Backhoe Loaders : Manufacturers Take on a Bumpy Ride
Backhoe Loaders manufacturers are reworking on their marketing strategies to combat volatility in sales, P.P. Basistha reports.
Infrastructure development across economies is generally characterized by its cyclic nature and 2013 seems to be the ebb when backhoe loaders manufacturers in India are really struggling hard to keep the business going. Demand retrogression started setting in from 2010 onwards, although manufacturers managed to register modest sales. However, demand perked up once again in 2011 making manufacturers get some exceptional business gains. But 2013 was all bearish led by overall slowdown in infrastructure projects across sectors, coupled by tightening liquidity and higher inflation, keeping rental costs under pressure. Not to mention prevailing overall subdued business sentiments.
Manufacturers are of the opinion that volatility in demand would not occur as has been the case between 2009-11, on the contrary; the bearish trend is now likely to be in place, until infrastructure development picks up in a big way. But the 'cyclic' trend led by 'bearish' demand has not gone too well with the relatively newer entrants in backhoe loader manufacturing. The year 2010 saw entry of good numbers, first time entrants in backhoe loaders production. Taking note and being enticed by the booming demand of the base machine for infrastructure development from 2005 onwards, companies altogether into different verticals of mechanical engineering, invested colossal sums in creation of production facilities and network for manufacturing and selling backhoe loaders.
Jumping into the gravy train, resulted towards initial gains. However, the prevailing complexities of backhoe loaders market in India dovetailed by the present uncertain demand situation has brought stiff challenges for the newer manufacturers. Newer players are opting for brand building with slew of marketing and product development measures. Challenges galore for existing players well versed in the business of backhoe loaders, as they are highly skeptical whether the market will be able to attain the volume size of 40,000 units by 2015 according to earlier projections. Size of backhoe loaders market has been estimated to be at 32,371 units during 2012 down by 1000 units as compared to 2011.
The foremost challenge for existing manufacturers is to counter the strong urge of buyers towards brand substitution. This is in case of both existing and new buyers. Urge towards brand substitution is essentially on backdrop of attaining total economical cost of operation precisely on account of rising fuel and operators' costs. Expectations of getting total products support are higher than before from manufacturers. This in turn is making it tougher for manufacturers to build up top lines and bottom lines.
However, according Mr. Amit Gossain, VP Marketing, JCB India, "despite volatile market conditions, JCB has succeeded in creating new avenues for business through generation of newer markets. In fact, we have seen growth in our market shares across several regions and product categories."
He explains, "The percolation in different regions has been possible on account of our strong and long standing relationship with all our dealers. Our dedicated dealer principals have invested heavily to upgrade their existing facilities and have also opened new facilities which are equipped with all the latest technology for efficient product support." Mr. Gossain adds, "JCB has the largest distribution network in the country with over 500 outlets. We will look at strategically expanding our network even in the remotest areas of the country."
Given sizeable market presence, estimated to be at 70%, challenge for JCB will be to retain its existing customer base, while concurrently expanding market share. The company has adopted multi-pronged strategy. It will continue to rely on its dealers with after sales support and parts availability in focus. New product launches will continue to be on the agenda. Mr. Gossain points out, "We have introduced a new version of India's most beloved construction machine - 3DX backhoe loader - "the New JCB 3DXcellence." The new JCB backhoe loaders save upto Rs2.5 lakhs per year on fuel and the recently launched; JS205LC saves upto Rs5.4 lacs in 4 years." JCB will unveil technologically advanced products for Indian construction market during Excon 2013.
Making products economical to own and operate through value engineering will be at core for JCB. Fully supported by its own 'Ecomax' brand engine manufacturing facility at its flagship plant at Ballabgarh in Haryana, the plant characterizes lean manufacturing supported by a strong vendor base. The company will look for strengthening lean manufacturing further.
Case India is taking forward the task of preserving its market presence through multiple strategies. According to Mr. Anil Bhatia, Head Marketing Case, "We have been strengthening our marketing network through sustained dealership development. Marketing promotion is being undertaken through road shows, best after sales package is being worked out with our existing and new customers." The 60% of Case's backhoe loaders are derived from first time buyers. Case offers backhoe loaders with 76 and 96 horsepower.
