales & Marketing - India, Enovation Controls India. Excerpts from the interview.

How do you assess the growth potential and demand-supply scenario for earthmoving equipment?
Over the next 24 to 36 months, excavators and wheel loaders will probably see the best growth, very close to 20 per cent YOY. There are several manufacturers with product offerings but technology will be the differentiator and decider on who gets the business. Several infra projects are on the anvil and we believe they will be executed. This will drive the growth. On the whole we see that over 12 to 24 months the CE market should have a growth of 8-10 per cent YOY.

Tell us the latest technology trends in your products?
Improved man machine interface and equipment intelligence is something that is the next step forward. This could start from a simple engine safety controller to a more complicated intelligent LCD display with control capability that keeps a check on the health of the equipment and ensures that both man and machine are well protected. This not only makes the machines more efficient but also increases diagnostic capability and reduces down time.

How do you look at the current progress of project execution?
Project execution in construction is slow and needs to pick up. The market has some negative sentiments and is over cautious before making new investments. Once the newly allocated coal blocks are back in action we expect to see a positive push to the earthmoving equipment business.

Please brief us on the value addition provided by your company?
We at Murphy by Enovation Controls have longstanding relationship with several CE manufacturers and the technology edge we provide them goes a long way in making their equipment more reliable, safer and eventually more efficient. From equipment displays to controllers, from sensors to I/O modules we work with our customers bringing world class technology to them. Overall we are focusing on total equipment integration solutions for our customers and are right here in India supporting them on a day to day basis.

In the excavator segment, almost 50-60 per cent of customers are looking at the value additions, whereas 30-40 per cent are looking at the initial investment.