Monday, November 30, 2020

Industry Focus- Excavators

 A 360° View

 

After a slow pre Covid-19 & a quarter thereafter, the demand for excavators is climbing positively. Demand is majorly fuelled by planned investment in various sectors like Roads, Power, Mining, Metros, Railways, Ports, Real Estate, Smart cities, Irrigation and other infrastructure works,  which tells us that the excavator industry is in for a sustained growth, writes RAJINDER RAINA.

 

Earth moving equipment in India dates back to more than 50 years. It started with excavators which back then, were imported from Europe and as they found acceptance, various manufacturing units got setup in joint collaboration with some leading manufactures of the world. It started with 20 ton track mounted excavators primarily because of the six cubic meter trucks manufactured / available in India then, which blended well with the size of excavator as a haulage truck. In mid-80s Escorts brought in the first backhoe loader in collaboration with JCB of UK. Till 1990 the numbers were very small but it always looked like hitting that critical mass very soon.

 

Fast Facts
  • Excavator sales  witness a rise from 1388 units in August’20 to 1803 units in September’20
  • Post Covid19 pandemic, the Excavator + Backhoe Loader market will easily cross 60,000 units.
  • Excavators will cross 25,000 units in next few years
  • Planned investment in various sectors like Roads, Power, Mining, Metros, Railways, Ports, Real Estates, Smart cities and Irrigation to propel excavator sales.

 

Unique to India

 

The market started with a 20 ton crawler mounted excavator and it stuck around these specifications despite many other variants being available world over. Globally 18 ton, 13 ton and smaller variants were also available. Indian market hovered around 20 ton class only. Tire mounted excavators started growing in demand outside India but its acceptability in India remained a challenge. Although not without a reason but other than L&T nobody tried to push it. L&T 90P was a 20 ton tire mounted excavator but it didn’t find traction in the market place. Stanford – EDER , a German collaboration, entered the market with an 18 ton excavator and created a niche for itself. It also offered tyred models 815P, however that didn’t find takers. By early 90s we had TATA HITACHI, L&T – POCLAIN, BEML-KOMATSU and Stanford EDER competing with each other. Around 1990 some international players entered Indian markets sensing potential. Samsung (now part of VOLVO) followed by DAEWOO (now DOOSAN), HYUNDAI and KOBELCO also entered the market through trading route. Meanwhile, KOMATSU moved out of BEML and joined hands with L&T. :

 

Excavators which comprise of mini (2T – 5.5T), midi (6T-10T), standard (13T-35T) and large (35TV and above ) . For each segment there is a different compatible haulage vehicle. It is very important to deploy the right size of excavator for the right application and usage to get the right productivity per hour and the lowest cost per unit of material excavated. This is one area where a lot needs to be done by the seller as well as the buyer/user particularly because of the high cost of diesel and maintenance. The growth drivers for excavators in India are essentially roads, railways, power, mining, irrigation, ports, major project sites, reclamation and major solid waste management sites. The demand also is spurred by timely completion of work to avoid cost overruns and early movement of other equipment into the sites. As large projects are being taken up the demand in excavator market is very high and promising. The other aspect of growth is the work being taken up in higher reaches and far flung areas like Ladakh, North East and Himachal. The terrain in these areas is fit for excavators only.

 

Escorts JCB started off in 1985 and by 1990 established itself fairly well as an earth moving equipment of choice. L&T, TATA HITACHI and BEML entered the market in 1990 but ESCORTS JCB consolidated on its first mover advantage. Backhoe Loader has a unique story to offer in India wherein it kept on posting double digit growth and stayed ahead of excavators all along. This phenomenon is unique to India, not even Asian markets find such preference for backhoe loaders over excavators. There are multiple reasons for it but the story remains unique to India. This is one product where we are ahead of China and JCB India does better business of this product in India than their parent company in UK. It offers a fantastic case study and a big opportunity for disruption.

 

The backhoe loader market in India has almost touched the peak wherefrom there may not be very big growth as the market of 35000 plus backhoe loaders per annum is fairly bigger size market. Backhoe loader market will keep growing as the development in rural areas like rural roads (PMGSY), low cost housing , smart cities, ground field work in tier 3 and tier 4 cities, small irrigation canals would give it the requisite boost. It also finds acceptance as a support equipment along with a fleet of excavators. It will always remain an equipment for all types of sundry jobs in various applications, particularly in the absence of small tyred excavators.

 

 

 

Customers today want utility and efficiency of the equipment without compromising on safety. Newer concepts like Telematics, IoT, Big Data Analytics along with Machine Learning can play a major role in meeting customer demands and increasing the efficiency of the sector. JCB India has been innovating continuously to create smarter machines that efficiently fulfil this demand. Our vision is to ensure that our customers get technologically advanced and innovative ‘Made-in-India’ products, thereby also contributing to making India a global manufacturing hub. Through this indigenous manufacturing of globally competitive products, we are also ensuring our support to the Government’s AtmaNirbhar Bharat Abhiyan. DEEPAK SHETTY, DEPUTY CEO & MD, JCB INDIA LTD

 

 

 

Interface

 

There is an unexploited market wherein today backhoe loader is deployed as a default earth mover. This domain essentially belongs to mini excavators. However it needs aggressive marketing through concept selling. Many players have entered the market with mini excavators but they are still selling it through some existing pull in the market which needs to change to a major push to tap the market currently usurped by backhoe loaders. Mini excavators are essentially more productive, cost efficient, more versatile, more compact & manoeuvrable & are 40% more fuel efficient. The mini excavators can double up as dozers & work in undulated underfoot conditions as well as asphalt roads. Not surprising that Japan, China & South Korea does not have a backhoe loader manufacturing plant nor are they deployed. A market size of 3000 units is up for grabs in quick time only that some smart market development has to be taken up by top three stake holders as all three of them will benefit & the market will keep growing. This is also the way forward to chip off the market share of JCB in the backhoe loader market.