Mr. Bhatia mentions, "Our focus is now on each and every customer rather than on territories on a macro level. We are looking for the possibility for being close to the customer as much as possible through deputing mobile workshop, for ensuring higher equipment uptime." Product sales and support is being undertaken by Case through requisite training to dealers through various programme, parts availability and also ensuring financial support to the dealers. The Fiat group company has 176 dealers outlets in the country. It claims to have sizeable market presence in North Eastern India for its backhoe loaders.
Infrastructure development across economies is generally characterized by its cyclic nature and 2013 seems to be the ebb when backhoe loaders manufacturers in India are really struggling hard to keep the business going. Demand retrogression started setting in from 2010 onwards, although manufacturers managed to register modest sales. However, demand perked up once again in 2011 making manufacturers get some exceptional business gains. But 2013 was all bearish led by overall slowdown in infrastructure projects across sectors, coupled by tightening liquidity and higher inflation, keeping rental costs under pressure. Not to mention prevailing overall subdued business sentiments.
Manufacturers are of the opinion that volatility in demand would not occur as has been the case between 2009-11, on the contrary; the bearish trend is now likely to be in place, until infrastructure development picks up in a big way. But the 'cyclic' trend led by 'bearish' demand has not gone too well with the relatively newer entrants in backhoe loader manufacturing. The year 2010 saw entry of good numbers, first time entrants in backhoe loaders production. Taking note and being enticed by the booming demand of the base machine for infrastructure development from 2005 onwards, companies altogether into different verticals of mechanical engineering, invested colossal sums in creation of production facilities and network for manufacturing and selling backhoe loaders.
The foremost challenge for existing manufacturers is to counter the strong urge of buyers towards brand substitution. This is in case of both existing and new buyers. Urge towards brand substitution is essentially on backdrop of attaining total economical cost of operation precisely on account of rising fuel and operators' costs. Expectations of getting total products support are higher than before from manufacturers. This in turn is making it tougher for manufacturers to build up top lines and bottom lines.
He explains, "The percolation in different regions has been possible on account of our strong and long standing relationship with all our dealers. Our dedicated dealer principals have invested heavily to upgrade their existing facilities and have also opened new facilities which are equipped with all the latest technology for efficient product support." Mr. Gossain adds, "JCB has the largest distribution network in the country with over 500 outlets. We will look at strategically expanding our network even in the remotest areas of the country."
Given sizeable market presence, estimated to be at 70%, challenge for JCB will be to retain its existing customer base, while concurrently expanding market share. The company has adopted multi-pronged strategy. It will continue to rely on its dealers with after sales support and parts availability in focus. New product launches will continue to be on the agenda. Mr. Gossain points out, "We have introduced a new version of India's most beloved construction machine - 3DX backhoe loader - "the New JCB 3DXcellence." The new JCB backhoe loaders save upto Rs2.5 lakhs per year on fuel and the recently launched; JS205LC saves upto Rs5.4 lacs in 4 years." JCB will unveil technologically advanced products for Indian construction market during Excon 2013.
Making products economical to own and operate through value engineering will be at core for JCB. Fully supported by its own 'Ecomax' brand engine manufacturing facility at its flagship plant at Ballabgarh in Haryana, the plant characterizes lean manufacturing supported by a strong vendor base. The company will look for strengthening lean manufacturing further.
Mr. Bhatia mentions, "Our focus is now on each and every customer rather than on territories on a macro level. We are looking for the possibility for being close to the customer as much as possible through deputing mobile workshop, for ensuring higher equipment uptime." Product sales and support is being undertaken by Case through requisite training to dealers through various programme, parts availability and also ensuring financial support to the dealers. The Fiat group company has 176 dealers outlets in the country. It claims to have sizeable market presence in North Eastern India for its backhoe loaders.
Market Consolidation
With demand being less and competition remaining high, retention of market share remains topmost priority for majority of manufacturers. Caterpillar has carried out investments at its production facility in Tamil Nadu. According to a company official, "To meet the growing demand for backhoe loaders, during 2012, we have invested in state-of-the-art facility at Thiruvallur. We have flexibility and when the time is right will be prepared to invest in rapidly increasing that capacity. Caterpillar Product System (CPS) is used in the facility which is a global process and best in class standards."
Caterpillar will look to expand its share of backhoe loaders banking on its existing exclusive dealers Tractors India Limited and GMMCO. The official explains, "Our dealers have branches spread across India for offering requisite product support. We conduct customer loyalty surveys regularly to collect customer feedback and take necessary responsive measures. Our dealers stock Cat 424B genuine parts and consumables at locations close to customers. Apart from this extensive network, our factory trained service engineers are equipped with mobile service vans to reach the remote job sites in a matter of hours. Customers can contact their local dealers via toll free numbers for any sales or service related queries."
