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Moving the Heavy Earth Moving Equipment Industry in India

Major projects have been put on hold due to the economic slowdown and the iron ore mining ban in the states of Goa and Karnataka have led to a sluggish market with people being reluctant about investing in the industry at these times. Fund flow in the industry has slowed down and the investors are shying away from betting their money here.

The first hit to the segment was the iron ore mining ban in Goa and Karnataka that put a lot of men and machines out of work. People associated with the mining industry both directly and indirectly have had to take a beating. One such industry is the heavy earth moving equipment industry leaving owners with huge dues on machines and the machines lying around as a liability without any work at hand. In these conditions the industry has been looking at newer alternatives to keep the show going as they best as they possibly can.

However with the coal blocks opening up for mining and Make in India initiative, the prospects for the industry to get back on a growing trajectory are rather bright. The boom in the infrastructure industry for the construction of IT parks, highways, airports, new smart cities and the increasing demand for urban infrastructure are bound to bring positive effects on the earth moving industry as the demand for the machines will increase. The increased demand will bring about an increase in the number of machines and skill power required to operate the machine.

A whole new sector will burst up for after sales services in the industry. The entry of new players in the industry will also add to the demand of both old and new machines. Additionally the rental market for equipment is all set to grow in India to meet the rising demands with the stalled projects up and running again and new ones being awarded.

A major chunk of the demand for the earth moving equipment will come from the government backed infrastructure projects. Another thing to note is that the focus is shifting towards introduction of products that are low on initial investment to stay afloat in the rather difficult market conditions. With machines becoming more sophisticated with every passing day, there is a huge short fall of well trained professionals who can operate these machines to their full potential and service them as and when required. The industry is taking up initiatives to fill this gap between the demand and supply for trained man power to make the most of the boom in the industry.

As both the global and national economy get back on the growing track so will the earth moving equipment industry in India.

Trends 2016: Construction Equipment Industry in India

While the industry is all set to grow like never before, what is required is forward thinking by the manufacturers to crack this dynamic field and the market that is geared up to move up after a rather long flat slump. Here are what we believe will be the trends in construction equipment industry in India.

1. Key to service: Service has always been an integral part of the CE industry. However in the time to come, it will become difficult for manufacturers to distinguish themselves only on the basis of their machines. This is where the dealers come into play and their role becomes pivotal. Construction industry needs machines to be repaired proactively and mostly on the same day barring which all work comes to a halt. Same day service will become an increasing demand and an important variable when considering which machine to buy. Preventive maintenance will become an increasingly important factor given the boom in the number of projects.

2. Education: New technologies are being integrated in the construction equipment industry in India on a regular basis. It will no longer be sufficient to just sell the machine. The buyers and operators will need to be educated about the newer technologies that the machine comes equipped with and how to make the most of it. Even field service providers will need to be trained to deal with the fresh technology. While field service is becoming increasingly important, it is also becoming increasingly difficult due to use of complicated technology.

3. Rise of the mobile: The mobile has played a crucial role in changing how the consumers interact with both the machine and the company. People now go to their mobiles to diagnose what the problem with the machine is instead of opening the glove compartment to check the handbook. Now the customer wants to have every minute information about what is going on with their machine. Mobile apps and telematics will play an important role in preventive maintenance, diagnostics and field maintenance to reduce down time of the machine.

4. Learning from other industries: Forward thinking manufacturers will adapt the latest technologies from other industries and apply it to their own to stay ahead in the game. This will lead to better machines being created at possibly lower prices. It is becoming an extremely competitive and forward thinking is becoming key to staying ahead of competitors.

5. Consumer evolution: The consumer is fast evolving and in becoming more demanding in terms of quality and services. Sales no longer end at selling a machine, after sales service is becoming key. Thanks to the internet, the consumer is demanding more in terms of everything.

These trends are likely to shape the CE industry in the years to come and the ones keeping up with the trends and changes will most likely be the ones making their moolah.

Impact of Infrastructure Growth Challenges on Earth Moving Industry

ear end i.e., March 2017, mainly due to major infrastructure projects announced and increased government spending for the same.

The infrastructure investment targets outlined by the government are aggressive and signal a positive intent, which could mean huge potential for Indias earth moving equipment industry. As a matter of fact, major earth moving equipment manufacturers are bullish about the Union government’s focus on road and highway sector, urban development and other infrastructure projects and believe that it will act as a catalyst in the growth of the segment. However, there are major challenges on the path to growth.

