1.25 lakh km of the road at a cost of Rs 80,250 crore will boost the road equipment segment tremendously. Road equipment segment which revived itself from a slumber post-2016 is riding high with these supporting measures from the government.
Infrastructure development is the primary driver of any economy, and it is no different in India. Of the broader segment, the growth rides on road development writes Renjini Liza Varghese
In the 2019 budget presented on July 4, the focus continues to remain in improving connectivity through road, rail, air, seas, and inland water. The government has announced Rs 100 lakh crore for infrastructure development over the next 5 years. The government has also announced a road map for the development of all segments viz. road, port, aviation (air cargo). The Bharatmala scheme —One nation One Road network, One Power Grid, Sagarmala and Jalmala projects (both international and inland waterway development) Udan (air connectivity/air cargo). This is not all, under the Pradanmantri Grameen Sadak Yojana (PMGSY) Phase -3, 1.25 L kms of the rural road would be upgraded at the cost of Rs 80,250 crore, and to speed up the infrastructure development, the Finance Minister has emphasized on the role of public-private partnership.
All these numbers clearly indicate a growth trigger for the construction equipment segment. On a closer look, one can say that the primary beneficiary of this growth would be the road construction equipment segment. Interestingly, while all stakeholders are pulling up their socks to maximize the benefits of this more significant opportunity, the construction equipment players have incorporated technology, improved efficiency, explored newer geography to conquer the markets.
The nation has seen a significant development in the road segment, and the total national highway length has increased to 1,22,434 kms in FY’18. In the last five years, one has seen a lot of development in terms of construction of the national highways and the major roads. A good example would be the Golden Quadrilateral and the North-South-East-West corridors getting almost completed. These are the major roads which have taken transportation in India to the next level.
Anup Nair, VP and Business Head, Hyundai Construction Equipment, said, “Now the next target would be the rural roads. Today you hear people say that national highways are great, but if we go to the interiors, in the rural areas, then it becomes a bumpy ride. But now they will be avoided, and road transportation will become smoother, and all these improvements will also benefit the development of the agricultural economy of India, which is still the primary bread earning occupation for many in the country.”
It is expected that the construction equipment segment would see a business amounting to $180-200 billion in the next 10 years. The manufacturers who faced a dip in capacity utilization a couple of years back, have regained considerably. The current capacity utilization, the industry pegs it at 75 per cent and anticipate to achieve full capacity utilization soon.
Given the current momentum witnessed in the road development segment, the industry feels that the growth would continue for at least five years. While the road segment would remain the primary demand driver, development of railway (replacement of ageing lines), ports, logistics park and solid waste management systems in every village would add extra fuel to the growth.
According to a report published by Research and Markets, India’s construction equipment market will see a CAGR of 10 per cent between 2019-2025. Loaders, excavators and cranes dominate the construction equipment market. Jasmit Singh, AVP Corporate Communication, JCB India said, “Among the range of equipment, excavators are growing fast because the size of the projects is increasing. Once you start building roads, you would see a lot of soil compactors, asphalt compactors, summing it up to the entire compaction profile. While building a road pretty much, all types of machines are utilized. So rather than a single product line, a whole range is benefited.”
Another factor, as pointed out by most of the equipment manufacturers isefficiency improvement, which is an ongoing process. Efficiency can be in terms of products, energy efficiency, service, support etc. Companies like Hyundai Construction Equipment, JCB, BobCat, Liugong, Case India point out that most of the products that have come from their stables have seen a significant efficiency improvement. Some products, according to them are 10 to 20 per cent more fuel efficient, and some are 30 per cent cheaper to maintain.
Urban and rural road segments are growing parallel; and hence there is a higher demand for compact road equipment. The size of the work in the urban area could be bigger than the rural sector, but the volume may shift to rural in the coming years. In the rural area, a road development means, there will be more developments in and around it like the hospital, schools, hotels, government offices so on
and so forth.
Today technology is widely helping the companies to realign their products according to the market demand. Jasmit adds, “JCB had introduced the Inteli series. It connects the machines toa mobile network through a central server. Customers can now know details like – how much work has the machine done, how much fuel remains when is the machine due for service etc. – All these pieces of information are available on their smartphones via an app. It has now increased the efficiency of the site, so now you can plan things better. Otherwise, once the machine breaks down, then you have to call somebody to fix it.”
