Technology, total solutions and the highest customer satisfaction will be the critical success factors for each player in the big time growth story of earthmovers, in India´s growing economy.
Material and earth movements are the major work content of all infrastructure developments and mining activities. Front-end loaders, backhoe loaders, dozers and application-centric equipment as options for the users to choose from to suit individual requirements. According to market reports, this industry is expected to grow in double-digits CAGR in the domestic markets and also be the base for exports, over the next decade. Equipment India focuses its sights on the infrastructure construction applications and the new generation earthmovers being offered by suppliers as total customised solutions in order to holistically address customers´ needs commensurate to the job at hand.
Countries with emerging markets are being focused by construction equipment providers which are expected to show a huge potential for industrial developments in the future. The major driver for growth of this sector is the increasing investments done to improve infrastructures. The major factors that will affect the construction equipment market in near future are global economic growth, public private partnerships, increase in oil prices, increasing government expenditure in infrastructure development, industrial, commercial and residential investments and a few more. The market is expanding with the increasing demand for residential and industrialisation and commercial infrastructure developments. Improving economic conditions are also helping in growth of this sector.
The construction equipment market is constantly enhancing with changing technologies and huge infrastructure developments. The companies in this market rely on local and regional distributors to enhance the geographical presence in the market. Inorganic growth strategies such as acquisitions are followed by companies to cope with increasing demand for construction equipment in key markets. This helps companies to create a large customer and partner base in key markets. The change in operating conditions and applications requirements for construction equipment make it necessary for manufacturers to invest in R&D to come up with new products.
Additionally, the market share of APAC region was valued to be over 60 per cent in 2015. It is expected that the region is going to show similar trends by the end of the forecast period due to the increased requirement of infrastructure, public utility and commercial and non-commercial construction in emerging nations of China and India. The region is marked with increasing population, rapid urbanisation and need for economic development. This drives the market for such construction equipment to support the population and urbanisation in the nations of Asia pacific. The global construction equipment market is expected to cross $200 billion by the end of 2022 with a growth rate of approximately 8 per cent in the forecast period.
´India is a bright spot today in the globe and every manufacturer would like to establish a base in India to encash on the opportunity. An entry strategy into India for many manufacturers is accompanied with commercial terms and conditions which tend to attract a customer in in the short term. However, we find that such temporary spurts have not made any significant impact in the long term.What the customers in India are looking for is the best quality and reliability accompanied by superior parts and service support. The Indian customers today are well informed and are aware of the USPs of the manufacturers and are making the right choice of equipment. L&T has had over seven decades of experience in the construction and earthmoving equipment and has been able to adapt with the changing times. The Government has been quite supporting in India and regulations being brought in have only helped the industry evolve,´ says Arvind K Garg, Executive Vice President and Head - Construction and Mining Machinery Business, Larsen & Toubro.
Earthmover manufacturers: Trending to one-stop-shops To begin with, Indian customers have outgrown the concept of using one or two models of an earthmover for all purposes. Having reconised the importance of operational excellence in totality, they are now on the lookout for the best of class earthmovers which exactly meet their operational requirements. As a result, the suppliers have suitably expanded their range and product portfolios to meet the market demands as one stop shop entity. A preferred concept, by the Indian buyers.
The past decade has witnessed many domestic and multinational manufacturers based out of the country were earlier recognised as suppliers of one or two equipment categories like JCB for backhoe loaders or L&T for hydraulic excavators and so on. However, in today´s context they all have emerged as multi product vendors for numerous applications in construction and mining.
