Company Description: Constituted
in 1949 as Tractor and Allied Equipment manufacturers and Importers Association
Ltd., the association started with 10 Indian member companies, primarily
importers of tractors, earthmoving and allied equipment. In 1986 the
association took on a new name as the Indian Earthmoving & Construction
Industry Association Ltd. (IECIAL) which was affiliated to the Confederation of
Indian Industry (CII). In 2012 it was named the Indian Construction Equipment
Manufacturers Association (ICEMA). Today, ICEMA has 44 members representing
construction equipment manufacturers, component manufacturers and finance
companies involved in financing of construction equipment. Construction
equipment comprises of a variety of products such as hydraulic excavators,
wheel loaders, backhoe loaders, motor graders,vibratory compactors, cranes,
dumpers, tippers, forklifts trucks, dozers, pavers, batching plants, diesel
engines, etc.
Could you please help us in classifying the various
kinds of construction equipment sold in India?
The
CE space offers a big variety of products catering to different segments. The
biggest segment is the general purpose machines which are basically used for
earthmoving. As the name implies, earthmoving is all about moving earth (or
dirt), which can be done with various types of machines, radically different
from each other whose usage is dependent on the job to be done and the amount
of earth to be moved. Typical earthmoving machines are front end or back hoe
Loaders, wheeled or track Excavators, haulers, dozers, graders, etc. Another
big segment is concrete which includes machines for transportation of concrete
– the big revolving drum transit mixers that you frequently see on the road,
concrete pumps, boom pumps, etc. that place the ready mix in the construction
of the high rise structure. Then there are a whole host of different machines
used for crushing big rocks into various sized aggregates used in the
manufacture of concrete and asphalt mix and for road building requires
specialised equipment for compaction of soil, pavers for laying the asphalt and
asphalt compactors, rubber tire rollers for finishing the road. These are only
some segment examples. We are perhaps the only industry to offer such a variety
of equipment whose classification is not based on the size of the product, but
on segment application and on what it actually does. Ofcourse within this
framework, there are different sizes of equipment, the selection of which is
governed on the size / quantity of the job to be done and the time period in
which it is to be completed.
What was the size of the Indian construction
equipment industry a decade back, now and what are your projections for 2020?
In
the year 2000, the entire industry was probably around 6,000-7,000 units per
annum which contributed to an industry size of perhaps under US$ 0.5 billion. A
decade later, in 2010, the market was roughly 60,000-65,000 units per year,
about US$ 3.3 billion in size. It is estimated that by 2020, the market will be
over 300,000 units per year to reach US$ 20-22billion in size. The growth of
this industry is directly related to the infrastructure investments made in
country. From history we observe that the industry growth trajectory steepened
when the Government decided to invest in developing the country’s
infrastructure. For example the Highway Development Program announced in 2000
saw big investments in road building which boosted the industry’s growth. All
through the last decade, especially in the 11th Plan the Government earmarked
big investments in infrastructure creation. In the new 12th year plan, the
investment in the infrastructure sector is projected to be cross over US$ 1
trillion, doubling infrastructure investment from the previous plan period.
Such projections augur very well for this industry, hence I’m very optimistic
of the future of this industry.
Is the CE industry going through a radical change
in terms of new vehicles? If yes, what are the new kinds of vehicles that are
expected?
Yes,
over time changes have happened, most of which are primarily driven by fuel
emission norms. For example, from April 2012 all wheeled machines were required
to be powered by BS III engines. Now this was a big change for the industry as
the earlier emission norm was the BSII which in reality closely resembled the
US Tier 1 norm. The BSIII norm however is almost equivalent to the US Tier 3
norm. Thus we went from US Tier 1 to almost US Tier 3 missing the intermediate
Tier 2 step.This brought about a lot of change in the machines. Additionally,
as fuel costs increase and with the increasing concerns about the environment,
fuel efficiency is now a big driver of change. Going forward, in the not too
distant future, we could expect machine and operator safety, the use of green
fuels, hybrid machines, to drive changes in the machine configurations and
specification.
As a number of overseas players are making
big-ticket investments in India, will there be a major shake-up in the
marketshare of exiting players?
To
participate in this industry, one has to be prepared to deal with some
conflicting elements, the large variety we talked about earlier, the relatively
low volume which is reflective of the current size of the Indian market, the
relatively high investment needed to setup manufacturing and distribution and
changing technology to be efficient and productive. The first movers in India
were global companies who invested early in setting up manufacturing
facilities. Thus the big players in India are global entities like JCB, Hitachi
(JV with the Tata), Komatsu (JV with L&T), Volvo, CAT, Schwing, etc. Indian
players are basically Indian entrepreneurs who have entered this industry with
in-house technology. In the case of Indian players, as latest technology access
and investments are limited, they are relatively smaller in size. Today, all
the global top 10 companies are present in India. The Indian market is growing;
our growth curves are predicted to continue at attractive pace. While most
markets in the rest of the world are flat or declining, our growth story
generates a lot of global attention. Thus, we hear about increasing investments
in India. Depending on individual player aggressiveness and product,
distribution strategies employed, over time market positions could change which
is quite normal for a growing market.
