Winds of change are here to stay! Investment in the construction development sector has a multiplier effect on the economy by way of infrastructure creation; substantial employment generation over the entire spectrum, and related industries creating healthy demand for products and utilities. Any policy reforms that can set up investment in construction development with its backward and forward linkages for many other sectors of the economy will be a game changer. Thanks to the bold decision taken by the Union Cabinet chaired by the Prime Minister, Narendra Modi, the recent move relaxing the FDI in the construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms is expected to boost the cash-starved real estate industry. This, in turn will have a positive impact on the construction equipment sector.
At the same time, the move by the government to allow e-auction of the coal blocks that were de-allocated by the Supreme Court recently is a step in the right direction. Reports suggest that the Coal Ministry is gearing up to prepare the modalities, and the proposed e-auction may take place in January 2015. About 72 mines may be put for e-auction in the first phase, out of which around 35 of them have already been developed, about five mines are nearing development and about 30 are being developed. This will have a positive impact on mining equipment segment, which has been severely impacted due to closure of mines. The market for most of the product lines used in exploration, mining, crushing and transportation have contracted considerably. The market for wheel loaders segment fell substantially and so was the case with high tonnage excavators, dumpers and heavy duty mining trucks' segment.
Another positive development is that the governments' effort to win over investors who has become averse to road sector seems to pay off! As per reports indicates investors from China and Malaysia is keen to pick up projects in Build-own-Transfer (BOT) mode. This may even encourage domestic investors to relook on the growth prospects in road sector.
On a high note, it has to be said that over the past couple of years, the mining and construction equipment (CE) sector has witnessed a wide array of product launches-either launch of upgraded variants or brand new models-across the product segments. Volvo Trucks recently launched its upgraded FMX model mining truck; Scania is to launch its new variants at the forthcoming bC India event; Amman Apollo has unveiled its new range of compactors and asphalt plants; and in the earthmoving segment, almost every major original equipment manufacturer (OEM)(Caterpillar, Case, JCB, Volvo, etc.) have either launched or upgraded their product range. Also LiuGong is to launch its new model of wheel loader; LeeBoy is to launch its new variant of back hoe; and no wonder, the forthcoming mega event-bC India-is sure to witness scores of new products.
However, on the flip side, the intense competition has also led to negative marketing and price wars. It is the first time a major OEM (JCB India) has been indicted of abusing its dominant position to keep away competition; and has had its offices raided by the Competition Commission of India (CCI). As per reports, the company has extended full cooperation with the CCI. The CCI has had recently brought forth an indictment on DLF for misusing its dominant status with consumers, the cement industry too has been awarded a stiff financial sentence for allegations of cartelisation but this is a first for the equipment industry. Looks like the stakes are getting bigger and bigger hence vigilance and governance is being raised.