The huge quantum of the infrastructure to be developed over a period of time, tells no other story. Even for the metros to sustain for another 25 years, we need better infrastructure, better connectivity. ´What we need is a stable government that attracts investors and a clear-cut policy that could speed up the projects to completion,´ says Vijay Sharma, Executive Director, Terex Equipment India. Excerpts of the interview.
Despite the challenging and competitive market for backhoe players, Terex has emerged as one of the leaders in this segment. How do you rate your success so far? It is true that we entered into an intensely competitive and challenging backhoe market. A decade ago, the brand Terex was not even known, especially in the construction equipment segment. Today with more than 9,000 backhoes in the market and with 56 dealers and 120 sales personnel on the ground, Terex as a brand is well established. From that angle it has been a very fruitful journey.
So far we have been able to penetrate the market, and hold on to our market share, i.e., about 5 per cent. Our plan is to take it forward to at least 10-12 per cent. With new variants of backhoes that we are bringing in shortly, we are very confident that we will touch the estimated target. We feel that we are on a good wicket from where we can build on it.
But, everyone says it is a bouncy wicket. It is a bouncy wicket for the market leader. But as far as Terex is concerned, the wicket-whether good or bad-doesn´t matter much.
Most of the OEMs have either started widening their product basket that complement the existing portfolio or are entering new verticals altogether. What has been your strategy so far? It is very similar with Terex too; we too are adding a range of new products. Skid steer is a good example. At a grass-root level, mechanisation is still in its infancy in India. You still find people carrying loads on their heads on a typical construction site, which is not the case in other parts of the world. We have filled that space with skid steers. When we launched skid steer in India, it was totally an unknown product; but today, that concept has caught on. In fact, nowadays, many players are getting into this bandwagon, which is good news because more and more players mean that the market will be developed. Another example is light towers. Though the market [at present] looks very small, but once infrastructure activity increases, the market will be good enough for many other players to enter. Having said, that product alone will not win the game. A lot of Chinese players have an entire portfolio but they were not able to penetrate the market. The real philosophy and principle for us is customer responsiveness. That´s what will change the game. How responsive you are to the customers´ needs, how close you are to him. All backhoes dig out, so how you differentiate is how responsive you are to the customer. That´s where Terex has scored and will continue.
Is it just customer service that brings all the differentiation? I am not saying customer service alone, it is the entire experience that counts; how responsive we are towards the customers. It´s a softer side of the business; and a lot of training goes on here. I am not saying that we have reached our destination but that´s what the principle we are working on - to train our dealers, our sales people, our service staff, our back office, and the engineering office. The entire back office needs to be responsive to the customer. If there is a call, we monitor how quickly we respond to the call. When a person calls up our service we actually throw a third party to monitor it that how many minutes it takes to answer that call and whether we close that call or it was left open. So these are small steps you have to work on. It´s a journey.
What are your strategies to get closer to your target in terms of market share, service capabilities, product strength, R&D, engineering and manufacturing strength? It´s a perfect mix of what you just mentioned. For example: in engineering - we have to be closer to the customer and understand his needs so that we engineer the products what the customer wants, and not what our engineer wants. Take for instance fuel efficiency. It´s going to be a big challenge because as the fuel prices go up we have to find a better way to engineer our products so that a customer does not have to use that extra drop of fuel. Environmental pressures and stringent emission norms are going to play a pivotal role over a period of time. Today we can get away with Bharat Stage II or Stage III emission norms, which according to me is way behind. We need to be start looking at tier IV.
Similar is the case with manufacturing. We have to be highly efficient to give a customer the benefit of a product which is low in cost. That will happen only if I am efficient on the shop floor. And then again, our sales and service teams need to be sensitive to the customer and customer´s customer, because 60-70 per cent of our backhoes go to hirers. So after all, a hirer also has a customer and we need to understand that person´s need, and then offer him what he is looking for.
So, what are the major initiatives you have already done in these areas? On the product side, we will shortly launch our new variants of backhoes. We will also be unveiling an array of wheel loaders. Complementing our existing range, we are coming out with compaction equipment, especially soil compactors, because we see an opportunity for infrastructure development to pick up.
On the manufacturing side, you have already seen our initiatives of going lean and green. We have greater focus on safety not just on the shop floor, but we have safety features in-built in our products too. Similarly, sales and service personnel are being trained to pick up the customer insights, their needs and requirements that will be fed back to the engineering and design teams to come out with far better machines that meet the requirements of our customers.
