Creation of infrastructure, an economic determinant of GDP growth, critically hinges on the pace of construction activity. In the past few years, several government programmes that lay emphasis on infrastructure development have spurred growth in the construction sector, lending vibrancy to the construction equipment market. This has rendered the earthmoving segment a thriving one that currently accounts for over 60 per cent of the
overall construction equipment sales in the country. Backhoe loaders, hydraulic excavators and wheeled loaders are some of the widely utilised types of earthmoving equipment across all infrastructure sectors at present.
The segment is slated for further growth as fresh construction works are expected to be taken up after the elections are concluded and the new government is formed. According to the Indian Construction Equipment Manufacturers Association, the demand for earthmoving equipment is expected to clock a compound annual growth rate of 12.5 per cent during the period 2016-20.
Indian Infrastructure takes a look at key trends in the segment…
Key trends
- Growing focus on mechanisation of operations: Operational efficiency, a basic driver of any business, is nudging construction firms to aim for greater mechanisation of operations. The move aids in both standardising and gaining better control of operations. In addition, factors such as reduction in the goods and services tax on most construction equipment (from 28 per cent to 18 per cent) as well as sector-specific policies that drive demand (for construction activities) set the stage for greater adoption of such equipment. With regard to better control of operations, benefits such as real-time monitoring of system failures and instant report generation using mobile applications are supporting the offtake of earthmoving equipment.
- Evolving business models: The earthmoving equipment industry is moving towards a more customer-centric business model to retain its clientele. A number of equipment providers are gaining a better understanding of how construction firms are aiming for value creation through the adoption of newer technologies. Business models are stretching beyond just products and sales, to include after-sales services too. Equipment providers are further graduating from being only sellers to consultants who facilitate complete on-boarding for clients, aptly responding to the fast changing consumer choices that are becoming more demanding in terms of quality and services. Thus, providing on-boarding and regular after-sales services such as training of personnel, field visits, etc., is becoming central to maintaining strong customer relationships. Time saving in transactions is also gaining traction, as reflected by the trend of “same day service” becoming a new norm.
- Preference for large-size equipment: While the type of equipment varies from project to project, a general trend is a growing preference for purchasing larger equipment. This also ensures that construction companies have the room for capitalising on scaling up of projects, as well as reducing time taken to carry out operations. For instance, a larger bucket size of earthmoving equipment ensures that more earth is removed in a given period of time. Thus, large-size equipment helps in expediting projects and enhancing the project uptake capacity of user firms/ construction companies.
- Monitoring and surveillance of construction activities: Monitoring and surveillance of construction activities is a new normal, and is being increasingly enabled through incorporating suitable technologies in construction equipment. Usually, equipment which is deployed at sites that are difficult to access is operated remotely. Remote monitoring technology offers quick identification of issues while also making it possible to remotely manage and control equipment deployed at a considerable distance from the control centre. At the time of a technical snag in the machine, it can be reported almost instantly and requisite action can be taken to rectify the same. This helps in avoiding delays in project implementation.
Today, earthmoving equipment is being increasingly installed with global positioning system devices and/or radio frequency identification technology. These help in keeping track of the real-time location of the equipment, number of hours of operations at the project site, diversion from any expected line of operations, number of hours of inactivity, etc. Earthmoving equipment is being deployed with other smart features too. These include smart sensing technologies to aid tracking fuel consumption and operating the equipment with the help of programmed inputs.
- Application of information technology (IT): Technologies that are being deployed for monitoring equipment are also being clubbed with IT applications, tapping into the increased penetration of smartphones. The integration could set off an alarm/send a message or an alert on the mobile phone of the operator or equipment owner in case the machine develops any fault, as also in cases when pre-programmed desirable outcomes are achieved. For instance, Android mobile app builder Snappii has developed two apps – the Construction Equipment app and the Heavy Equipment Inspection app – which allow users to collect and process all equipment data using only a mobile phone. With such applications, users can generate actual data-driven reports and rate their equipment in terms of operational parameters. This can also help them in taking a stock of their equipment inventory along with efficiency indicators. Over time, telematics is expected to play a significant role in preventive maintenance, diagnostics and field maintenance of earthmoving equipment.
- Intelligent service panels: Another key trend is the increasing deployment of intelligent service panels on earthmoving equipment.
These panels allow operators to diagnose and rectify errors quickly, making use of technologies such as artificial intelligence. The equipment is thus in a “self-checking” mode while operational. When there is an issue with the equipment, it is detected automatically and shared with the operator using the service panel. This enables immediate action and prevents any delays due to equipment malfunctioning and ensures continuity of operations.
- Focus on occupational safety: With growing awareness regarding the importance of safe operations, equipment manufacturers are according high priority to worker/equipment user safety, both at the manufacturing location and at the project site where the equipment is deployed. Earthmoving equipment now has advanced safety measures and processes, load management systems and specialised accessories to ensure occupational safety. For example, JCB’s excavators are fitted with a servo lock override system and a swing lock system to prevent unintended machine operation when the machine is idling, thereby ensuring worker safety.
- Increasing indigenisation: A number of equipment manufacturers such as JCB and Hyundai are looking to increase indigenisation of their products. This is aligned with the government’s mega Make in India programme, which is aimed at providing a fillip to the domestic manufacturing sector. As per rough industry estimates, the indigenisation level in the equipment segment is expected to increase from the existing 50-60 per cent to over 70 per cent in the coming three-four years.
- Emphasis on fuel efficiency and compliance with stricter emission norms: Equipment manufacturers are also attempting to improve their engineering to achieve higher fuel efficiency of equipment. Designs for various components such as wheels and chassis are being optimised to reduce fuel consumption. This not only helps the users trim costs in the long run but is also more environmentally sound. Further, manufacturers are also looking to adapt state-of-the-art technologies from other industries in their manufacturing processes to ensure availability of a high quality product at competitive prices. Besides, higher standards for emission norms are also being adhered to. The compliant equipment will carry significant fuel cost savings for users.
The way forward
The earthmoving equipment industry, the largest segment of the construction equipment sector, is slated for robust growth in the coming years, owing to the thrust on infrastructure development that is likely to continue. In the short to medium run, there will be far greater clarity after the country elects its new government in May this year. This will set the stage for fresh projects that will translate into demand for construction and allied activities. Within the earthmoving equipment space in particular, innovation and greater adoption of technology is a trend that is likely to intensify competition by differentiated efficiency driven products.