Says Jasmeet Singh, Head - Corporate Communications and External Relations, JCB India,´Yes, we have come up with larger tonnage earthmoving equipment. We have already showcased most of them in the recent Bauma Conexpo India 2016. In the excavator range, we launched JCB 30Plus (3 tonne mini excavator), the JCB 220LC Xtra (22 tonne tracked excavator), the JCB 305LC (30 tonne tracked excavator) and the JCB 370LC (37 tonne hydraulic excavator). In wheel loaders, we have 5.5 tonne pay load machine, the 455ZX. We also have 430ZXPlus and 432ZX wheel loaders which are in 3 to 3.5 tonne pay load capacity range.´
He adds, ´We started on one global quality. This genuinely means that any factory of JCB can supply any machine to any part of the world, in terms of capability. The product specification might vary, but the capability of the manufacturing facility and process will be the same all over the globe. In 2011, the domestic market started to grow year-on-year. That raised the volumes of the market and has made us further improve our internal set up and achieve that one global price phenomena. In 2011, we were exporting to just 5-6 countries, but in 2016 we have already exported to 74 countries. Even during the downturn we have achieved a lot. We set up a facility in 2014. The fact is that we knew where the market was heading. It has turned up sharply. We had to ramp up the existing capacity. And that is why today we are exporting all our products to 74 countries.
For compactors, in fact we are the manufacturing hub for the global market.´
Dimitrov Krishnan, Vice President and Head, Volvo CE India, says, ´Volvo CE has one of the most comprehensive ranges of earthmoving equipment available in India. Our company has been building excavators for over 75 years. Our range in India stretches from the popular EC140B Prime, with a 14-ton rating, up to the EC950E, which launched last year and is the largest excavator we have ever produced, with a 95-ton rating.´
Garg elaborates on one-stop-shop products and solutions from hins company, ´L&T pioneered the launch of excavators and vibratory compactors in India. On the excavator range, we offer the mini excavator to the mega mining machines from the Komatsu stable. Our starting range is the PC71 which is a 7T class excavator to the 60T class L&T 300 CK in the construction range. The range consists of the: 7T- Komatsu PC71, 13T - Komatsu PC130, 21T - Komatsu PC210, 30T - Komatsu PC300, 35T - Komatsu PC350, 45T - Komatsu PC450, 60T - Komatsu L&T 300 and a range of mining excavators. On the wheel loaders, we offer the 3T - L&T 9020 and L&T 9020 SX machines, and in 5T - Komatsu WA380 wheel loader. The compactor range consist of: 4T - L&T 491 tandem compactor, 10T - L&T 990 HF tandem compactor, 11T - L&T 1190 soil compactor, and 24T - L&T 2490 pneumatic tyre compactor. Our dozer range starts from the 105 HP Komatsu D39, 266 HP Komatsu D85 and extends to the mega mining dozers. On the graders for the construction sites, we offer the 150HP Komatsu GD535 and the 195 HP Komatsu GD 555. Attachments like rock breakers and bucket crushers are also on offer. We will also be launching the L&T skid steer loaders and hydraulic pavers shortly this year. L&T also offers the Scania range of tippers in India.´
Project type, size, duration, location and ground conditions are the primary dictates of the equipment selectors. Depending on each factor, need to deliver the work before schedule and maintaining sustained profitability are the major differentiators of the market segments. The new entrants in each type of earthmovers are larger capacity equipment.
Says Singh, ´Our assessment is that the project size is going to be larger and the way the market is standing out, there is a need for larger equipment because the equipment size and project size have to be matched. At the same time, the demand for smaller projects is not going to reduce. That is why we have the range of mini excavators and other smaller capacity equipment. The scope for large capacity equipment is on the rise with projects in mining, highways, irrigation, etc are opening up. That is why we want to be ready when the demand picks up in future.´
´Volvo CE is the only major manufacturer with a strong market presence in each of India´s big three equipment sectors: road building, mining and general construction. In road building our EC140B Prime and 21-ton rated EC210B Prime are both very popular; in mining applications our 48-ton rated EC480D is extremely popular - being the best-selling large excavator in India. Our larger 75-ton rated EC750D launched in 2015 and is also proving popular in mining s. For general construction our full range, from the EC140D up to the EC380D are used in a variety of applications and for a variety of tasks,´ comments Krishnan.
Paradigm shift: customers´ mindset
Modern India is driving acceleration of all infra developments in the country, in a competitive arena to achieve its targeted goals. Contractors and miners are clear that there is alternative to excelling in all aspects of their business, in order to survive in this scenario. Most are breaking away from their past practices and adopting fresh angles of approach to their vendors. Industry speaks about the paradigm shifts they are witnessing in customer mindsets.
