CE industry all set for a big leap

EXCON, the Mecca of construction equipment industry, is gearing up to be unveiled with greater promise
Undeniably, infrastructure sector is a key driver for the economy. With government focussing on initiating investment friendly policies, the construction industry is on rise with a positive outlook. The construction equipment market is projected to grow to $ 7-8 billion by 2016-17 and $ 16-21 billion by 2020. Further more opportunities like smart cities, clean India and metro projects, there will be an increase in purchase of construction equipment.
Sharing his outlook on the recent optimism in the market Abhijit Gupta, Managing Director of Case India says, “With the recent push of the central government towards greater transparency in the tender awarding process backed with a push towards infrastructure development, especially the road sector in particular, the general sentiment in the industry is upbeat. While the initial results are already visible in the road sector, the general infrastructure development will take some time to kick off.”Dimitrov Krishnan, Vice President, Volvo Construction Equipment India observes, “The coal mining and road construction segments are very active right now and driving the demand for construction and mining equipment. The quarry and aggregate segment that supplies into road construction is also pulling the demand for equipment. We see increase in business volume for excavators, wheeled loader, motor graders, compactors and pavers.”
With respect to growth potential, undoubtedly, India offers a huge growth potential. Going by statistics like per-capita consumption of concrete, steel or cement, in all these areas India is far below the developed countries. However, VG Sakthikumar, Managing Director Sales and Services, Schwing Stetter India expressed his concern by saying, “We are a little bit worried about the 3 year downturn that has happened in India since we do not know when the market will bounce back to reach the growth we had during the boom time.” Since the beginning of this year almost 5,000 kms of road contracts have been awarded which has definitely benefited the road building equipment manufacturers. Many more road contracts are expected to be awarded in the near future, which will certainly help the road construction machinery manufactures. The road construction network in India is quite large, so there is enormous scope for further development. Therefore, the roads and highway sector will continue to grow in the coming years. However, Sakthikumar observes, “Even though this will give a boost to the road equipment industry, it does not have a very significant impact on the entire range of earthmoving machines.” Therefore, he suggests, “For the overall development of construction, earthmoving and material handling equipment, there should be similar initiatives on other infrastructure projects like power, metros, airports and dams in order to bring an overall improvement in the CE industry as a whole.”
The overall development in the industry is going well along with the initiatives taken by the government. Further the announced investments in various sectors and projects like roads and highways, smart cities and high speed railway corridors are expected to upsurge the demand for construction equipment. On this note, Jasmeet Singh, Head – Corporate Communications, JCB India, shares, “The overall business outlook is certainly that of hope in the industry. Though the last three years have been a period of decline for the infrastructure sector however, we see a bottoming out trend in the industry. In the last one year, the government has taken some decisive and bold steps towards stabilising the economic scenario. We have seen a strong intent from the government towards infrastructural development and the roadmap for the infrastructure and allied industries looks promising.”
Krishna Kumar, Divisional Head -Tower cranes, Liebherr India anticipates that the market is expected to pick up in the coming years with positive measures by government and also the various projects declared. “It is matter of time, we expect a steady growth in coming years,” he says.
Rajeev Kumar, CEO, Friends Equipment expressed his optimism by saying, “The market was low for last three years but now it seems that the market is growing up. We have seen the growth in last one year and had sold good numbers of cranes of various capacities. We hope that in next 6 months the market will again achieve the same height.”
Encouraging factorsInfrastructure creation is the top of central government’s agenda as it seeks to kick-start the investment cycle. The efforts are evident as along with the big announcement the government has also been taking small steps to sustain the momentum. After a year of efforts aimed at the resolution of procedural, policy related hurdles such as environmental clearances, land acquisition issues, transparent e-auction of tenders and contracts etc, the central government has laid the groundwork for a massive infrastructure development. Ambitious projects such as 100 smart cities, 200 airports Swachh Bharat program, Bharat Mala and Sagar Mala, rejuvenation of NHDP and 30 km/day road in FY16 has been a welcome sign and has raised hopes for the industry at large. According to Abhijit Gupta these initiatives are intended at a medium- to long-term growth. “Any marginal increment in demand will get consumed within the available established equipment pool, but as the utilisation of equipment goes up, fresh requirements will emerge in many areas,” he observes.
