The backhoe loader industry in the past two years has grown consecutively over 20 per cent year-on-year. Manish Arora, Business Head, Mahindra Construction Equipment shares more on the equipment industry.
Which are the infrastructure segments that your equipment cater to?
The construction equipment sector in India is growing at a faster pace, driven by the huge investments being made by the government and the private sector in infrastructure development. In fact, the overall Indian construction equipment market is expected to grow by a CAGR of 6.2 per cent backed by infrastructure spending estimated to be about 10 per cent of GDP during the current five year plan.
What are the positive trends in the current market for your equipment range?
At present, this construction equipment sector is mainly dominated by backhoe loaders (more than 40 per cent of total demand) but broad-based growth is expected across products, with each segment expected to see growth. Particularly, the demand for backhoe loaders is expected to grow as it is a versatile machine and can be employed for numerous applications at the job site. The BHL industry in past two years has grown consecutively over 20 per cent year-on-year basis and we at Mahindra Construction Equipment has kept pace with this growth clocking over 1,000 units each year. Factors such as decreasing availability of manual labour and increased demand for mechanisation are expected to provide a boost to the growth of backhoe loaders and other optimised machinery for the developing world in particular and construction equipment sector in general.
How do you experience the demand trend for your products in the last two years?
Owing to the buoyant market and the product range expansion by the Mahindra CE business, we are currently operating at almost 100 per cent of the installed capacity in all three shifts but together. Since we have more product launches this year in pipeline, we are working towards expanding our installed capacity. Being a recent entrant to the industry with our first product launch in EXCON 2011, we already had additional installed capacity from the beginning in order to cater to industry demand. While it has served us well till now, going forward with ample opportunities available we aim to cater them with planned expansion within the available set-up.
How are you gearing up to meet the expected demand growth in future? What are the challenges you foresee in the growth path?
Owing to the factors already mentioned above, broad-based growth is expected all four major segments within construction equipment namely earthmoving, road construction, concrete and material handling. The combined sales of these four equipment types, which dominated the market, increased by 37 per cent in 2016 and 17 per cent in 2017. Of these backhoe loaders, crawler excavators and mobile cranes accounted for 76-79 per cent of the total market during 2013-2017. The share of mobile compressors, compaction equipment and wheeled loaders remained in the range of 16-17 per cent during the same period. We expect these sectors to continue drive volumes.
Considering the set of conditions prevailing in the country and other foreseeable factors at this moment, we believe that the market for construction equipment will follow an upward trend in the next five years. However, a marginal decline in demand is expected in 2019 due to general election. This is also backed by Off-Highway Research which forecasts the market to grow 10 per cent to 85,265 units in 2018. With growth ranging 6-8 per cent during 2020-2022, sales of construction equipment are projected at 102,965 units in 2022, surpassing 100,000 units mark for the first time.