Comments Singh, ´In terms of technology, currently we are all talking about emission, which is very important. It is progressing in the right way and we all have to match up with the norms. Currently, in all the wheeled equipment, there is the regulation of BS-III. As and when it moves up, we will continue to invest in technology. The other change in terms of technology is Telematics. It is the latent need and has really come up in the forefront. Till recently, no one was speaking about it. But now customers are coming forward and seeking to install some of the latest Telematics technologies. There are around 30,000 JCB machines in the market with our Telematics technology, LiveLink. There is a great demand and enthusiasm among older customers also getting the equipment retrofitted with LiveLink. They see the advantage in terms of tracking the machine operations, operators and day-to-day site management. So LiveLink helps in efficient site management. Site efficiency is directly linked to better site management.´
According to Krishnan,´Customers are looking to get higher productivity from their machines combined with lower costs of operation and better reliability. All three factors are closely interlinked. At Volvo CE, our own machines remain popular because of the excellent fuel efficiency they offer. This not only lowers costs for owners, but also contributes towards a cleaner environment on site. Work in India at present is best characterised by the need to do more. Production targets in sectors such as road building and mining are very high. Customers not only need higher productivity from their machines, but they also need more of them. And the ones they have must be able to deliver reliable performance.´
Garg indicates, ´Customer expectations have, as always, been the products with superior technology, fuel efficiency, productivity, longevity and above all a good parts and service support network. If you consider the technology part, as an example, the customers in the past wanted a monthly report of the equipment maintenance history from the OEM but today they are looking for a complete asset management solution and access to information relating to the asset on their laptop/mobile devices. Remote asset management has become a way of life today.´
Technology and quality will drive the future Sustained market leadership is a common vision for all. At every stage of the journey, a new set of fresh challenges is being lodged into the field, in various forms. For example: India leap frogging emission norms, changing project specifications or accelerating project schedules and others. Some of these are foreseeable while others are surprises. However, technology and quality will be the common denominators for all in future. These key deliverables are the prime focus of the industry.
´Quality today is one of the basic requirements a product or a service will have to offer to continue to be present in the market. However, the customer expectations are also increasing day by day. The life expectation of the engine and the drive line of an earthmoving machine have come a long way from a few thousand hours of operation to more than a few million hours of operation. Continuous innovation and technological advancements are what can build in such quality and reliability.
Increase in the consciousness of environment and the conservation of mother earth have also gained a very important role in today´s scenario. Eco friendly machines and Hybrid technology are some of the upcoming technological advancements which will drive the future. Product versatility is one more fast emerging trend,´ says Garg assertively.
Singh says, ´There was a time when no one was speaking about technologies. But in the last few years, all our contractors had the exposure to visit major exhibitions world over to understand what are the latest technologies are coming up in the global market. So they are now absolutely tuned with what is happening world over and they are now thinking of technology. Today the highest selling equipment is not the cheapest one. Earlier the business was happening based on price. But now it is happening based on the value and uptime of the machine. People are talking about features, reliability, air-conditioning, emission, Telematics and the like. My personal view is that all innovations and developments have to come at a price point where the customer can buy at affordable price and it has to get some value.´
According to Krishnan, ´Volvo CE is widely recognised as being one of the industry´s leading companies in terms of innovation and technology. We very much see technology as a driving force for good in our industry and something that will be increasingly prevalent in coming years. Late last year we unveiled our prototype LX1 wheel loader and HX1 carrier, both of which seized the attention of the global equipment business. Bringing greater automation into operations, particularly duty cycle operations, is something that our customers are eager to see and we will continue to work on making this commercially viable.´
Technology adoption and adaptation at affordable costs
Domestic buyers have, are and will continue to be price sensitive. Although it is true that technology will drive the future, its adoption and adaptation for the country at affordable costs, is another matter. For a better understanding, it must be noted that most of the advanced technologies and systems have emerged in highly advanced countries, in order to address highly sensitive problems specific to them. For example: Very strict labour laws on work time per week or high wages or inclement weather or low population requiring higher automated mechanisation and the list continues. However, India does not have identical issues but need to adopt the latest is evident. Therefore, all new technologies have to be adapted to suit India´s requirement of low cost, by the vendors. Although the domestic buyers are steadily accepting better technologies, they are not willing to pay disproportionate costs. This situation is a huge challenge as well as an opportunity for suppliers to innovate. According to Krishnan, ´India is less price sensitive than it was previously, reflecting how the market is maturing. Correspondingly, there is growing acceptance of new technologies and the benefits they bring. As with all these things, it´s important to strike the correct balance. Having a manufacturing plant in Bangalore means we are better-placed than most to get this balance right, creating products locally that will suit local needs, but still with the advanced design, productivity and reliability that Volvo customers expect.´
´India has been price sensitive but has provided opportunity to manufacturers who have tried to introduce the latest technologies. On the excavators, we introduced the CLSS technology in the early 90s which was well accepted in the market.