Do you have any plans to take Excon shows to cities
beyond Bangalore? What about hosting
similar shows abroad?
Just
to clarify, Excon is a biennial event organized by CII to showcase Indian
Construction Equipment and Construction Technology. ICEMA is the sector partner
for the event and our members are closely associated in shaping the event as
part of the Steering Committee. This event has been held in Bangalore for
various reasons. I’m not in a position the answer whether CII deems to take it
beyond Bangalore or even outside India. Nonetheless, I can mention that there
is discussion on whether the Industry needs to have more regionally based
events. As Excon’s primary role is to showcase Indian capabilities both in
machines and components expanding its coverage would help in the development of
the industry.
So can we expect India to be a global manufacturing
hub for multinational players?
The
move has already started, Indian manufacturers, both local and multinational
have commenced machine export for a selective range of products. The only
constraint that I see of India being a true global supplier is the engine
emission norms. This is because the developed economies have now moved into
Tier-IV norms which neither the engine nor the fuel is available in India. I
thus see India becoming a hub for supply of equipment to regions where similar
emission norms viz. Tier-III is prevalent. Exports today are happening in a
small way to South East Asia, Africa, Latin America, etc. I believe we have a
big opportunity to build on this. In the component space, I see tremendous
opportunity which requires a lot of work to capitalise on this opportunity.
So does ICEMA support Free Trade Agreement (FTA)
with other nations?
ICEMA’s
role is to help build the Indian industry, we would be happy to support any
trade agreement that fosters an equitable growth opportunity. Naturally, ICEMA
would not support any FTA that puts the Construction Equipment industry at a
disadvantage, just to gain advantage for some other industry. Thus we would
like to get a much better understanding on the FTA drivers and ofcourse study
its long term impact.
Coming back to the domestic market, are non-metro
cities the major thrust areas for CE players?
Typically
large construction business houses are located in metro cities; hence these
automatically become the market thrust areas. Having said this, I would like to
qualify that the market thrust areas are really dependent on the location of
the large contractors who bid and secure large infrastructure contracts. So the
CE business is not governed by Tier-I or Tier-II cities but where the large
contractors are located and who is awarded the contract. So you could have a
contractor from Andhra Pradesh executing a job in the north-eastern part of the
country, or a Delhi based contractor Delhi executing a project in South India.
Having said this, as the industry develops we will see more and more
sub-contracting done locally, as well as mechanization increases, machine sizes
will become smaller and the geographic spread will become larger.
How has the CE industry been impacted by the
running cost of diesel fuel? If yes, are you working on products run on
alternate fuel propulsions?
All
our machines run on diesel fuel hence there is a major impact. As I mentioned
earlier, fuel efficiency is big driver of change. This has multiple benefits,
providing better operational costs and helping to conserve the environment. The
industry is constantly looking for better productivity and enhanced fuel
efficiency. At recent global Trade fairs, multiple manufacturers showcased
hybrid machines like hybrid wheel loaders and excavators. We could expect these
products to be commercially produced in the next few years.
Also, there is ongoing work to explore use
of alternate fuels, biodiesel, etc. Electric powered equipment could be
difficult as our machines operate in remote areas. Having said this, I would
also like to clarify that that very large mining haulers do run on electrified
power, wherever electrical power is available at the mining site.
Is your industry also working on Nano-like
entry-level low-cost products?
We
must remember that Construction Equipment is designed to perform a particular
task and thus should be reliable and rugged to do the task and comply with
safety and emission norms. Construction Equipment sold in India, which
incidentally is perhaps the lowest price market in the world, is already at a
very basic configuration with little or no frills, thus I would say is already
at the entry level low price product position. I don’t think we could go any
lower without compromising performance or safety or reliability of the machine,
However what I do see happening over time, as mechanization increases, product
sizes will become smaller which means product prices will correspondingly come
down.
Lastly, what is your vision for this industry?
Given
the planned opportunities for growth, on the long term horizon, it is a very
exciting industry. However in the short term, we continue to see a lot of dark
clouds in the form of stalled projects due to land acquisition issues, shut
down of major mining centers, delays in project execution due to uncertainty in
pollution control norms, hindrances to free movement of machines due to local
tax structures, etc. These are all governance issues, which I hope will be
removed and resolved through the reform process. I’m an optimist; I continue to
be optimistic of the Indian construction equipment market as I believe that we
have the potential and the opportunity to be among the top three markets in the
world.