What are your investment plans? Is there any extra capex on the anvil? Yes, we will be spending close to Rs 50-75 crore. Initially wheel loaders would be in CKD form. We will bring them and assemble it here. Firstly we will penetrate the market then we will start the production and localising it.
The road sector has seen the worst with no new projects and many of the ongoing projects stalled due to various reasons. With Terex´s focus mainly being on the road sector, how have you been able to sustain the pressure? The slump has not affected us directly. We have been hit indirectly as the market has shrunk by 17-18 per cent last year. This has put a lot of pressure on us, but we have been able to retain our numbers. But having said that, the road sector will bring the required momentum back. Performance-wise, 2014 will be same as the last year. However, I could be wrong, and I wish I am wrong. As of now, politically there is so much of uncertainty.
What we need is a stable government, which will create a conducive environment for the corporates to invest. With Elections underway , it´s just a matter of time. I am very bullish about India. We expect 2015 to be a good year. If you move out of the metros there is no infrastructure. Even in the urban areas there is no infrastructure, which could sustain the growth pressure for the next 20-25 years. So there is ample scope for development.
Will you be able to meet the demand once the economy is back on track? Yes, ramping up on the manufacturing side is the easiest part. We have enough room for that. We are operating on a single shift now and we can move to two and three shifts if required. Currently, the issue is lack of demand. Once the demand kicks in, not only us but all manufacturers can ramp up their business pretty quickly?
What are the policy reforms that you are expecting from the government? The most important thing the government needs to do is to release funds for the projects, which they have cleared, and for the projects that are stalled - whether in public-private partnership (PPP) or build, operate and transfer (BOT) format. We expect that the government does financial closure of these projects in a transparent manner so that there are no agitations around it. Also for large infrastructure projects, issues like land acquisition, environmental clearances, etc. need to be sorted out quickly.
Do you think putting up a regulator for the road projects will solve these issues? According to me even PPP was a very good system had we done all things right. PPP failed because land wasn´t acquired by the agencies, and the contractors were penalised for not finishing their projects. Even for BOT projects the issues are pretty much the same. If land is not acquired, the project gets stuck midway. I think we need to first get that right.
What about the growth potential from mining sector? It´s a paradox that we have so much of coal reserves and we are forced to import coal. What happened in the coal sector in the last couple of years is not that encouraging. However, I strongly believe the mining sector will open up. Our wheel loader is meant for the mining sector. The recent development in Goa is a welcome step in the right direction.
Every OEM claims that his machine is the most fuel efficient one, but unfortunately we don´t have a benchmark to prove it. What is your take on this? Every manufacturer does benchmarking and they compare it against their competitors´ machines on a website and then see if they have same fuel efficiencies and same output of productivity or not. There is no regulator for benchmarking. Everybody relies on whatever the manufacturer says. This is not the case in automobile industry. They have an agency, which certifies how many miles you would get a city drive or on a highway. We need an agency similar to that.
Is there any move to create such kind of benchmarking? Or in such a scenario how demonstration helps you to win the client? There is no move yet that a single agency certifies the claims of an OEM. However, today, the market dynamics would decide it. You rightly said we need to demonstrate and prove to the client how fuel efficient our machines are and live demonstrations has become a very important tool in our kind of business where we spend a lot of money.
We actually take our machines to the customer´s site, and run the machine on his site, and on different applications. From north to south, the requirements are totally different and the strategies are different. We actually demonstrate and show it to him that to what extent our machines are fuel efficient and productive than that of the competitors´ machines.
Tell us about your initiatives in the area of skill development. Lack of skilled technicians, operators, and trained mechanics is a huge challenge. We run a training school wherein we bring in youth who are unemployed from local communities and we train them, certify them as backhoe operator. It´s a bit of a CSR initiative; but the underlying principle is to train as many people as we can. We are even working with some of our big dealers to run training schools in their areas.
We are also trying to tie up with some skilled development companies. We have been in talks with them; trying to formulate how we can tap into their reach.
In another five years down the line, how do you look at the whole scenario? With mechanisation, more and more products are expected. I think, the ports sector would have a huge thrust in the next 5-10 years. Terex is getting ready for that.
Today, with more than 9,000 backhoes in the market and with 56 dealers and 120 sales personnel on the ground, Terex as a brand is well established.