The construction equipment industry has witnessed a slight upsurge in demand; in the short term, coal sector is to further the demand and infrastructure to enhance the growth further in the next 4-6 months.
The numbers published by ICEMA clearly shows that there is a slight uptake on the larger equipment like excavators and wheel loaders. In the smaller equipment like mini excavators, backhoe loaders etc have still to pick up the trend. Elaborating the prevailing scenario and the growth drivers. Dimitrov Krishnan, Vice President - Sales and Marketing, Volvo CE India, had this to say. ´In short to medium term, the growth drivers will be coal mining and infrastructure activities; in infrastructure sector, it is primarily road projects. The Central Government has taken specific actions like the coal mine auctions making sure that power sector is getting the required coal allocation. Almost 21 blocks are already allocated and more are going to happen. This shows that they want to get moving with this and there are possibilities to solve the various issues pertaining to coal blocks. So I think, in the short term, the coal sector will drive the demand and that´s where demand for bigger equipment will grow. Then infrastructure will pick up at a later stage. Also, there can be some activity seen in urban infrastructure space in waste management, and cleanliness drive by the government. Urbanization and smart city initiatives might also drive demand for utility sector. Overall in 2015-16, coal and infrastructure (especially roads) will drive demand for earth-moving equipment.´
Says Amit Gossain, Executive Vice President - Sales, Marketing and Business Development, JCB India, ´Owing to the recent focused and bold reforms by the Government, Indian infrastructure industry is gaining momentum and as a result, we are witnessing a slight upsurge in the demand of construction equipment. The industry still has a long way to go but we are definitely on the growth trajectory.´ He adds, ´But to achieve these targets, the Government needs to ensure that all the bottlenecks are removed and the stalled projects are cleared without any further delay. The need of the hour is to identify projects of national importance and ensure they are implemented expeditiously. We need to have a mechanism in place which will streamline the on ground execution thus, ensuring a long term demand for all construction equipment.´
Says Abhijit Gupta, Managing Director, Case Construction Equipment India, ´Last few years have not been conducive to infrastructure sector including earthmoving equipment, which has declined by 15 per cent in 2013 and by 16 per cent in 2014. The decline however seems to have gotten arrested in the past few months and some green shoots are emerging. This is effective tilting the balance towards greater demand of construction equipment, esp. those pertaining to the road sector. The demand remains subdued and scattered with no clear sectors leading the pack. However at macro level Rural India is contributing consistently and now even higher than the urban India in past few years. This has been a positive and robust signal for revival in near future.´
´The growth potential largely depends on the opportunities coming up in the market and is driven by the announcement of different projects by the government. The demand-supply would not be a concern as most of the equipment suppliers including us are running with spare capacity. So even a boom is expected after the budget, the equipment supplier is ready for the demand rise. Mainly road and rail projects will drive the demand for earthmoving equipment. We also see a lot of opportunities in power and mining,´ according to Sanjay Wadnerkar, Vice President, LiuGong India.
Harpreet Singh Wahan, General Manager - Sales & Marketing - India, Enovation Controls India, ´Over the next 24 to 36 months, excavators and wheel loaders will probably see the best growth, very close to 20 per cent YOY. There are several manufacturers with product offerings but technology will be the differentiators and decider on who gets the business. Several infra projects are on the anvil and we believe they will be executed. This will drive the growth.´ Wahan adds, ´ Firstly, modifications in rules and regulations are needed to make it easy to setup and do business in India. Interest rate reduction (if and when it happens) and increased focus on infrastructure are the other factors that will drive the CE Market. We expect this budget to be a step in this direction. This if done well sends positive signals to the marketplace. Big projects then receive the necessary backing and the ball gets rolling. On the whole we see that over 12 to 24 months, the CE market should have a growth of 8-10 per cent year-on-year.´
Elaborating on the opportunities that will drive the demand for earthmoving equipment, Gossain says, ´With the Government´s renewed impetus on infrastructure, the construction equipment industry is now poised for tremendous growth. The Government has instilled a positive outlook in the country by announcing new infrastructure projects and is allowing huge investments in infrastructure industry. The new Government is also promoting domestic and foreign investment in a big way. Announcements like the US companies planning to invest $42 billion in India over the next two-three years, China planning to invest $20 billion in India primarily in building the railway infrastructure will give a huge boost to the infrastructure industry. As per media reports India´s most ambitious infrastructure project, the Rs 325,000-crore Delhi Mumbai Industrial Corridor (DMIC) took off with the DMICDC putting out bids for building trunk infrastructure in VikramUdyogpuri near Ujjain in Madhya Pradesh. The Government is investing close to Rs 7,500 crore infrastructure projects - Rs 4,200 crore for the railway project in the state besides Rs 3,200 crore for the power transmission project in Arunachal Pradesh. Additionally, the Government has introduced some notable reforms - projects like Swachh Bharat, Clean Ganga, and Make in India. Smart cities are another project which resents a huge opportunity for the CE industry.
There is a very strong case for improving the global competitiveness of India by focusing on infrastructure, ease of doing business by bringing in regulatory reforms to cut bureaucracy and improve existing taxation norms and help to generate jobs. The recent announcement that the government will set up five more ultra mega power projects of 4000MW, entailing investments of around Rs 1 lakh crore, is a big positive.
Speaking about the Union Budget and its impact on the growth story Kamal Bali, Managing Director, Volvo India had this to say. ´There is a clear focus and greater public spend on infrastructure, which was the need of the hour, especially to kick start the stalled projects and, I am sure, this will fuel growth, bring in private investment and get India back on a sustained economic growth trajectory.´