Owing to the overall slowdown in the Indian economy, the current fiscal year has been bit sluggish for the construction equipment industry. The industry will gain momentum if the government starts implementing the delayed projects and carries out active review and monitoring to ensure timely completion. However, in the long term, nearly all of the infrastructure sectors present excellent opportunities, with roads and highways, ports and airports, railways and power standing out as particular bright spots, with astounding sums of investment planned in the coming years. Evaluating the future growth prospects, the government has doubled the investment in the infrastructure sector in the next Five Year Plan (2013-2017) compared to the current one, says Vipin Sondhi, Chief Executive Officer & Managing Director, JCB India. The construction equipment industry and specially excavators have been witnessing a growth of 20 per cent plus for last five years. Current situation is of a slowdown in growth rate, yet increase is still happening. There is so much of work on hold all around that future has to be bright, when things start up. We are seeing the effects of multiple factors such as European chaos, some recent decisions of retrospective acts, high inflation, high deficit etc, which are keeping back the Industry and investment friendly actions the government should be taking. Despite these actions or lack of them, I am sure of a bright future for this industry, says Vikram Sharma, Managing Director, Kobelco. He further adds, "The manufacturers are under severe cost pressures, especially the high end machines manufacturers like Kobelco, since we have imports of major aggregates. The weakening of the Rupee viz Yen/$ has been to the extent of over 10 per cent in last one year. This is one of the major constituent of cost hike. In the highly competitive environment of CE market, manufacturers are absorbing most of the input hikes. We can only look inward for relief. Focus is therefore on greater indigenisation, resourcing and cost cutting." "The growth of construction equipment industry depends largely on the project execution in infrastructure sector. The speed at which execution of infrastructure project takes place decides the pace at which the equipment suppliers will grow. Currently due to issues like land acquisition, hardening of interest rates and delays in other approvals have affected the pace of project execution. Rising input costs, increase in fuel prices and depreciation of rupee have also taken their toll on the market. However, as Government has targeted for huge ($1 trillion) spend in Infrastructure sector, the medium term outlook for Indian construction equipment industry remains bullish," says DK Narang, Managing Director, Case India. Says AM Muralidharan, President, Volvo Construction Equipment, India, "Even though the market grew for the first six months of 2012 as compared to 2011, we expect to finish the year in a flat market. The industry is experiencing a slump due to a slowdown in the mining industry as well as delay in infrastructure projects due to time and cost overruns. Shortage of funds, environmental concerns and delay in governmental clearances added to this. Project delays have been caused due to land acquisition challenges, in turn causing major investment deferrals by companies. There is also a lack of structured regulatory and policy framework for PPP models which needs to be addressed." Muralidharan adds, "However, the market is likely to pick up by mid-2013 and this is mainly due to the government of India focusing on the infrastructure of this country and planning to invest $1 trillion during the Twelfth Five Year Plan. The problem in the mining industry is also a temporary glitch and we expect the situation to resolve soon." According to Samir Bansal, General Manager, India, Off Highway Research, after a brief decline in 2008 and 2009, demand for construction equipment increased to 54,793 units in 2010 and this growth trend continued through 2011 as sales peaked at 72,162 units; representing a rise of 22 per cent. The year 2012 did start at an optimistic note and despite the prevalent talk in the country and outside about the policy paralysis of the government, the construction equipment industry appeared confident about retaining its growth momentum. Unfortunately, that hope has failed to materialise and activity in the infrastructure sector has lagged behind earlier expectations. Throughout 2012, the political and economic climate in the country has not been conducive to the healthy growth of the infrastructure sector. Policy decisions on land acquisition, approvals, clearances and execution of projects are being set aside as the government is frequently struggling with a wide number of social and political issues. Amidst the prevailing uncertainty in the infrastructure and mining sectors, the market for construction equipment is now likely to decline by approximately nine per cent to 66,000 units in 2012. Despite the challenges, Off-Highway Research remains bullish about the long term prospects of the construction equipment market. It forecasts sales of construction equipment to reach 66,000 units in 2012, and 105,730 units by the end of 2016. Samir points out, "The construction segment accounts for a large proportion of crawler excavators where smaller machines (operating weight 6.0-22.0T) are predominantly used. Sales of crawler excavators in this segment grew by 35 per cent in 2011 and accounted for over 90 per cent of total sales. On the other hand, the mining segment (which utilises larger machines) declined by four per cent." He adds, "20T class (18.1-22.0T) 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. It is therefore no surprise that this class represents the single largest segment of the market, and in 2011 accounted for 55 per cent of total excavator sales." Says HS Mohan, Chief Operating Officer, Doosan Infracore India, "The market is continuously driven by 20T excavators with over 50 per cent market share in this class. Over 30T and above, the market has slowed down due to various mining contracts that are getting delayed for execution due to various reasons. But this segment is definitely expected to grow in the near future as the overall excavators segment will grow with CAGR of 30 per cent during the next five years." According to Dheeraj Panda, Head - Marketing & Key Accounts, Hyundai India, the market for the 20T class of excavators is close to 50 per cent of the total excavator market. The lower tonnage class comprising 8-14T is expected to do better while the large tonnage market will be steady on account of slower mining activity. The total size was about 15,000 excavators in 2011 and is expected to grow at 12 to 15 per cent in 2012. Speaking about the technology trends Samir had this to say. "A very significant point to note is the varying levels of technological sophistication in excavators that are currently being promoted in India. This varies from the basic technology to be found in the L&T90 and EX200 models, to the latest generation machines from Caterpillar, Hitachi, Kobelco, Komatsu and Volvo, with varying levels of technology in between. Contemporary machines have electronically controlled engines, electronic