With indications of nascent improved offtake of backhoe loaders, manufacturers are getting ready for projected full scale demand, which is likely to surface by the middle of current fiscal. The preparedness is beset with its own challenges in the market that has been dormant for quite some time owing to subdued equipment acquisitions. However, for taking on the challenges, the strategy of manufacturers is to expand business footprint based on existing market standing through numerous initiatives. P.P. Basistha reports.
Growth of infrastructure sector in India is generally characterized by its own cycles. The base equipment market of backhoe loaders has not been an exception either. With demand peaking prior to 2010, the market grew at exceptional pace followed by retrogression and then by lengthy subdued demand cycle. The market size of backhoe loaders was 22,500 units last year. Attainment of traction has been awaited for long, with the market reporting degrowth by almost 15% in the year ended March 2015. However, fiscal 2015-16 seems to bring some promise with fresh funds being released in the infrastructure sector, coupled with indications of reducing interest rates. Most importantly, reemergence of the rental sector, notably first time buyers with infrastructure companies showing keenness to offload assets owing to paucity of running capital led by extended payments, is an added reason for the positive sentiment.
The positive business sentiments are well likely to get strengthened leading to improved offtake for the backhoe loader makers in the time to come, precisely led by newer road projects. The positive demand expectations of backhoe loaders can be corroborated according to rising demand of compactors and motor graders. The demand of compactors have gone up to 3000 units in the year ended March 2015 from 2500 units last year.
However, fresh demand will not surface before overcoming, 'the problem of plenty.' Present supply glut in the market is a concern. Though exact figures are not available with the manufacturers and iCEMA, both concede the volumes to be substantial, that has been accumulating since 2010, followed by lower rate of equipment utilizations over the years.
Manufacturers anticipate, absorption of the existing population, many of which are relatively young, with owners laying emphasis towards optimum utilization that will continue to happen till October 2015. This is then likely to be followed by fresh demand. Prior to this, ratio wise 70% of requirements of the existing/ongoing or newly awarded infrastructure projects will mostly be met by existing backhoe loaders population whereas 25% of new infrastructure construction requirements in awarding stage will require new units.
This makes the evolving mid phase i.e between utilization of existing units till demand of fresh units, extremely challenging for backhoe loader manufacturers as they would have to aggressively counter brand substitution for the forthcoming projected demand. This is for both existing and new buyers. Urge towards brand substitution by customers is essentially on backdrop of attaining total economical cost of operation precisely on account of generally rising 'fuel' and operators' costs. Strategy for brand strengthening becomes vital at present, based on the rising expectations of getting total product support from manufacturers.
Selective introduction of newer products and building up the portfolio advancements in the existing backhoe loaders line, have enabled the company to gain more market space, claims Mr. Gossain. According to him, "In 2014, we introduced our 'Next Generation Backhoe Loaders' fitted with best in industry features like servo operated excavator control, Livelink - an advanced telematics system to manage and monitor machines remotely."
Mr. Gossain informs, "Equipped with independent steering pump, our new and advanced range of backhoe loaders deliver improved fuel economy upto 8 percent. Auto shutdown for reduction towards fuel consumption also deliver fuel economy. Fitted with an 'ecoMAX' engine, JCB backhoe loader saves upto 2.6 lacs per year. Regarded as the most fuel-efficient and high torque at low rpm engine in the industry, ecoMAX provides lower operating cost to JCB customers."
He continues, "We are developing products in sync with demand from markets with possibilities for newer applications and high growth potential. JCB 2DX backhoe loader is the smallest backhoe available in our portfolio, and is specifically designed to suit the rural applications. The machine is gaining popularity in some unique applications like plantation, construction of rural roads, fibre optics laying, truck unloading, and tractor trolley loading."
Along with carrying product improvements, JCB is looking to absorb rising production costs influenced by external factors. The company has in place at its flagship Ballabgarh plant, manufacturing backhoe loaders and ecoMax engines, regimented process for ensuring "Built in Quality" in all the processes. The entire facility is designed and built around this concept. Lean manufacturing principles with No-Faults-Forward has allowed JCB India to keep rising production costs at abeyance.
Mr.Gupta continues, "Catering to the growing customers requirements towards lower costs of operation, precisely through reduction of maintenance costs, we introduced the signature FIAT FPT S8000 engines in our new EX series backhoe loaders with engine power range of 76,86 & 96 HP which are low in maintenance and offer unparalleled fuel economy with unmatched performance even in the most difficult terrains of the geography. The EX series hosts perhaps the largest cabin in a similar class of machine and ensures the most robust structures backed on the CASE 'S'tyle DNA boom. These machines are being manufactured in India and exported to various parts of the world." CASE sold 1900+ units last year.
The company has been carrying out improvisation in its backhoe loaders to reduce the cost of operation. Mr.Gupta says, "Case India has an extensive R&D facility with a design center located within the manufacturing plant at Pithampur. The design team of over 30 designers is spread across verticals such as product engineering, validation, value analysis, product platform, hydraulics, engines and drivelines."
Strengthening product support initiatives for higher equipment availability, in turn avoiding brand substitution CNH is planning to enlarge its sales and services network across the country. Mr. Gupta elaborates, "We have gone on a drive to increase the availability of its genuine parts and service support across the length and breadth of the country. With a network of 67 dealers and over 250 outlets Case India is well represented and close to its customer base.
He adds, "We are also focusing on the machine uptime of its customers with preventive maintenance solutions such as Annual Maintenance Contracts and the availability of a toll free number to all our customers across India to reach various levels of the product support organization. All this is a value which is unparalleled in the Indian construction equipment market and has helped us sustain for nearly a quarter of century in India as a top tier player."