When asked Sakthikumar about which segment encourages him most out of the development of 100-smart city, 200 airports, 30-km a day road making, he comments, “What encourages me the most is roads because seeing is believing! We were at 2.5 kms a day and now we are currently at 13-km a day and reaching 30-km a day is not so far away because we are supplying many machines for these projects. However, he observes, developing 200 airports is not going to be that easy as getting land for this purpose is an issue.
Dimitrov Krishnan considers 100-smart city, 200 airports, 30-km a day road making projects crucial for India and says they all are good news for the equipment industry. He adds, “It gives me hope that the execution of these projects will happen in a systematic and planned way. Volvo Construction Equipment has wide range products and solutions to suit the needs of contractors who will be involved in making these a reality.”
Performance of CE industry After 3 consecutive years of decline, the CE industry is still sluggish but showing signs of recovery in 2015. There have been green shoots but the real momentum is expected to manifest in FY 2016-17 only, observes Abhijit Gupta.
He adds, “At a macro level road sector seems to be leading the pack among sectors where major growth is expected in next 5 years.” The last union budget announcement to increase the outlay in road sector by Rs. 14,000 crore to reach perhaps an all-time high of Rs 42,000 crore in a year will boost the demand in all associated sectors.
Although the CE industry had seen a tough time during the past three years, Rajeev Kumar observes that the market situation is still not so bad. “Overall it’s a satisfactory situation especially because of some major projects started in the last year made most of the rental companies comfortable,” he adds.Giving his experts views on performance of the industry, Sakthikumar says, “There is a lot of positive sentiments and all our customers are positive that things will slowly start moving and having said that most big construction companies are facing similar issues due to the liquidity from the banking system. We are positive because the government is looking at more of EPC contracts.”
The government is also looking to reimburse contractors for the unfinished projects. “Once that finance comes, their liquidity will improve,” opines Sakthikumar. “There is a lot growth for the infrastructure development with Rs 70,000 crore being allotted. Moreover the Rs. 8 fuel cess will also provide additional funding.”
In addition, 5 ultra mega power projects and freight corridors are also excellent projects that will improve the economy. According to Sakthikumar, Schwing Stetter has been making profits in India but is looking to revive its success from 2011. “This year we crossed Rs. 850 crore and we touched Rs. 1,068 crore in 2011,” he informs.
Dimitrov Krishnan from Volvo CE India believes that the industry outlook is positive today. However, he opines, the capacity utilisation of factories is still not sufficient and the market pickup needs to sustain for the industry to perform better and create new jobs. “The thrust given by the government towards power and road sector is very crucial for the CE industry,” he states.
Citing the intersectoral developments PV Ramdev, Managing Director, Everest Engineering Equipment says, “The current trend is to match the operational requirement with minor technical specification given by the site management and concentrate to get the lowest price.”
Major challengesSpeaking on the biggest concerns of the industry, Abhijit Gupta of Case India says, “The major challenges for the Indian infrastructure and construction equipment sector are unavailability of a clear policy framework, financial allocation to infrastructure projects and funding related issues. To address these fundamental concerns the central government has started working on making the policy framework much more transparent and smooth, such as electronic tendering and auctions and opening up of certain sectors to privatisation.”
Almost echoing Abhijit Gupta’s views, Krishna Kumar says, “Policies need timely reforms to make easier doing business in India. The government should implement the positive measures like GST, single window clearing system for projects and positive measures for real estate sector, which will improve the growth and can help attracting more FDIs in India.” Whereas Ramdev views that the import of raw materials, mechanisms, and safety devices are still the major area to be developed in India.
Jasmeet Singh of JCB points out that the biggest challenge for the industry is the sluggish demand for construction machinery due to lack of infrastructure activity at present. However, he adds, once the industry recovers from this prolonged slowdown, the challenge that we foresee is lack of skilled manpower especially of trained machine operators in the CE Industry.”
The government is already working towards ensuring that people are trained with the right skills set for the right job through several initiatives like Skill India and Pradhan Mantri Kaushal Vikas Yojna. OEMs like JCB India and Volvo CE have set up their own operator training centres to train manpower and create employment.
In the past 5 years, metro and mono rail projects, and high-rise constructions have increased in urban areas like NCR, Mumbai, Bengaluru, Hyderabad, Kolkata, Chennai and Jaipur. These projects are time bound and speed of construction is the key factor. Besides, while working in urban areas, space management and noise pollution are other critical aspects. The time window available for contractors to bring concrete from central plant is very small considering the traffic. Therefore, Sakthikumar believes, reliable high performance machineries supported with excellent service at the site are what the customers expect. “Schwing Stetter India exactly meets the customer expectations,” he assures.
