Earthmoving equipment currently constitutes nearly 73 per cent of total construction equipment sales, and happily, this structure of sales is expected to continue. The cumulative sales of backhoe loaders, crawler excavators and wheeled loaders have been growing at a CAGR of over 20 per cent for the last ten years and will continue to grow at an impressive rate. EQUIPMENT INDIA digs out more facts.
As per the Off-Highway Research report presented during the ICEMA Conference, at bC India, the quantity of earthmoving equipment sold in India in 2012 was a whopping 78 per cent: crawler excavator 23 per cent, backhoes 52 per cent and loaders 3 per cent. Globally, the sales of earthmoving equipment were led by crawler excavator (38.8 per cent), followed by loaders (24.3 per cent), mini excavator (6 per cent), and backhoe loaders (5.6 per cent).
The sales split- up forecast for 2016 is rather interesting. As per the report, 78 per cent of the total sales of earthmoving equipment is compartmentalised as follows: crawler excavator 35 per cent, 12 per cent increase in growth rate, backhoes 38 per cent (a decrease of 14 per cent) and loaders 5 per cent (an increase of 2 per cent). Does this indicate changing user/sales patterns?
Says Vikram Sharma, Managing Director & Chief Executive Officer, Kobelco India, "The pattern of earthmoving equipment being the largest constituent of the CE market is the same all over the world, and is not particular to India. In the case of our country, since a lot of infrastructure work is starting from the initial stage, it necessarily thereby involves high amount of earth removal and handling. The estimation of Off Highway Research is an indicator prepared by the best judgement which their research has put together, and I feel that any figure in the region of 70 per cent looks realistic and achievable. The figure remaining at 78 per cent upto 2016, as per their estimate, does not mean a no growth situation for the earthmoving equipment. We are expecting India to get back to 20 per cent plus kind of growth 2014 onwards, and therefore 78 per cent of that growth will be very substantial for the earthmoving equipment."
Samir Bansal, General Manager, India, Off-Highway Research says, "The cumulative sales of backhoe loaders, crawler excavators and wheeled loaders have been growing at a CAGR of over 20 per cent for the last ten years and will continue to grow at an impressive rate. It currently constitutes nearly 73 per cent of the total construction equipment sales, and this structure of sales is expected to carry on. However, the share of individual equipment may vary as Off-Highway Research believes that the demand for more efficient and specialist equipment such as crawler excavators and wheeled loaders will grow at a faster rate."
The Indian market is slowly but steadily moving towards the usage of specialised equipment and attachments. This follows the global trend where specialised equipment is utilised for specialised jobs on tighter project execution timelines. Backhoe loaders will remain the most popular type of equipment sold in the country for some time to come, though already a change in the structure of demand can be seen. While it will continue to remain the most popular equipment type amongst plant hirers and small contractors on account of its versatility and mobility, it is expected to be increasingly replaced by more efficient and productive machines, such as crawler excavators and wheeled loaders, particularly on large infrastructure projects. Therefore, the future growth rate of the backhoe loader industry may decline; then again, it may well see increasing applications in rural areas which will sustain its strong market presence. There is more demand for higher capacity machines like crawler excavators and wheel loaders, as timely commissioning of highway projects has become a big factor in the infrastructure space. This is why the sales of excavators has grown by leaps and bounds, and is going to compete with backhoe loaders in terms of volume over the next few years.
"We expect the first-time buyers to continue to go for backhoes because of the versatility of the machine. The backhoe loader is popular because of its multitasking ability, while the excavator is a specialised machine. The excavator is gaining in popularity and acceptance in the market; however, we expect the backhoe loader will gain preference for first-time buyers because of a suitable equation of return on investment for the customers," says Vipin Sondhi, Managing Director and Chief Executive Officer, JCB India. He further adds, "We at JCB understand the project requirement and therefore, manufacture products which are robust, custom built and highly fuel efficient plus provide the best return on investment to our customers. In the backhoe loader category, the all new 3DX offers 20 per cent more fuel efficiency, and uses BSIII complaint JCB's ecoMAX engine that offers Rs 2.5 lakh saving on fuel cost per year to our customers. Our latest entrant in the excavator segment is the rugged and reliable JS120, the 12-tonne excavator. Like all JCB excavators, the JS120 is fitted with unique Plexus filtration system which increases hydraulic oil and filters life, resulting in huge cost savings and better emissions." JCB has recently announced its plan to set up its fourth world class manufacturing facility on a 70 acre site in Jaipur. An approximate investment of Rs 500 crore has been planned to set up this facility in phases with an objective of keeping pace with future economic growth and strengthen our position as market leader in the construction equipment industry both in India as well as APAC and MEA.
"Traditionally, the backhoe market has been growing. Recently, we have seen the excavator market above 11 tonne growing faster than backhoe loader market. According to the Accenture report, by 2015, the excavator market is likely to be the same as backhoe loader market; we anticipate the trend continuing for excavators," says AM Muralidharan, President, Volvo Construction Equipment, India.
"In the next five years, excavators will definitely have a better growth rate than backhoes. But at the same time, backhoes will continue to be Number One. In 2011-2012, the total backhoe industry was about 33,500; this has witnessed a decline of 1,500 units in the last fiscal. Backhoe will continue to have bigger volumes; it may not have the same growth rate going forward, but if you look at the potential, from the current 32,000 units, it may go up to 50,000 units in the next four to five years," says, Sunil Tiku, Senior Director - Sales & Marketing, Terex Equipment.