Challenges to achieving infrastructure targets

  • Limited long-term funds: Funding for infrastructure projects is a constraint because of limited public funds, which leads to work-in-progress projects being stalled, thereby, adversely impacting the growth of earth moving equipment industry.
  • Land acquisition delays: Across infrastructure projects, delays as a result of land not being acquired by the time projects are awarded have affected many projects both before and after they start. Due to this, the demand for earth moving equipment is also affected.
  • Clearance delays: Delays related to forest and environment clearances heavily impact infrastructure projects. Clearance policies are often not used objectively, providing different rationale for clearances on different occasions. Not only does this impact the speed of clearances, it also sends uncertain signals to investors and often leads to pullback of investments directly leading to low demand.
  • Inadequate planning: Many times, the infrastructure plans do not necessarily incorporate an integrated view that encompass all facets of development, including transportation, housing and effective land use, to name a few. For example, there is general lack of coordination between central, state and local agencies for road construction projects and planning for urban transportation. Because of changes in the ecosystem, the master plans developed for urban development are often outdated by the time they are implemented. Thus, adversely affecting the market.
  • Low financial viability: Many infrastructure projects have low internal rate of return because they are heavy on investment and the revenue stream often does not reflect fair costing. Because infrastructure projects tend to be multiyear programs, working capital cycles are long and operators are stretched for margins. Thus, interest in infrastructure development projects is often low, especially from operators looking to invest in short-term projects with good financial returns. This also impacts on the industry.
  • Weak governance. Multiple bodies acting at all levels across central, state and local governments is a common phenomenon across an array of infrastructure development areas. The fragmented nature of governance not only delays projects, but also conveys conflicting signals to stakeholders, thereby, adversely affecting the demand for heavy earth moving equipment.

In a nutshell

Many analysts as well as earth moving equipment manufacturers of the country believe that an array of proactive initiatives taken by the government as well as others to boost infrastructure segment in the country can in turn, help the industry grow.

Opportunities Galore for Earth Moving Equipment Manufacturers in 2016-2020

Of the various segments of heavy construction equipment industry, the earth moving equipment market is the fastest growing across the globe as well as India.

In fact, in India, the industry is expected to grow at a healthy CAGR of 20-25 per cent over the next few years, from FY13-14 levels of about 48000 unites. This would bring the market to between $16 billion and $21 billion by 2020, up from today’s $3 billion. Primarily, two factors will help in this growth of the industry i.e., increase in demand from end-user industries and higher adoption of heavy construction equipment in traditional construction applications. These trends are expected to open plethora of growth opportunities for the earth moving equipment manufacturers in India.

Opportunities galore for moving equipment earth manufacturers

  • Demand for is likely to rise as a result of growth in traditional end-user industries including construction and mining. Such an increased use of these equipment in previously traditional applications to speed up projects will be seen especially in time-sensitive projects.
  • Urbanisation will also drive the demand to meet residential, commercial and infrastructure development needs.
  • New players entering the market will make competition stiffer, thereby, making products more affordable. This will further deepen the markets to cover users with equipment requirements that previously had low access.
  • Keeping in mind, the facts that increased productivity and the reliability of equipment ultimately translate into higher profitability from fewer defect-related claims and the avoidance of death penalties, the demand for such equipment will only move northward. End-users will realise that earth moving equipment can significantly reduce the cost of large-scale projects; hence, they will demand more in the future.
  • Last but not the least, knowing the clear benefits of using equipment over manual labour and traditional methods like improved quality, timeliness, better project financials and safety, end users will move towards this segment happily.

In a nutshell

The high construction and infrastructural growth, technological developments, their adaptations and rapid urbanisation will fuel the growth of the industry in the country. What else? Increasing government spending on infrastructure development including roads, metro rails, flyovers and commercial complexes will also help further to surge the market growth over the next five years. It is also believed that the industry will see major agreements, contracts, joint ventures, and partnerships in future. These strategies will further aid manufacturers to create a large customer and partner base.

Overall, in the coming five years, the segment will mainly see increased investment in infrastructure, continued dominance of price and value-focused customers, deeper engagement of global Original Equipment Manufacturers (OEMs) in India and increasing opportunities for exports. Thus, by 2020, it is expected that the earth moving equipment industry in India will be sky rocketing.

Tapping The Global Building Construction Equipment Market

th is primarily the increased investments in infrastructure sector including residential and commercial building construction segment worldwide.

