ECE's Strategies to Retain Leadership
"CE industry is witnessing a sustainable and phenomenal growth of over 40% from infrastructure and industrial sectors. Though the demand is moving towards high-tech and advanced technologies, but low cost basic equipment also has quite a big market," says Mr. Rajinder Raina, General Manager-Marketing, Escorts Construction Equipments (ECE), in an interview with S.A Faridi.
What are the factors driving growth of the CE sector?
If you see the first three quarters of this year, the growth in CE is over 40% but sustaining such a phenomenal growth can be a difficult task. We are expecting the industry to close this fiscal with over 25% growth YoY. There was a complete lull for 3 years in the infrastructure and mining sector. The Government in the first two years did a wonderful job; they restarted stalled projects and awarded quite a good number of new projects, especially in the roads sector, where the hybrid model has been a game changer. Besides roads, irrigation projects, especially in UP, MP, and Maharashtra, have driven the demand for earthmoving and concrete equipment. That apart, the mining sector is opening up and demand for heavy equipment is coming up from here as well. The only sector which is currently not contributing to the CE sector's growth is real-estate, which, I think, will take another couple of years or so to show signs of revival.
What activity is happening in sectors such as power, warehousing, etc?
There is some decent movement in the power sector as well. A few thermal and hydel power projects are in the final stages. Renewable power like wind & solar energy is getting big boost. Power grid projects & upgradation of electric transmission lines is in the pipeline too.
As the industry looks up across all sectors,the warehousing sector is also booming, with top international players setting up/expanding their base in India. Growth in material handling equipment and warehousing forklift trucks is a strong indicator of this industry looking north. Just look at the top 20 infra companies that were in bad shape' today they are showing healthy order books and have come out of the red.
Is demand for advanced equipment exceeding that of conventional equipment or are the two working in tandem?
They are certainly going in tandem. There are two types of works going on: The works being executed by international players or even major Indian players who are working with almost the same international practices and believe in high technology products to complete projects on time. Similarly, in NHAI projects, there is a penalty and incentive clauses and these big contractors bid for the project factoring in the incentives. Here, technologically advanced equipment plays a big role.
Then there are a second type of projects where time is not on premium as they have the flexibility. So the market would move in tandem; there would be a traction for high technology and high priced equipment, but low cost equipment also has quite a big market, even though the trend is changing and technology is beginning to play a major role. Low cost equipment still is & will continue to comprise the broad bottom of the pyramid.
What are your current areas of focus and strategies to retain your leadership position?
We are working on three different domains: one is the backhoe loader; where we are focusing on certain areas such as mines/quarry. If we take the generic specifications of backhoe loaders, there is almost 80% equal capability in what they can deliver. We are trying to address a niche market and putting up equipment more related to hostile terrains. We want to address the need of areas which are difficult to reach with our recently launched product 'Escorts JUNGLI'.
"When strata get tough only the tough get going," this is what led the birth of Escorts New Backhoe Loader named 'JUNGLI'. Created for the hard battles and designed in an eye catching colour (combat colour of a battle tank), the machine gives higher productivity coupled with better fuel efficiency and reduces the operation cost, thus, making JUNGLI the best for the specific application.
Normally, one relates a backhoe loader with basement work, soft work (good earth), more speed & output, and less of hard terrain. We are altering the definition and trying to deliver more speed, and higher height. We are primarily looking at rough terrains (mines & river bed sand) and hard applications. Output is not that important in hard terrains as getting work done without damaging the machine. As this area is not being genuinely addressed so far, JUNGLI is custom made for it.
Most of the smart cities are retrofitted and in brownfield projects where space and time will be a constraint, as the work would be carried out mostly through the night. So we will be launching machines for fast work, with high maneuverability as there would not be much room for mobility. In short, we are going for application specific equipments and for areas where we can offer customized solutions and where there is some thrust, our objective is to have a first mover advantage so that before others catch up, we will be able to position our products better.
We are a leader in the crane segment,on new products & technology developments. We will continue this pursuit as a mark of respect to the market place in keeping with our decades old tradition. As far as the compactors are concerned, the benchmark is set by global leaders and we can't afford to be seen lacking, hence, we're upgrading our compactors regularly. As technology would be a qualifier and only then can you compete, having it may not be your USP, but not having it means you cannot compete. Our soil compactor EC 5250 & TVR HD 85 continue to have a great brand recall.
What opportunities are you tapping in the north-east?
There is no doubt north-east and Jammu-Kashmir are promising markets. In the north-east, we are already recasting our dealership network keeping in mind that sales outreach is not that important here as is service. We plan to have satellite and smaller dealership outlets to increase our footprint for improved proximity to the work sites. We value our brand but are equally sensitive about customer service. We are training these dealers and they will keep spare parts as well. This is how we try to proliferate. From the current 150, we are planning to go up to 250 outlets in the next 6 months.
What special services do you offer to retain customers?
The 2nd time buyer must be given some add-on services if you want to retain him. In the case of cranes, dependence on service is not very high on OEMs, but for a new technology product the customer will prefer Escorts dealership & are conscious of this fact. So we are trying to do a bit of packaging to enhance the value proposition on after sales front to meet his specific requirements.
F15 is the most selling crane today, in the high end segment. We are also trying to educate the user so as to take them to the next level. For example, if he is using F15 we may suggest F17 but first we have to see where does he belong now. The 2nd time buyer has breached the entry barrier so we ask him what he is looking for the next 2-3 years. Maybe he should graduate from a Hydra to a TRX series or from a 15Ton to 17Ton. It all depends upon which area he is working on and what projects he is trying to graduate to.
Hydras and TRX till recently have been primarily purchased as a commodity. We are now trying to customize them. The fact remains that 40 to 50% crane customers still do not know what they are buying for and what is their horizon for the next 3 years. F15 may be good enough today but after the job gets over in a year or so, what next ? These are the area where we are working hard to retain the customers.
How strong is your set-up for re-manufacturing machines?
Other than our satellite service centers, we are creating Escorts mini factories. We have already started this in Jaipur, TN, and Karnataka. Our dealers have set up workshops and we are supplying parts at a nominal rate for major overhaul. We have a buying option for someone who cannot afford a Rs 12 lakh machine. He can go for a cheaper/refurbished machine. We are giving extensive training and trying to raise the service capabilities in these mini workshops. These machines will go with a warranty.
What are ECE's initiatives to make its product fuel-efficient?
We have been continually upgrading and increasing the fuel efficiency and service intervals of machines. We have customized lubricants for our equipment. These are sold under the brand E-Suraksha, and it has the appropriate mix that we need and it comes in appropriate volume pouch/container sizes, so our customers don't have to buy big barrels.