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India, along with China and Brazil, is poised to be one amongst the three large and growing CE markets globally. This has led to various new players entering the industry, which is in turn, getting more hyper-competitive, with constant pressure on existing players and new incumbents to continuously improve their value proposition and cut costs. The high margins that have traditionally been earned by market leaders will come down.

This also has a direct impact on the technology and services provided by the OEMs. The product technology and services offered are catching up to the global standards. Customers will look for high levels of fuel efficiency, highest levels of reliability but all at costs far below global levels. Advanced electronics features for machine control and maintenance diagnostics are becoming requirements; styling, safety and operator comfort are increasingly becoming relevant options. The big challenge for OEMs will be to offer products of contemporary technology at prices that are the lowest in the world.

According to Samir Bansal, General Manager, India, Off-Highway Research, manufacturing capacity is created to meet the long- term demand of the market. 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 that the Indian construction equipment market grow to over 100,000 units by 2017. Further, India is also developing as an attractive manufacturing base for the export of construction equipment, which also supports capacity creation.

Market scenario
The earthmoving equipment industry is driven by the infrastructure development and mining activity in the country, which in turn depends largely on the government plans and investments to the sector. During the economic slowdown, the government's revenues were adversely impacted leading to a cut back/delay in investments in to the infrastructure sector, that then resulted in a downturn in the demand for earthmoving equipment. Further, the slowdown had a negative effect on business/investment sentiment, which led to postponement of equipment purchase decisions.

Vipin Sondhi, Managing Director and Chief Executive Officer, JCB India had this to say: "In the present economic scenario, the demand prospects across the industry are down. The slowdown in infrastructure investments, liquidity crunch and several regulatory roadblocks has led to a sharp decline in demand for construction equipment in India. Difficulties in achieving financial closure, land acquisition and issues related to environment and forest clearance continue to hamper progress. However, the long-term prospect of the Indian construction industry looks strong, provided government reforms and execution thereof are implemented without any delay. Once infrastructure starts moving, we will then see the increase in the demand for construction equipment and thus, growth in the rental market."

Sondhi adds, "The demand for all the construction equipment has declined because of the ongoing slowdown. However, even in these challenging times, JCB has succeeded in creating new avenues for business through generation of newer markets. In fact, we have seen growth in our market shares across several regions and product categories. To ease the financing process for our customers, JCB has tied up with all the non-banking financial companies and several state-owned banks, which makes it easier for FTBs to avail finance for JCB equipment. We repeatedly introduce new and innovative financial schemes to make the loan offers attractive."

Says Samir, "The major challenges faced by the industry are the delays in the government's policy decisions relating to land acquisition, procedural and approval delays, especially for environment and forest clearances, and issues related to long term financing needs for infrastructure projects. The general elections scheduled for early 2014 makes the situation even more complex. The monetary policies being followed by the government to control inflation have unfavourably affected economic growth and increased the cost of borrowing for purchase of construction equipment. The continuous depreciation of the rupee is increasing the cost of imported machines and input cost for the local manufacturers."

"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 add 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. "However, there has been no major effect on the construction equipment market due to this slowdown. The market slowdown for equipment manufacturers is due to the recent government policies in mining. We consider this to be a temporary phase and expect mining to revive this year," he adds.

Muralidharan further adds, "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 almost amounts to Rs 3.9 lakh crore. The road transport and highway ministry is planning to achieve the target of 20 km of highway construction per day during the first half of 2014-15."

Relevant factors
"Due to slow land acquisition, high interest rates and slow environmental clearances, the infrastructural growth has gone down. The demand for construction equipment is aligned with infrastructural growth so the construction equipment market has also been deeply affected by this. The long-term growth story of India is still intact and we expect a revival in the coming times," Anil Bhatia, Director Sales and Marketing, Case India. Says Viraj Parthi, India Country Leader, Terex Mobile Processing Equipment, "In hard times, staying close to our customers is a priority for us. When we do business with a customer, we are not just selling a product, we are providing them with an experience. Our products safely gets work done fast and improves the client's bottomline and we as a team, support our customers through this process. We also help in arranging equipment finance for our customers with the help of Terex Financial Services."

Anil adds, "Low downtime of the machine is a major factor under consideration while buying new equipment. We have very strong and focused after sale service with a very efficient and trained service staff. We are also looking into new initiatives like SAP- enabled part support in all our design and mobile service. The organisation's focus is on the providing hassle- free service and part support. The customers today have realised that if they are purchasing these costly pieces of equipment and if they get their machines serviced and purchase parts through an authorised service centre, then it gives better life, lesser downtime and hence, more productivity."

Yogesh Khurana, AGM - Market Support Department, Kobelco Construction Equipment India had this to say, "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. There is a 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. There is a tough battle for market shares and companies are coming up with innovative strategies to woo customers."

Khurana adds, "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, yet 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."