 

 

At CASE, we care about our customers and their business as well. So to decrease downtime and increase productivity for our customers, we have a dedicated aftermarket team which provides quality parts and services. CASE offers optional extended warranties and service support, so customers can use their machines more confidently knowing that CASE will support them through the machine’s lifecycle. CASE Care is a cost-effective service contract under which we pro-actively monitor the machine which helps in preventive maintenance. CASE Protect is a comprehensive extended warranty which ensures expert care, round the clock availability and hassle-free operations. SANDEEP MATHUR, BRAND LEADER, CASE INDIA

 

 

 

 

 

 

Forecast

 

Earthmoving equipment in India has in best of the times crossed 50,000 units cumulatively (backhoe Loaders + Excavators). No surprise that any & every manufacturer of earthmoving machines/Excavators is present today in India, either directly or in a JV collaboration.

 

Post Covid19 pandemic, the Excavator + Backhoe Loader market will easily cross 60,000 units. Excavators will cross 25,000 units in next few years for sure.

 

The total installed capacity of all the Excavator manufacturers today is more than 25,000 units per annum plus the fully imported units.

 

Excavator manufacturing industry is incomplete without its vendors as many of the manufacturers depend heavily on outsourced components. The good news is that the vendors are equally geared up to ensure the surge in demand expected in the year 2021. August & September ’ 2020 is the proof of it all.

 

From 1388 units of excavators in August’20 to 1803 units of excavators in September’20 during Covid times is the proof that the Industry can deliver as per the demand. This agility both at  the vendor & manufacturing end speaks volumes about the demand and supply side.

 

Similarly the numbers of Backhoe Loaders moved from 3410 Units in August’20 to a whopping 4564 Units in September’20 shows the tenacity of the vendor & manufacturer combine.

 

It is just possible that the October numbers may be higher.

 

This clearly shows the readiness at the supply end for excavators & backhoe loaders.

 

 

Technology trends

 

The technology & price matrix has remained unchanged in the Indian market. Excavators, in particular, has seen increased with the price warfare unleashed by some Chinese players like Sany, LiuGong & XCMG in particular. This has resulted in repacking of offerings from Hyundai, JCB & Kobelco. The price war is there to stay. This however does not take away the fact that there is room at the top for the premium brands who offer superior technology, productivity & reliability. The market segregation is very much defined & the customer segmentation is fairly well defined. There will be a change in demand based on the size of the excavator. The midi segment of excavators can get altered as there is reason enough from the application perspective for some of the manufacturers to push less than 20 ton models to create space for themselves as there is overcrowding in 20 ton segment and over reliance on this size of the excavator. The thrust on mini excavators has to come purely from the manufacturers by selling them as value propositions and multiple usage equipment. The penetration of mini excavators into retail rental segments will increase the number multifold.

 

 

 

Safety of the machine, the Operator as well as the immediate surrounding environment are all important design considerations. Besides the provision of safe entry/exit, the Operator Cabin is a very safe and convenient workstation – with feather-touch controls, ergonomically designed adjustable Seats, excellent view of the work area, climate-control air-conditioning, shock-proof cabin mounts, protective front & top guards, emergency exit tool, etc.  The machine has several operating modes including a fuel-saving Eco mode. S K JARUHAR, ADVISOR – SUPPORT SERVICES,KOBELCO CONSTRUCTION EQUIPMENT INDIA PVT. LTD.

 

 

 

 

 

 

Financing

 

Financing remains an inseparable part of sales package in this industry. In backhoe loader market hirers comprise a major chunk of buyers out which many are first time buyers & users. More than 95% of the purchase is through financing route & that too through NBFCs. Financing by and large has been a big challenge wherein many NBFCs had to shut their shops because of lack of domain expertise, high delinquency and improper payment collection mechanism in place. The GST in place, the book building with the hirers is improving which makes funding easier and safer NBFCs.  Many manufactures setup their own financing companies and some of them created special purpose vehicles in financial collaboration with NBFCs. The manufacturers and financers have also got in together on service front to ensure high uptime of the machine enabling timely EMIs from the customer. In the case of default on payment from the customer on EMIs, and the manufacturer as per the agreement stops providing services forcing the customer to ensure timely payment. Since these equipment are mobile the manufacturer helps the financers to track down the location of the equipment on as and when basis. In the case of backhoe loaders, there are buy back arrangements also in place. A few more innovative things are in place to ensure a robust mechanism of minimizing delinquency from the customers which boost the sales for specific brands and gives confidence to NBFCs that manufacturer Is acting as a responsible and willing stake holder.

 

Training

 

Training of operators has been an area of focus of this industry. iCEMA took note of the need of trained manpower in this industry a few years back & through IESC gave it a structured identity. It has helped the man-machine integrity which has benefited the sellers & buyers/users equally. However there is a step improvement needed in this area.

 

 

Conclusion

 

A holistic look at the growth of Excavators & Backhoe Loader market in the past two decades dovetailed with the planned investment in various sectors like Roads, Power, Mining, Metros, Railways, Ports, Real Estate, Smart cities, Irrigation & other infrastructure works tells us that this industry is in for a sustained growth. Even a 10% to 12% CAGR growth over the next 4 to 5 years augurs well for the industry as a whole. It is an industry that will play a key role in the development of India & the good news is that we are fairly ATMANIRBHAR on the equipment & after sales front with almost everything manufactured in India as also exported from India.

 

 

 

 

 

 

 

 

 




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