India is emerging as one of the largest markets for earthmoving and construction equipment (ECE) in the world. As a result, most global original equipment manufacturers (OEMs) are expanding their footprint in the country. In the past 12-15 months, the segment has reported significant activity in terms of launch of new products, adoption of new technologies and capacity expansion initiatives by key players. Notably, the central government has provided an impetus to the sector with the approval of the National Capital Goods Policy in May 2016. Players have been able to gain expertise in the design and development of new products as well as maintenance, repair and overhaul services.
Policy impetus
The recently formulated National Capital Goods Policy, 2016 proposes to prioritise the earthmoving and mining machinery under the Make in India initiative. The policy has proposed several changes in the earthmoving and mining machinery sector. One such proposal is the introduction of a more favourable tax structure for the sector. Simplification of taxation norms for equipment leasing will provide an impetus to the development of the equipment rental and leasing business in the country. A separate regulatory framework for off-highway equipment has also been proposed. The establishment of a dedicated research and development as well as advanced test facility for the construction equipment industry and regulations for stopping the use of spurious spare parts are some of the other changes that have been recommended. The policy will be implemented by the Department of Heavy Industry in a time-bound manner.
New technologies and products
In the ECE segment, technology-driven features such as automatic controls for handling machines, more efficient engines and remote access devices are gradually gaining popularity. Adoption of fuel-efficient green machines with low emissions has also been on a rise.
For instance, JCB’s Livelink which operates on the SOS (service, operation and ssecurity) principle is a notable innovation in the loader segment. It is an advanced telematics system which collects data and information on machine health, vital parameters and location through built-in sensors and sends it to a JCB secured system using mobile communication technology. In February 2016, Caterpillar launched CatAccuGrade which is a grade control system to ensure construction efficiency by sending real-time feedback to the operator. Escorts Construction Equipment’s DIGMAX II series of backhoe loaders are equipped with an equipment management system which functions as an effective diagnostic and tracking tool. The product was launched by the company in June 2015.
Another key focus area for the earthmoving equipment industry is energy efficiency. Manufacturers have emphasised the production of fuel-efficient and higher-productivity machines. Volvo CE’s OptiShift is a system designed to increase operator comfort in and durability of wheel loaders while optimising fuel savings in applications such as load-and-carry by up to 15 per cent. Case’s FIAT FPT S8000 engines are equipped with a charge air cooler to improve and optimise air induction. This solution provides outstanding fuel consumption during both production and travel, especially in backhoe digging applications. LiuGong’s heavy duty excavator is equipped with the Cummins QSB7 engine and the advanced computer-aided power control (CAPC) system. The CPAC system helps in proper combustion of fuel, thereby achieving high efficiency with low fuel consumption.
On the manufacturing front, there has been growing emphasis on localisation. For instance, China’s heavy equipment major SANY plans to manufacture about half of its products (in value terms) locally. Putzmeister is also looking to increase the localisation ratio as it currently imports 40 per cent of its components from Germany. In order to make their products competitive, Japanese mobile crane manufacturing major Tadano India is also exploring options of localisation. Atlas Copco plans to carry out modifications in its range of compressors, road equipment, light compactors and hydraulic rock breakers for making them adaptable to Indian site requirements.
New projects and capacity expansion
On paper, several players have outlined expansion plans in the segment, entailing huge investments. The SANY Group has committed an investment of $4 billion for setting up manufacturing units in the country. The company has already set up a $100 million unit in Pune to manufacture heavy equipment. It also plans to invest $1 billion in setting up other manufacturing units. The Heavy Engineering Corporation (HEC) and Promtractor JSC Russia Chetra have agreed to jointly execute a project for the manufacture and assembly of dozers of different capacities across user industries. These dozers require special engines and accessories which will be sourced from Cummins India Limited.
As part of its growth plans in India, Sandvik has committed to setting up a manufacturing facility at Pune. To this end, it plans to make investments in a phased manner over the next five years. The new manufacturing facility will be operational by end-2016. Further, BEML has signed an MoU with Dredging Corporation of India Limited for indigenous design, development and manufacture of spares for existing dredgers and the supply of backhoe excavators for new dredgers.
Key impediments and the way ahead
In recent times, the market for ECE rentals has shrunk. ECE rental in India is valued at 7-8 per cent of the total ECE market, which is much lower as compared to other developed and emerging countries. Most contractors in India prefer owning the equipment to renting it. A lack of national registration procedures for ECE makes it difficult to determine the residual value of the equipment, further hindering growth of the used equipment market.
Lack of well-trained manpower is one of the most challenging issues in the ECE segment in the country. A lack of coordination among government agencies, OEMs and construction companies has resulted in a lack of specialised skill development programmes. Lack of national safety and quality guidelines for construction sites encourages small contractors to employ less qualified workers. Substandard maintenance, scarcity of trained mechanics and a lack of spare parts also adversely impact the uptime of ECE in India. However, with the increased focus on timely execution of projects, consumer preference has seen a shift to the “total cost of ownership” concept in which ECE players take into account the full cost of equipment purchase rather than focusing just on the initial purchase price.
Given the interest in faster, cost-efficient and productive equipment demonstrated by customers, the industry cannot afford to lag in its research and development (R&D) efforts. With the backing of their global R&D efforts, many players are now at the forefront of introducing advanced technologies in the Indian markets.