Decoding The Global Trends

Demand within the global building construction equipment manufacturing industry is anything but homogeneous with certain countries and sales regions significantly outperforming others. We look at these global market trends and what is in store for building construction equipment manufacturers in India:

  • The Asia-Pacific market including India is expected to account for much of the growth in the global heavy construction equipment sector as construction activities will continue to increase in these regions. The Asia-Pacific construction equipment market is supposed to grow at a CAGR of 10.2 percent during 2015 to 2020.
  • The Asia-Pacific region, with China at the forefront is expected to be the key region for aggregate demand due to its huge government-led investment in new transport and other vital infrastructure. In fact, this region’s share of overall global aggregates demand is believed to grow substantially over the next two years. Such a big demand for aggregates will definitely go hand in hand with big demand for building construction equipment.
  • The demand for construction equipment is set to rise in Malaysia, Singapore and other Asian countries as well.
  • Growth in North American market is expected to remain moderate in times to come.
  • After experiencing construction equipment oversupply issues from 2007-2012 in some of the Africa/Middle East region’s wealthier nations, the market here is expected to advance at a faster pace in the five years.
  • Despite the rollercoaster ride of the construction equipment sector in Europe, the demand is expected to increase in future in the region.
  • For US, the outlook for the construction equipment industry coupled with positive mortgage industry measures looks positive due to the revival in residential as well as non-residential construction measure.
  • An expanding economy coupled with increased government spending on infrastructure is forecasted to help the Chinese construction industry to achieve a CAGR of 9.72 per cent over the period of 2014-2018.
  • It is estimated that the South Africa’s construction industry will achieve CAGR of 8.93 per cent during the period of 2014-2018.
  • As for India, according to the Indian Construction Equipment Manufacturers’ Association (ICEMA), India’s construction equipment market is expected to grow by a healthy 20-25 per cent over the next few. This would imply a US$16 billion-$21 billion market, up from today’s $3 billion.

Overall, the huge demand for heavy construction equipment from emerging as well as developed economies is expected to accelerate the growth of the ECE market. CE manufacturers in India can take advantage of this trend.

Outlook for ECE manufacturers in India

Keeping these global trends in mind, building construction equipment manufacturers in India have a very bright future. If experts are to be believed, then next few years can be the right time for ECE manufacturers to launch new products in both domestic and international markets. Various strategies can be adopted with an aim to target international markets. They can look at expansions, agreements, contracts, joint ventures and partnerships in the sector to garner a larger share in the market. Moreover, collaborating with other equipment companies could be the key to success. Alliance across industries due to the entry of more diverse and technology-driven products into the marketplace can also help the Indian ECE manufactures to gain a larger share of the global market.

Why the backhoe loader is an ideal heavy earth moving equipment!

For those newly venturing into the construction industry to claim their moolah from the renewed boom in the industry, here are our top reasons why the backhoe loader is an ideal heavy earth moving equipment in addition to being a brilliant piece of engineering.

Size and Power: The BHL is a rather compact machine, but it packs more power than one would assume. With peak gross torque in the range of 321Nm @1300-1700 rpm it is a huge explosion in a rather small packet. Gross horse power in a range of 83 HP @ 2300 RPM is sufficiently high for a machine the size of a BHL. It is this combination of small size and great power that adds to the inherent appeal of the machine to the operators and owners alike. Its operating capacity in both vertical directions are much higher compared to other machines of a similar compact size.

Versatility: There is no denying that the backhoe loader is a versatile piece of equipment. While it serves as an excellent heavy earth moving equipment, it is also very useful for trenching, excavating, breaking asphalt, uprooting trees, clearing ground etc. The BHL is a single machine that can do the work of 3 or more on a smaller work site saving a lot of expense in terms of machine requirement for various jobs.

Ease of operation: BHL’s can be operated with ease without stressing out the operator much when compared to other machines used for similar operations. With the new technology being adopted at a rather fast pace, ease of operation has increased with the levers being replaced with joysticks and the cabins being made more comfortable for the operators. BHL cabin’s these days come equipped with radio, two way speakers, comfortable chairs and air conditioning to help operators work with increased efficiency.

Sound technology: Given the fact that backhoe loaders occupy more than 45% of the market in the CE industry, sufficient money is spent in upgrading the technology to make BHL’s better in terms of the manufacturing costs, over all pricing, materials used in manufacturing, fuel efficiency, the quality of the machine and comfort of operation. A good number of hours are spent on R&D to improve the good to better. Money wise: BHL’s are becoming better and easy on the pockets with passing time. While buying a BHL may not be suitable for all, given the machine’s popularity, it is widely available on rent and lease as an out from having to block a sizeable capital in acquiring the equipment which could be better used elsewhere.

All in all no matter what the argument, the BHL comes out as a clear winner as an ideal and versatile heavy earth moving equipment.

Building construction equipments Industry: Overview for 2016

That being said, manufacturing of construction equipments for building is on a rising trajectory to meet the requirements of increasing urban and rural infrastructure. With 2015 seeing slow but drastic changes to make the environment friendlier for growth, here is a brief over view of what can be expected in the months to come.