Sharma had this to say, "As regarding the growth of excavators at the cost of backhoe loaders is concerned, this is inevitable, since higher production machines will become the norm more and more. This will be due to stricter time bound project targets, as well as due to low availability of labour, and movement towards excavators will be a normal process. Nevertheless both will continue to coexist, since our economy would always need backhoes for small hirers etc."
Says Sunil Sapru, President, LiuGong India, "For LiuGong, India is a second home market. We have heavily invested in India; we have set up a training centre, we have set up and engineering centre; we have studied the applications of various segments and have localised and optimised our products to give the customer a better yield. We are trying to bring in the products with the latest technology. Even the excavators what we are trying to bring in India is the latest generation machine which has been globally accepted well. The 9 series excavators are in-built features that give you safety, fuel efficiency and more productivity." He further adds, "We see a very buoyant trend for earthmoving equipment in the next five years."
Sapru continues, "The government investments have been articulated clearly for the 11th and 12th Year Plans and when these investments are translated into equipment worth, it clearly signifies the emanating demand of equipment. Seeing the demand ahead, we have invested further in our local facilities and have planned some new investments in the start-up facilities. We will see a demand and supply situation even in the future. The market of hydraulic excavators in India was 14,500 units in 2011 and this is expected to more than double over the next five years. However, the focus is now shifting to the retail segment also and we plan to become a major player in the medium size excavator market in the next four or five years."
The construction segment accounts for a large proportion of crawler excavators where smaller machines (operating weight 6-22T) are predominantly used. The 20T class (18.1-22T) of machines is the mainstay of all construction activity, and they are invariably found working on all major infrastructure projects in the country. This size offers the best compromise between price, machine size and overall productivity, as well as being a good match for the loading capacity of locally made on-off highway trucks. Says Sharma, "The earthmoving segment has been seeing a growth in the smaller ranges of 11/14 T market, which is due to the introduction of higher productive and versatile machines, which can deliver the work output for varying applications. The versatilities of this segment have resulted in fast growth in applications such as states/rural roads, small irrigation projects etc. Once the mining reopens, we could see a growth in the 35 T and above segments also. However, the 20T category would continue to remain the largest due to its wide applicability."
Hyundai Construction Equipment India recently launched its R210-7v excavator at bC India 2013. Says Dheeraj Panda, Head, Marketing and Key Account Management, "As per our study of the market, the 20-22 tonne class of excavators captures about 50 per cent of the total pie of the Indian market. Hence through the launch of the R210-7v and R210-9, we aim to provide a wider range to our customers in this segment. Last year, we touched the 2400 machines mark across various segments, with a growth rate of 23-24 per cent, which is not only a testimony of customer delight but is also a strong vote of confidence of our customers in our products and technology." He further adds, "The 9 Series excavators provide stability, greater digging and crowd force along with advanced hydraulics for improved controllability and smoother operation in arduous conditions like quarries and mines. One of the unique features of the 9 series excavator is the data download that enables customers to monitor progress of the excavator at site."
Case Construction Equipment has recently launched F Series wheel loader and B Series motor grader in the Indian market. The new F Series wheel loader offers Indian customers fast acceleration, performing cycle times, high travel speeds and productivity, together with reduced fuel consumption. The F Series loaders are powered by fuel efficient diesel engines, with improved programmable power modes while the comfortable cab environment reduces operator fatigue, increasing productivity. The Case four mode programmable power control, offering Economy, Standard, Auto and Max settings, provides operators with increased flexibility when matching the engine output for each task. Says Anil Bhatia, Director Sales and Marketing, Case India, "Our endeavour is to consistently launch and upgrade our machines, and our customers' feedback plays a key role in this. Upgradation of the machines is done to ensure the best fuel efficiency in their class, longer life cycle expectancy, and minimal operating costs. The result is our unwavering leadership position. With new launches we eventually wish to become a full liner construction equipment company with emphasis on quality."
The CE industry foresees a very buoyant trend for earthmoving equipment for the next five years. The government investments have been articulated clearly for the 12th Five Year Plan and when these investments are translated into equipment worth, it clearly signifies the increasing demand for equipment. As per Off-Highway Research projections, crawler excavators will witness the highest growth rate among construction equipment and well may catch up with backhoe loaders, with annual sales of 40,000 units in 2016. Every major global player has set up facilities here as intense competition is slowly changing the rules of the game.
The prime factor favouring the growth of the construction equipment industry is the sheer scale of work yet to be done in the infrastructure sector and an investment of $1 trillion planned in the 12th Five Year Plan. The increased size of projects and steadily declining availability of manual labour also favours the demand for the mechanisation of work at construction sites.
Bhatia sums it on a positive note. "We believe in the long term growth story of the country; there might some blips but that is part and parcel of any growth story. With the initiatives that the current government is taking, we firmly believe that this year we will see a modest growth but the long term story remains intact, there is going to robust growth in the construction business, and it means more opportunities for us."
The CE industry foresees a very buoyant trend for earthmoving equipment for the next five years.