Subsequently, we bought in the CRDi technology on the engines followed by introduction of Information and Communication technology and features of remote asset management,´ opines Garg. He adds, ´Komatsu uses Telematics that capture signals from the machine and transmit machine operational data and maintenance cautions which machine owners, service providers and Komatsu can access this data on smart phones and laptops. Now with the extensive use of smart phones, customers would like to interact with the OEM and service providers through the Apps and we are gearing up for such requirements. In this journey of pioneering new technologies and features, we have found that the customers are willing to pay for it if we can add value to their business.´
Impact on manufacturing and quality deliverables
Frugal manufacturing capability of the country was a prime attraction for international manufacturers to set up their production bases in the country. In early stages, this capability worked well for them. However, the technology global drive has long entered India. Further increased customer acceptance of such technologies is driving change at the manufacturers´ end to revamp or upgrade manufacturing facilities and quality systems.
Says Singh, ´We started on one global quality. This genuinely means that any factory of JCB can supply any machine to any part of the world, in terms of capability. The product specification might vary, but the capability of the manufacturing facility and process will be the same all over the globe. In 2011, the domestic market started to grow year-on-year. That raised the volumes of the market and has made us further improve our internal set up and achieve that one global price phenomena. In 2011, we were exporting to just 5-6 countries, but in 2016 we have already exported to 74 countries. Even during the downturn we have achieved a lot. We set up a facility in 2014. The fact is that we knew where the market was heading. It has turned up sharply. We had to ramp up the existing capacity. And that is why today we are exporting all our products to 74 countries. For compactors, in fact we are the global manufacturing hub for the global market. There was a time when everything was done and controlled manually. But with the LiveLink application within our Telematics system, the efficiency of support has gone up.´
Krishnan opines, ´Our commitment to producing advanced construction equipment that offers customers a competitive advantage will remain constant. At the same time, we will strive to build machines that are best-suited to customers. Having our advanced Volvo Production System, which guides our manufacturing operations, will help. VPS combines elements of lean manufacturing with the latest technology to help us build the highest quality construction machines around. It also helps us offer more customisation for particular product lines allowing us to tailor them to individual markets. We believe that modern equipment manufacturers will need to be agile enough to manufacture a range of models, with greater options, in shorter times. To do that, processes such as the Volvo Production System are a must.´
Garg highlights L&T´s standpoints, ´Our manufacturing systems and the emerging design trends have been adapted with the Customer First policy. We are continuously innovating at the GEMBA Work place at the customer sites, our manufacturing facilities, design centres and the distribution network. Hence we don´t see it as impacting us in any way as we are always desiring to be change agents. The DNA of L&T and its business partners has been to continuously innovate and adapt to surpass customer expectations.´
Total solutions a CSF
Garg elaborates on the significance of total solutions, ´It is very essential to be a total solutions provider to be in a leadership position in the premium construction equipment space. As an example, we offer Vehicle Health Monitoring System (VHMS) that automatically records vital machine parameters on large sized mining machines. The machines are fitted with various sensors to capture vital data of various system. This data is collated on periodic basis in a form of trend line which can help the maintenance team to ascertain the health of a particular system on continuous basis. One can see how the engine blow by and exhaust temperature and boost pressure has fluctuated over a period of time, giving a tell-tale indication of the engine condition.´ He further adds, ´The L&T Suraksha extended maintenance and warranty program helps the customer with peace of mind on the equipment operation during his prime project execution period. The Full Maintenance Contract package ensures that the customer doesn´t have to worry for anything on the operation and maintenance of his assets for a very long time. We also offer Annual Maintenance Contracts and site support arrangements which are customised to the needs of the customer. We also have component re-manufacturing and exchange programs to keep the customer maintenance cost low and ensure high equipment availability. Our machine exchange programs and a certified used equipment pool give customers tremendous value.´