Addressing Impact of Long Subdued Cycles
Long contracted demand phase has restricted liquidity flow with some of the important manufacturers and also vendors supplying critical components. On indications of gradually improving demand scenario, the challenge for some leading manufacturers is now to rebuild, and strengthen their own and vendor's manufacturing capabilities. In between countering brand substitution, the strategy would be to carry out product advancements through fresh investments.The situation becomes quite trickier in market, where financial institutions are becoming more careful towards lending support. That too in a market where according to industry estimates, characterized by intense competition, 65% of the owners are first time buyers with less knowledge of optimum equipment utilization that results towards lesser financial gains from utilizing the equipment.
Taking note of emerging demand situation in close consultation with our vendors, we have positioned our 'Digmax' range of backhoe loaders making them suitable for required applications. This strategy has enabled us to sell 90 units on an average with 100 units already sold during January 2015. This was achieved during restricted demand phase. Making the backhoe loaders suitable for various applications ranging from good earth excavation & loading, trenching, rock breaking, mining and quarrying, drainage cleaning, etc. We have garnered 13% market share in Uttar Pradesh and 25% in Bihar besides forty percent share in Nepal by appointing a new dealer," says Mr. Rajinder Raina, General Manager-Marketing, Escorts Limited - Construction Equipment.
He adds, "Appropriate product support through various packages has also contributed towards attainment of business." ECEL sold 900+ units last year.
He explains, Digmax is fitted with choice of 76hp, Kirloskar diesel engine on the standard machine & 90hp on a 4-wheel drive machine. The backhoe loaders score atleast by 10-12% on output, calculated in terms of speed of work as also based on fuel consumed per unit of the work done. Higher productivity of the equipment, based on its ability to work between 3000-4000 hours a year equal enables the Digmax to deliver higher return on investments year-on-year basis."
"To meet the growing requirements of North East markets, where typical road construction application involves rock breaking at high altitudes, we have got in place 4x4, turbo charged Kirloskar engine fitted on Digmax backhoe loaders. To make the units perform hard jobs in difficult terrain,we have made the structure of the equipment stronger as part of product improvisation," says Mr. Raina. The equipment monitoring system (GPS+GSM based) provides sms alerts for effective equipment management & acts as a diagnostic tool.
Strategy to build-up sales is being undertaken by Terex Equipment through market segmentation. "We have been doing careful segmentation of the market, so as to promote our backhoe loaders sales. The strategy will enable us to optimize our given resources, precisely position sales and service personnel and provide value solutions to our customers, especially in terms of product and services support," says, Mr. Rajesh Shrivastava, GM, Head Marketing & Dealer Segment, Terex Equipment India Private Limited.
He elaborates, "On part of product placement, rather than going for outright sales, we have been closely studying the customer requirements and then present products as solutions. Product placement has been dovetailed by studying the regions which have got positive demand potential, precisely Western, Eastern, and North Eastern parts of India, where new numbers of road projects are coming up."
Mr. Shrivastava adds, "Terex is banking on higher sales based on its new enlarged portfolio. We are now well positioned in our range of TLB 740-SE, TLB 844-S, and new TLB 818 centre mounted machines and TLB 818 S, Perkins engines fitted, side shift backhoe loaders for our export markets. The new units with high break out force are ideal for functioning on toughest strata. We are also looking to aggressively promote the new and upgraded products to the export markets of Middle East, South East Asia and Latin America. All our backhoe loader models score high on faster digging, loading with lower operating costs."
He continued, "Strengthening our offerings, Terex India has now on offer, upgraded TLB Series 844S and 740S backhoe loaders. The upgraded 844S and 740S are powered by Kirloskar Engines delivering 90 hp @ 2200 rpm and 76 hp @ 2200 rpm. The upgraded loaders have standard buckets of 0.24 cum with width of 892 mm and optional backhoe buckets of 0.09/0.12/0.18/0.3 cum and loader buckets of standard capacity of 1.0 cum with width of 2235mm." All the upgraded series and the new loaders are being manufactured at the company's plant in Gautam Buddha Nagar, Noida. The company sold ~1150 number of total units in 2014 and recorded a 10% growth over 2013 sales volumes. It currently has 53 dealers with 140 touch points and plans to add another 30+ customer touch points by the end of 2015.
Emerging Market
At par with product improvisations and new launches, manufacturers are scouting for newer potential markets, as part of their marketing strategy. Mr. Gossain says, "We have recently participated in CONMAC 2015 in Guwahati, Assam wherein we showcased our world-class products and reiterated our commitment to North East market which is an important market for JCB India and hence, we have a strong presence in the region. We are there in all the states of North–East through our extensive dealership network. With the growing infrastructural development, the demand of our products will keep rising with our continuous support to our dealers in reaching out to the customers in the best possible manner in the region."Targeting the emerging requirements of the growing North Eastern market, CNH has recently launched 851EX backhoe loaders to suit the requirements of its customers in the mountainous terrain. "In a bid to strengthen our position in the North Eastern market, we participated in Conmac 2015, Guwahati, with the introduction of our own branded rock breakers and trenching buckets which have shown growing demand in the region," says Mr.Gupta.
"To meet the growing requirements of North East markets, where typical road construction application involves rock breaking at high altitudes, we have got in place 4x4, turbo charged Kirloskar engine fitted in Digimax backhoe loaders. To make the units perform hard jobs in difficult terrain, we have made the structures of the equipment stronger as part of product improvisation," says Mr. Raina.
The aggressive marketing strategy of backhoe loader manufacturers to make deeper market penetration augurs good for the Indian infrastructure sector. The strategy is most likely to contribute towards enhanced mechanization. However, the challenge will be towards drawing product support packages to meet the diverse customer requirements, so as to avoid brand substitution both by the existing and potential customers.