The trends for the coming months will remain to be urban rural and transport infrastructure. With the rapid increase in the need for infrastructure, the demand for building construction equipments is also increasing at an unpreceded rate and will continue to do so in the coming months. With the huge number of smart cities that are planned, the new growth in the CE industry will easily be absorbed.

The number of ongoing projects is increasing and will continue to do so, especially given the new tenders that the government is passing one after the other. The demand for new heavy equipment will rise steeply in addition to a boom in the old equipment market and the rental business. In addition to the construction industry new segments like commercial projects, mining, agriculture, etc are also shifting to standardized equipment adding to the demand of the machinery.

Rental business is still in its initial stages in India and penetration is surprisingly low as of now, but with availability of easier financing the scenarios is set to change. Rental is a good option for small business owners and new ventures in the industry. Keeping that in mind, it would be wise to assume that the rental business will boom in the tier II and tier III cities where capital is a constraint. While there are growth opportunities, there are challenges too. Here are some of them to throw some light on the current scenario. The market for used equipment is not well developed in India and the resale value is also meager despite products being in sound condition. This is becoming a major challenge for the market players. In addition to it low rental penetration is still a problem and will take time to grow posing yet another challenge. Low penetration also means less availability of options and difficulty on cutting down on capital expenditures. Lack of skilled labor is another huge challenge, the supply for heavy equipment operators and skilled experts is falling short to meet the heavy and increasing demands of the industry. In addition to it there is no stability in the demand in terms of demand and pricing thus making things difficult for equipment suppliers.

While there are challenges, they can be met with strong collaboration between the government and private players’ to help stabilize and create a suitable environment for growth to help the industry meet its full potential.

Building Construction Equipments In India

. In the past most construction equipments were either imported from other countries or manufactured in India by foreign companies or their subsidiaries in India. Off late thanks to the initiatives of the new government this scene is changing to become more favourable to the manufacturers both domestic and foreign. With the manufacturing of the much required building construction equipments happening in India now, the products are becoming cheaper and competition for superior products more intense. No longer will to Indian market have to spend exorbitant amounts of money to own the best available technology in the industry.

Construction equipment manufacturing as an industry is all set to grow to become a $21 billion industry form today’s $3 billion by 2020 as per forecasts of the ICEMA. These forecasts were made before the regime of the new government an in light of the new initiatives; the industry just got a huge boost to not only reach the $20 Billion mark but to exceed it with ease. Along with manufacturing, the flood gates have been opened to the lesser known after sales and rental market of construction equipments. While the rental industry is at large in foreign countries, the market is still in its infant stages in India and is slowly but steadily taking roots and is expected to grow many folds in the years to come.

On a broader scale, the construction equipment as an industry will create more than a million jobs in the near future given the rise in the number of infrastructure tenders passed by the government. With the growth of infrastructure there will be a staunch rise in the need for skilled labour to keep up with the new tech savvy equipments in the industry. It has also opened the gates for training institutes to make money from the growing needs of the industry for skilled labour. A lot of companies like L&T have already started off with certified training centres to meet the growing demand for skilled labour to operate the machines.

When it comes to technology, the buyers are becoming more aware of the global trends and are demanding the same from the domestic manufacturers. While the technology is slowly but surely finding its way to the heavy duty machines in India, we still lack the infrastructure to make the most of the available technology. Say for example, in foreign countries, IIOT is all the rage and even the equipment is placed on site depending on the data provided by the GPS and the instructions are directly relayed to the machine to take care of the work. The digital infrastructure in India is not that strong to support that kind of technology just yet.

That being said, the construction equipment industry on a whole is on a roll and well on its way to become the largest construction equipment market in the world.

Market Of Earth Moving Equipment In India

Earth moving equipment market in India has been witnessing strong growth over the last few years on account of increasing demand from the construction sector across the country. The demand is also growing owing to increasing government spending on infrastructure development including residential and non- residential projects. Further, increasing mining activities are also driving the market for earth moving equipment. This continuous growth in infrastructure, mining and construction projects is anticipated to enhance the application scope of earth moving equipment.

Thus, the construction and earth moving equipment market in India is expected to grow at a healthy CAGR of 20 to 25 per cent over the next few years, from FY13-14 levels of 48,000 units. This is supposed to bring the market to $21 billion by 2020, up from today’s $3 billion. Among all the industries, the key demand drivers going forward are likely to be road construction, urban infrastructure, irrigation, real estate, construction and mining.