Ajay Aneja, Brand Leader, CASE India, also spoke about the need for a smart application for better customer care. “We have introduced the customer version of mobile service mobile app using CASE eSeva where customers can directly reach us, and the response time can be tracked. CASE India ensures that the problem raised is responded within 8 hours and solved within 24 hours after the registration of the complaint.”
Every industry segment faces challenges. Some of the players don’t address them as challenges but rather see the opportunity it offers. However, some of them were vocal about funding, and bad loans that are a severe challenge the manufacturers are facing.
Anup Nair continued by saying, “There are several challenges that we face in this segment. Some of them,for example are things like; a liquidity crisis; a lesser money supply in the market. Also the Non-Banking Finance Companies (NBFCs), they are into a big crisis situation today, hence they are not able to finance equipment or the automobile the way they used to do, say about, six months back, following the IL&FS crisis. Hence today we are managing our business with both nationalized as well as private banks’ support and through some NBFCs who were not affected by the crisis.”
Ajay Aneja, added, “Land acquisition, unwanted downtime, completing work within the given time span, unavailability of skilled manpower, inability to work with technically integrated machines and unwanted accident prone sites are some of the challenges of the construction sector. Implementation of better reforms and policies, and dedicated training centres for skilled operations would resolve the above issues to a much larger extent.”
Jasmit touched upon the changes and evolution of a product over the years. He said, “As products change and evolve, more types of skills come into picture. In terms of skill, again, there is a lot of opportunities. In our industry, IESC, is seen as a massive step in the right direction. The IESC is the Infrastructure Equipment Skill Council, which is for the members of the industry, providing skills to operators and technicians. So these are really the areas we feel, a lot of work or action takes place and will continue to take place in the coming years.”
The equipment industry, with great support and push from the government, for sure is readying for a kangaroo leap. Nischal Mehrotra, spokesperson of Liugong India, puts it, “We are expecting a growth of about 15 per cent in the present year over last year.” The road equipment industry will register double-digit growth in the coming years.
Improved efficiency and safety of equipment
Ajay Aneja, Brand Leader, CASE India pointed out that Environment safety is one of the pillars of World Class Manufacturing practises and is of utmost importance to CASE India as well.
India, with its massive infra projects underway what growth do you expect from the Indian market for the next three years?
Infrastructure is a key focus area for any developing economy and given that, India’s growth rate is expected to hover around 7.5% for some time. Additionally, the governments focus on the increase in expenditure on Infrastructure and construction industry will call for maximum projects. With a target of spending Rs 100 billion by 2024, the government has committed to increasing roads and highways construction projects.
The government also has many ambitious programmes aimed at improving rural and urban infrastructures such as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Smart City projects. With this kind of trend, we expect positive momentum to continue for the next five years.
What is your experience after opening the exclusive showroom near Delhi last year?
CASE India is the first company to open a company owned, the company operated showroom in NCR area. With this showroom, we are able to stay in touch with the customers directly. Entertaining their concerns regarding machines, doubts related to the job work and offering sales, service and spare parts under one roof has certainly enhanced the overall customer experience for all our patrons in the market.
Could you please elaborate on the efficiency improvement in your products in the last 3 years?
CASE India R & D team constantly endeavours to develop clever innovations to make equipment more fuel efficient and bring in the latest technologies and solutions for better performance and comfort. In the last three years, we have launched PRO series in our loader backhoe range, which was based on customer’s feedback.
This PRO series in Loader Backhoe is powered by an FPT Industrial S8000 engine which delivers powerful performance and fast response time. The series is re-engineered from the ground and provides backhoe breakout force, higher loader lift capacity/reach and best-in-class cab visibility.
We have also added an advanced Eagle-Eye-Telematics solution in our loader backhoe & Compactor range for better operational efficiency and security.
The Indian government has given more thrust on Environment and safety. Tell us the three major initiatives taken by your company in this regard.
At CASE India, we follow World class manufacturing practice. WCM is one of the global manufacturing industry’s highest standards for the integrated management of manufacturing plants and processes. Environment safety is one of the pillars of WCM and is of utmost importance to CASE India as well.
As an OEM manufacturer, we practice following initiatives to promote environment safety
– Detailed risk analysis and preventive measures are taken on the shop floor
– Usage of BS emission norms and efficient fuels for least pollution
– Safety audits on the shop floor to avoid any incidents
– Regular tree plantation and adoption of water dripping method