70 per cent of the CE industry is related to rental companies. In India, the rental rates are too low whereas the Indian rupee is still depreciating. Most of the big cranes still need to be import from other countries. According to Rajeev Kumar, one has to pay about 20 per cent more money for the same product what he was paying earlier because of the depreciation of Indian rupee whereas the rental rates has been reduces drastically. “The payment flow is impacting a lot. The bank interest rates are very high as compare to foreign banks. Government must give some special benefit to the Construction Equipment Industry as it’s a back bone of our Infrastructure development,” demands Rajeev Kumar.
EXCON: the much awaited extravaganza EXCON is one of the prestigious events in the CE industry of entire South Asia. Participation in this event is expected reiterate the confidence of all the major CE players and the associated companies in the Indian infrastructure space towards the long-term growth story of India. Over the years, EXCON has emerged as a much-awaited launch pad from companies across the globe.
Continuing this reputation Volvo Trucks plans to launch a few products under its FMX range. “Volvo CE will be launching its large hydraulic excavator EC750D and displaying the same at EXCON along with full Volvo Trucks product range,” says Dimitrov Krishnan.
In EXCON 2015, JCB will showcase its entire range of equipment which will include Backhoe Loaders, Excavators, Wheeled Loaders, Compactors, Loadall, Skid Steer Loader and Gensets along with the varied range of attachments, parts and consumer products. “JCB’s world famous ‘Dancing Diggers’ show will also be performed in the exhibition to enthral and entertain visitors,” Jasmeet Singh promises.
Liebherr will display its range of equipment including the tower crane 85EC-Bi which is made at Pune factory whereas Everest Engineering Equipment will be displaying its GJJ passenger hoist. “This hoist is proven in the world market with its high reliability and safety with NORD Germany Mechanism, Siemens VFD, Schmersal Germany safety limits and galvanised structure. GJJ have worked out a very economical pricing for the growing India Market,” informs Ramdev.
According to Sakthikumar, this year EXCON is happening at a very important juncture. He reveals, “Right now the increment growth has crossed 20 per cent. The increase in road projects and the return of stalled projects have largely attributed to this growth rate. However, the real estate industry is still going through a rough period because there is a large inventory of apartments and residential plots.” Schwing Stetter is upbeat about a stronger growth by mid 2016.
The company is looking to launch new products at EXCON. “We are looking forward to customers’ viewpoint on how to improvise on our project range. In addition, we are looking forward to meet newer contractors and build our relationship with them as well,” Sakthikumar says.
Friends Equipment has recently diversified in to Tunnel Boring Machines (TBM) in Indian market and it plans to launch its TBM at EXCON. It has announced a tie-up with China Railway Construction Heavy Industry Co. Ltd, a 100 per cent state-owned company. The company is going to give some special benefits to the customers during EXCON, says Rajeev Kumar.  However, he didn’t disclose the ‘special benefits’ further.
In celebrating its successful run in India for the 25th year, CASE will be showcasing its entire gamut of products being currently offered in India.
ConclusionAs 2015 is coming to an end and 2016 is around the corner, the industry is all set to revive. And what can be the right platform than EXCON to begin with! The international extravaganza on construction equipment and technology will witness the rendezvous of policy makers and who’s who from the industry and will inspire to script nation’s growth story.
—————-We were at 2.5 kms a day and now we are currently at 13-km a day and reaching 30-km a day is not so far away.
VG Sakthikumar, Managing Director Sales and Services, Schwing Stetter India———————–
————–We have seen a strong intent from the government towards infrastructural development
Jasmeet Singh, Head – Corporate Communications, JCB India————-
————The thrust given by the government towards power and road sector is very crucial for the CE industry.
Dimitrov Krishnan, Vice President, Volvo CE India————–
————-Policies need timely reforms to make easier doing business in India.
Krishna Kumar,Divisional Head -Tower cranes,Liebherr India—————
—————There have been green shoots but the real momentum is expected to manifest in FY 2016-17 only.
Abhijit Gupta, Managing Director, Case New Holland Construction Equipment India
———————–
—————The current trend is to match the operational requirement with minor technical specification given by the site management
P V Ramdev, Managing Director, Everest Engineering Equipment—————-
——————–We have seen the growth in last one year and had sold good numbers of cranes of various capacities.
Rajeev Kumar, CEO, Friends Equipment

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