Earth Moving Equipment At A Glance

Earth moving equipment mainly comprises excavators (compact excavator, dredging, dragline excavator, front shovel and others), loaders (skip loader and wheel loader), backhoe loaders, construction tractors and others (grader, scraper, track loader and material handler etc). Among all earth moving equipment, backhoe loaders are flourishing well in India and have a very bright future in the country. At present, it comprises 65 per cent of heavy earth moving equipment segment.

The backhoe loader, consisting of a tractor, front shovel/bucket and small backhoe in the rear, is a versatile piece of equipment and is therefore, often the only piece of heavy equipment brought onto small to medium landscaping projects. A backhoe can duplicate the work of a bulldozer, front end loader and excavator. The backhoe loader also has the advantage of being driven directly to the different job areas as opposed to other specialised machines which need to be towed into the site and require external power sources. Thus, backhoe loaders are quiet popular in India and the country is the second largest market for backhoe loaders in the world. Followed by backhoe loaders are the excavators which are also very popular in the earth moving equipment segment.

Issues To Be Addressed

Overall, the Indian earth moving equipment industry is poised for excellent growth in the coming years, based on India’s overall manufacturing sector and infrastructure growth. To leverage this opportunity, Indian construction equipment manufacturers need to focus on developing individual and pooled capabilities to develop global competitiveness across the sector. Collaborative endeavours to provide integrated services, industry bodies to promote the industry’s interests and working with the government to promote technology development are some of the key measures that should be taken in the future.

Bright Future Of Earth Moving Equipment

In a nutshell, increasing demand for construction and infrastructure activities is anticipated to augment earth moving equipment market growth over the next few years. Increasing government spending on infrastructure development including roads, metro rails, flyovers and commercial complexes will further help to surge the market growth over the next few years.

As a result, the heavy earth moving and material handling equipment segment is projected to grow at the CAGR of 8.42 per cent from 2015 to 2020. It is believed that the key players in the segment will have to implement different strategies such as expansions, agreements, contracts, joint ventures and partnerships to garner a larger share in the market.

Problems Faced By Construction Equipment Manufacturers In India

While the potential for growth is tremendous, so are the challenges. A lot of changes are required both inside the CE ecosystem and outside. Here is a brief over view of the current problems hampering the growth of the CE industry.

Basic infrastructure for sustainable growth is missing. These are the basic challenges on the highway to growth.

1. Procedural Clearances: The clearance procedure for the industry involves multiple agencies and the process is painstakingly slow. Due to lack of ground coordination between the involved agencies, basic clearances take up a lot of time and are rather difficult to get. Policy changes are proposed in the matter and are being taken into consideration for implementation to speed up the clearance process at grass root level.

2. Money matters: Financial matters are a web of inter related issues like lack of interest by the private sector, low cost recovery, long working capital cycles, thin central outlay spread etc. CE as an industry is a sizeable investment to start with and while profitable, the profits are slow and come over a long period of time thereby reducing the number of players in the market to a select few with access to big funding.

3. Land acquisition: The laws for land acquisition in India are unfair to the corporates and the acquiring process takes a considerable amount of time. The corporate houses have to take up added responsibility of relocating the concerned people in addition to compensating them appropriately for their lands. The laws and processes for acquiring land for industrial purposes is a task in itself.

4. Governance issues: Lack of coordination between the local, state and central bodies causes major delay in getting the required approvals and documentation processed. The local urban bodies are not empowered enough to authorize such large scale proceedings. Lack of integration in the whole process of setting up a manufacturing plant leads to loss of possible investments and employment opportunities.

Then come in the issues with the ecosystem of the industry itself, which are mentioned in brief below

1. Lack of accreditation norms: The required norms to set the standard and maintain the quality of the products and the operators is missing. There is pressing need for formal training of operators and accredited certification for the same. Quality is another standard that needs to be maintained and improved in terms of the products. A lot of private players have come up with training programs for operators of heavy equipment.

2. Unfavorable laws and taxes: The laws and taxes applicable to the industry are not favorable for growth. The profit margins become smaller and slow, causing investors to lose interest in the industry as a profitable investment.

3. Poor rental penetration: Equipment rental is a profitable space in the CE industry, sadly the concept of equipment rental as a business and service is a relatively new concept and requires a sizeable investment to start with and the profits are yet to keep pace.

4. Demand supply gap: There is a growing demand in the market for construction equipment that have supporting software technologies integrated. While the demand and supply are both there, there is a drastic shortage of skilled labor that can make the most of the available technology.

The present day scene in the CE industry is rather challenging and changing. While the challenges remain, the new government is fast working to create a more favorable atmosphere for the construction equipment manufacturers in India to rise and reach their full potential.