Says Rohit Punjabi, Assistant Director - Strategy and Marketing, Liugong India, "The sentiments are not very positive at present; however, we can see a quick return of growth as our government is taking concrete measures to encourage growth. 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 further invest in our world class manufacturing plant at Pithampur near Indore and will also invest in up-skilling our people to ensure that we continue to maintain our leadership position in the market." Rohit adds, "The advancements in technology attained today have escalated the mechanised drive in the earthmoving and construction equipment (ECE) industry. 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 devoid of it and is witnessing widespread automation. One amongst such major addition is the implementation of electronic and telematic features within the equipment."

Says Ajay Kumar Somani, Director, Mobile Crane Division, Liebherr India, "The slowdown has greatly affected the markets during the last one year, especially the high capacity crane segment. The slowdown for high capacity mobile cranes and crawler cranes was caused by the decline of depreciation allowance for wind energy and slow progress of thermal power projects. Also, as quite a few cranes in the rental market are free, the rental rates up dipped heavily and this has also affected the sale of new cranes, when end users are able to get cranes on rent at a much cheaper price compared to investment costs. We expect a revival probably after elections in 2014 but some sectors are hopeful of a revival by start of the year itself."

Says Somnath Bhattacharjee President, Material Handling Solutions and Equipment & Project Solutions Business, TIL, "The downturn in the economy and the challenges in the market have adversely impacted the sales of material handling equipment and that include mobile cranes. The mobile cranes sales contracted considerably in 2012. Overall, the demand for cranes including higher capacity mobile as well as crawler cranes, also witnessed a significant slowdown. This decline in demand is primarily driven by slower execution of projects and clearance related issues in the infrastructure and power projects which have large potential for higher capacity cranes."

Long-term outlook
Somnath further adds, "Despite the current material handling equipment demand scenario, the long- term outlook for domestic economy remains positive with significant investment in infrastructure development has been scheduled in the 12th Five Year Plan. Further structural changes in the key government policies are likely to improve the demand outlook."

There is going to be a huge surge in the demand for material handling equipment at Indian ports, for both bulk and container handling. Also, containerisation as a medium of trade will grow steadily to the levels of developed countries; this augurs well for material handling equipment OEMs. Says Saeesh Nevrekar, Country Manager, WMI Konecranes India, "Indian ports are the gateways to India's international trade by sea and handle over 90 per cent of foreign trade. The Indian ports sector is poised for significant growth driven by new manufacturing and power projects and higher cargo traffic at ports. Increase in containerised trade, coupled with the government's active initiatives to develop the Indian ports sector, is expected to further boost growth. Many private ports also came into operation to cater to the increasing container traffic at ports. It clearly shows the kind of growth in container traffic, and the subsequent demand for port cranes and material handling equipment like lift trucks and reach stackers. The market size for port cranes is estimated to be close to $300 million in India. This market is expected to grow steadily by 15 to 20 per cent."

"The overall growth in the coming years will purely depend on projects taking off and investments coming in. We expect that the infrastructure sector will drive the growth of overall concrete equipment industry, whereas the real estate segment, along with the power segment, will drive the growth of concrete pumps," says Rajesh Kawoor, Vice President (Concrete Business), Universal Construction Machinery & Equipment. He adds, "Currently, due to the market trend, there is a gap in the demand- supply scenario. With the progress of the construction industry, the demand for concrete pumps will increase substantially. Considering the future of the concrete pump industry, major concrete pump manufacturers have already built up capacities or are in the process of doing so.

"If we look at the technology adopted in concrete pumps in the past, we have experience a vast improvement in recent years. The international concrete pump manufacturers are now able to offer a vast range of concrete pumps for various applications without compromising on quality. In the past, concrete pumps were used mainly in metros and major cities only. In recent years, we have seen the increase in demand of concrete pumps in the Tier II and Tier III cities. Also, in the past, concrete pumps were mainly used by big corporate companies but now these pumps are also used by medium and small contractors," says Rajesh.

All said and done, the industry 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. In spite of the present slowdown and resultant sluggishness in the CE market, the long- term growth prospects are still intact; and experts view the huge infrastructure deficit as a major growth driver and prudent steps from the government can bring India back on the growth trajectory. Trade fairs such as Excon can act as a catalyst, and no wonder, the 7th edition of Excon with 2,20,000 sq m of exhibition area, 900 expected exhibitors inclusive of 300 companies from abroad, seven country pavilions, and an expected 35,000 visitors, and over a hundred new product launches, Excon 2013 edition is expected to bring the positive sentiment back. Excon has been successful in bringing together the entire spectrum of the CE industry such as manufacturers, assemblers, component suppliers, financiers and after sales servicers to assess the current status of Indian construction equipment industry and the underlying opportunities and challenges.

Off-Highway Research forecasts that the Indian construction equipment market grow to over 100,000 units by 2017.

The industry is optimistic about the future growth of the construction equipment industry in view of the high potential that exists in the country.