monitoring and control systems with automatic mode selection. They are fitted with efficient hydraulic systems, which results in higher breakout forces, faster cycle times and greater fuel efficiency." He further explained, "Initially, local producers used dated technology but the pressures of time bound contracts, with heavy penalties for delays, have pushed many buyers towards more contemporary machines. The demand for lower technology machines is clearly on the decline, and now stems mainly from smaller, price sensitive contractors. A large number of Indian contractors are also now executing projects abroad and therefore require machines that are compliant with global emissions and safety standards which will encourage the further enhancement of quality in the future." Says Vipin Sondhi, "The focus is on whole life costs which include increasing fuel efficiency, lower maintenance costs and higher performance as there is pressure on margins due to higher fuel costs. Also, the operator comfort and operator-friendly features are gaining attention. He adds, "As of now, the shorter tail swing machines have not gained popularity in India as it has in developed markets. These machines are generally used in urban areas where there are space restrictions. Thus, higher urbanisation would create demand for such machines. Also, as the Indian market matures there would be higher demand of specialist machines which will fuel demand of short or zero tail swing machines. Mining and quarrying are major applications where tracked excavators are used and account for approximately 30-40 per cent of the overall excavator market in India." "There is a positive trend in the mid-sized excavators with clear user preferences for higher technology. This has come in owing to squeeze in project time and stiff competition in rates. The demand is for higher productive machines with lesser fuel consumption and higher component life. The consumption of spares and other running items and the cost thereof is of paramount importance while choosing the make and series of equipment in a project," quips Dheeraj. Backhoe market India is the largest backhoe loader market, with unit sales crossing over 30,000 in 2011-2012. The sales forecast for backhoes by Off-Highway Research is pegged at a target of 36,000 units by 2015, up from 30,000 in 2011, whereas for the crawler excavator alone, the forecast is 35,000 units, up from the 2011 figure of 14,500. With most of the global players setting up production facilities in India, the competition has become intense. One interesting thing is that the competition is not just between different players, global or Indian, rather, as the end-user community is looking more to application-oriented equipment and machinery, the competition is also between different machines. The focus seems to be on the value propositions offered by the OEMs; also, innovation has become key, whether in product offerings, back-up support, closeness to customer and suchlike offeringsThe 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. Samir explains, "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.Its sales have been growing rapidly since 2000, (except for a dip during 2008-2009, and the figures would have exceeded 33,000 units in 2011. 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." Parminder Sachdeva - GM-Sales & Marketing (Backhoe Loader), Escorts Construction Equipment, begs to differ. "The backhoe loader is one of the most versatile pieces of equipment and its popularity in India is based on its mobility and price prepositions. Its proliferation in India has been tremendous and today it is the single largest volume equipment in the CE space, at roughly 30,000 in 2011. This is despite the fact that excavators came to India before the backhoe and we do not have any reasons to believe that the utility of the backhoe will diminish." Talking of the supposed drift towards wheel loaders, Sachdeva says, "The wheel loaders (articulated chassis) market, not only in India but the world over, is skewed in favour of 3T/ 5 T and above capacities, as smaller capacity wheel loaders face price challenges. The smaller capacity requirement is catered to by the backhoe loaders, loader variants of backhoe loaders or the tractor- based loading attachment and hence the requirement of wheel loaders is not in decline; , the growth in wheel loaders is coming from different a segment which requires 3T or more capacities and as such, does not indicate any impact on the backhoe loader market." Says Vijay Sharma, Executive Director, Terex Equipment, "It is beyond any kind of doubt that the backhoe loader has been the flag-bearer of the construction equipment industry in India for the last decade. From the levels of 3,000 backhoes in a year to over 33,000 units in 2011, the Indian backhoe loader industry has seen phenomenal growth. During the next three to four years, we firmly believe that the backhoe loader industry will touch levels of 45,000-50,000 per annum. However, at the same time, 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 the levels of backhoe loaders in terms of volume over the next few years." He adds, "We don't think that the projected growth in case of mini-excavators is going to impact the sales of backhoe loaders in India. This is mainly because of the fact that the backhoe loader is a versatile machine and can be used for numerous applications in the field of earthmoving. Of late, there is higher awareness about the utility of this machine in rural markets and more farmers- cum- entrepreneurs are starting to own these machines." Kairas Vakharia, Business Head, Mahindra & Mahindra, opines, "Crawler excavators are present over a wide range of tonnage starting from 6.1T to 50T above and see to the needs of large-range customers who demand machines that can help them finish their projects faster. However, backhoe loaders are more versatile machines which fit a slightly different market where a customer enters the earthmoving business and then moves onto bigger things, with the help of a backhoe loader." He further adds, "Initially the price of mini- excavators was high in comparison to backhoe loaders. Today their price has come down to the level of the backhoe loader. This can make customers drift towards mini- excavators because of their speed in comparison to the backhoe loader; however, this shift is very slow and should not make any drastic impact on the backhoe loader market. Sondhi sums up:"Inclusion of earthmoving equipment in the Focus Product Scheme will go a long way in upgrading the quality of the products. The earthmoving and construction equipment manufactured in India are at par with international standards, the suggested inclusion will further help in bringing advanced manufacturing skills in operations and will boost the image of India as the engineering hub for the world." Despite the prevalent talk in the country and outside about the policy paralysis of the government, the construction equipment industry appeared confident about retaining its growth momentum. The sales forecast for backhoes by Off-Highway Research is pegged at a target of 36,000 units by 2015, up from 30,000 in 2011, whereas for the crawler excavator alone, the forecast is 35,000 units.