Singh opines, ´You look at it through the evolution of the market. Now the customers are approaching one company for the complete product range and solution for their projects. This prompts us to think that we should increase our product range. Compared to the product ranges in 2011, today we have many more range of products. The additions are compactors, mini tandem rollers, soil compactors, tandem rollers, etc. A new addition in our range is material handling where we have telehandlers. We also have skid steers, super loaders and agricultural products. In the backhoe range, we realised that we need more types of backhoe loaders. We introduced small range of 2DX, 3DX, and larger 4DX range. A customer should get attracted with the type we present.´
Says Krishnan, ´For many years now, customer support has played an increasingly important role in our industry, and for us at Volvo CE. It´s something that we see continuing into the future. A large part of our success in India is down to the scope and skill of our experienced Volvo CE dealer network. With greater pressure than ever on deadlines, customers want to know they have a reliable partner. We offer a range of Customer Support Agreements: Gold, Silver, Blue and White. Our White agreement delivers entry-level support while Gold delivers our most comprehensive service offering. Giving customers a wider range of choice can help them choose the level that best suits their needs.´
Stumbling blocks in the way
Every growth story has its own specific set of hurdles or stumbling blocks in its chosen growth path. Industry speaks on the problems visualised and mitigation measures taken by them.
Singh comments, ´I wish no. We all know that the current industry growth rate of 46 per cent is not sustainable as we are just coming out of the lag period. But in the coming years, we expect a 10-15 per cent growth. About the stumbling blocks, we cannot predict them. For example, think about demonetisation. No one had ever thought of something like this is going to happen. Take the case of Brexit, nobody thought of this kind of a policy change happen. Anything can happen that may affect business. If you are in the right direction with the right lead, you will continue to grow. There are a lot of development projects in the pipeline, be it roads, irrigation, rural infrastructure, inter-linking of rivers, etc. So I think there will be a growth momentum in future.´
According to Garg, training and skill development as the industry scales up will be a challenge. He adds, ´We at L&T are gearing up with a host of training programs and skill enhancement techniques on line and through class room to meet this challenge. We also have several apprentice training programs to bring in several unskilled youth to be quality technicians. In association with the Government of India, our Central Training Centre at Kanchipuram got affiliated as Training Partner to Infrastructure Equipment Skill Council (IESC) in August 2015. IESC is promoted by Indian Construction Equipment Manufactures' Association (ICEMA - affiliated to CII) and National Skill Development Corporation (NSDC), under Ministry of Skill Development & Entrepreneurship. We have been training operators and mechanics under Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and non-PMKVY programmes. We have invested in operator training simulators for equipment operation training facilitates across the country.´
Singh comments, ´We would like to become a full fledged infrastructure equipment partner. We would have to transform to a company which can provide all the infrastructure equipment solutions under one umbrella. Backhoe loaders will remain our major equipment range, which will be supported by excavators, wheel loaders, other material handling equipment, gensets, etc. Overall, we want to become infrastructure equipment partners for our customers. It is an exciting time. Customers in India are actually transforming. There was a time when customers only spoke about price. But today they talk about technology, energy, uptime, and compare products. This helps them to move up in the value chain.´
´We are working towards being a full range supplier of construction equipment to be a one stop shop for our customers for all their needs. We will as usual bring in the best of the technologies into India, continuously innovate to add value to our customers and stake holders to be their preferred partners,´ says Garg.
Big time ahead
Indian business climate duly supported by government´s initiatives and much better investment levels in most infra sectors, is conducive for earthmover spelling big times to come, over the next two decades.
- Shankar Srivastava