Assistant Vice President,
Sales and Marketing,
Expectations of continued aggressive investments in infrastructure by the government has lead to over production. The excessive inventories is creating confusion in the market with customers and vendors alike says Hemant Mathur, Assistant Vice President, Sales and Marketing, Tata Hitachi.
Construction Equipment segment had seen a slow pace in the first two quarters of the year and with the changing economic condition, what is your take on the segment growth for the year?
The overall economy is on a major slowdown mode and is highly unpredictable. The Construction Equipment market has declined by around 25 per cent in the last five months. The liquidity crunch for our industry due to delayed payments to construction and mining firms from the Government has added to our woes. Given this, customer confidence in further investments has taken a beating and they have become cautious in expanding capacity.
The government has announced several measures in the recent weeks acknowledging the seriousness of liquidity situation. And has allocated significant money as per the budget plan to various infra ministries, it will take several months to reach our customers & for its impact to be seen. Customers will like to see a steady flow in both money as well as work orders before they regain confidence to invest in equipment further.
From the point of view of the equipment manufacturers, it has also been a case of overproduction due to expectations of continued aggressive investments in infrastructure by the government following the elections. The excessive inventories has led to confusion in the market with customers and vendors alike.
With this background, we believe that recovery will be slow from now onwards.
How much time, according to you will it take for the stimulus package announced by the government to reflect on the construction equipment segment?
The stimulus measures announced recently has an impact on the Infrastructure segment (in 2 tranches)
The first was announced in August:
- Delayed payments: Government/ CPSEs to be monitored by Department of Expenditure
- Decision to pay 75 per cent of the arbitration awards: by Government/ CPSEs to be implemented and monitored by Cabinet Secretariat
- Rs .100 lakh crores for developing modern infrastructure over 5 years: An inter-ministerial task force is being formed by Department of Economic Affairs
The second was announced this month:
Corporate tax rates slashed to 22 per cent for domestic companies and 15per cent for new domestic manufacturing companies.
The market is yet to see the impact of release of delayed payments.
Similarly, the govt is yet to come out with measures on liberalizing / simplifying the payment of 75 per cent of arbitration awards. The Government has just set up a committee to draw up a list of projects over the next 5 years and they are yet to submit proposals. In case of reduction of corporate tax on construction companies, we expect to see savings for companies – this year and beyond. Clearly, while the corporates will rejoice at these moves by the government, the impact of the above measures is going to be felt in the long term rather than in this year.
Excavators are one of the moving product of any CE company. How different is your product from the competitors?
At Tata Hitachi, we are aware that today, our customers realize that they need to be extremely competitive in the marketplace – and to be competitive, they need to reduce operating costs and improve efficiencies.
Keeping this in mind we have developed a two-pronged product strategy – one addressing the value segment and the other the premium segment.
The value segment:
The EX Super+ Series of excavators – combining technology and low running costs – to enable a high return on investment. The focus is on superior reliability and longevity of products in this series, which ensures ease in serviceability leading to a lesser downtime for maintenance. This series comes with our telematics solution – InSite, an inhouse machine health monitoring system- that gives detailed data, remotely, on the performance of the equipment at job sites. The Super + series of hydraulic excavators work in a wide variety of applications in various geographies across India commanding best in class resale value.
For the premium segment:
Our offering is the ZAXIS GI series of machines – fitted with industry leading hydraulics technology to ensure unbeatable performance, high fuel efficiency and high durability. These excavators provide impressive fuel economy, swift front movements and is easy to operate with industry leading ergonomic cabin for operator comfort. Another highlight of this series is the optimized hydraulic system and the improved engine which showcases Hitachi’s technological prowess and expertise. Powered by ConSite : a next-generation service solution that utilizes Information Communication Technology
( ICT), to deliver monthly reports to customers.
While there are many players in the construction equipment market, there are not many players globally who can design and manufacture the larger mining class of equipment, which demonstrates the engineering prowess of Hitachi. Even in this segment, Tata Hitachi is a leading player in India, and continues to dominate despite the overall slowdown in the economy.
Which segment of Excavators do you see more demand now?
As mentioned earlier the CE demand is down by around 25 per cent this year and the excavator market is in line with this trend. However, some segments within excavators are performing better than the overall trend, Mini excavators, 35T & mining excavators are faring better as these are driven by slightly different demand drivers:
- Mini excavator demand is driven by urbanization & increased mechanization.
- 35T is mainly used in mining quarries.
- Mining excavators are driven by investments in coal overburden removal etc.