Caterpillar claims to offer value added services to its customers through its dealers based on their rental, used and new equipment business model. Presently, Cat is offering only one 76 hp model in India. It proposes to expand its products range in near future based on market potential and shift in customer requirements. The Indian backhoe loaders market is dominated by 76 HP standard machine which accounts for about 85% of the backhoe loaders industry. Cat sold 1,593 units of backhoe loader during 2012.
Delhi based Escorts Limited (Construction Equipment Division) sold 1196 units during 2012. The company expects to sell around 1400 units during 2013-14. Higher sales expectations are based on the ability of the company for better product placement. According to Mr. Parminder Sachdeva, GM, backhoe loaders, ECE, "We are relatively a new player in the market, however with technically advanced products in terms of higher reaches, higher break out force, better productivity and fuel efficiency, we have been able to brave demand volatility."
ECE's 'Digmax' series of backhoe loaders, which was launched in 2010 is equipped with proven Kirslokar engines. Mr. Sachdeva claims, the engines have higher uptime and better fuel efficiency. The maintenance- friendly engines have a higher maintenance span which are cost effective too."
ECE will look to strengthen the brand of its 'Digmax' backhoe loaders through better product support. Mr. Sachdeva mentions, "We are ensuring 97-98% availability of our backhoe loaders through total packaged services. This involves, operations and parts availability, lubrication maintenance contracts at competitive costs post warranty period." ECE is looking to expand its network through identification of dealers at strategic locations.
Mahindra will be banking as well on its dealers to build up sales of its backhoe loaders. The company is focusing on retaining its dealers through providing necessary support. According to Mr. Kairas Vakharia, Senior Vice President, Automotive Strategy & Business-Construction Equipment, "Adequate dealer support is being ensured as we are very mindful of dealer viability and constantly monitor it and take necessary action. There are various means to do this. Firstly, design the dealer business model that allows for operation at a reasonable breakeven volume, secondly, provide the dealer adequate financial support in terms of margins as well as expenses support, thirdly, provide a range of products and fourthly drive demand in the local area through effective marketing and retail financing support."
Mahindra has created a pool of dedicated dealers for its construction equipment business. However, the company also promotes its backhoe loaders through some of its auto and farm equipment dealers. Mr. Vakharia points out, "We have selected dealers based on their interest in this category and our assessment of their financial and operating ability in this segment." Mahindra has over 150 dealer sales, service and spare parts outlets. The dealers are backed up by twelve area offices, one mother parts warehouse and ten regional parts warehouses.
Retention and sales built up is also looked into by Mahindra by keeping its production costs under control. Mr. Vakharia explains, "On the supply side, we work with vendors who are financially sound and have the ability to withstand market's ups and downs. In our case, volumes to vendors have increased significantly this year with growth in sales and we face no issue at this front."
Mahindra claims of being ranked number 3 in the backhoe loader market in the first quarter of this financial year. According to the company, sales for its 'Earth Master' brand of backhoe loader by 89% in quarter 1 as compared to the same quarter last year. The company sold 800 numbers of backhoe loaders in 2012. Mahindra's manufacturing plant currently has a capacity of 2000 backhoe loaders per annum.
However, the prime strategy to increase sales will be through increasing its portfolio for backhoe loaders. Mahindra has recently introduced two new variants of 'Earth Master' brand to participate in all price segments of the market. Mr. Vakharia mentions, "We had entered the market two years back with a premium product that provided superior features as well as performance and was priced at the top end of the market. We have built credibility with this approach, and have now added products at lower price points that will allow customers with lower budgets to own an Earth Master. The two new variants, Earth Master LX and Earth Master SX will complement our premium variant Earth Master VX." Mahindra also plans to introduce a 4 wheel drive version of Earth Master this year.
About 51% of the Mahindra's present sales of backhoe loaders are derived from its existing customers. The ability to draw sales from existing customers has been through, according to Mahindra, owing to its prompt customer support. Mr. Vakharia informs, "We have invested heavily in customer care. We have an ongoing method of tracking customer satisfaction 90 days and 300 days after a customer purchases a machine. The latest tracks show over 90% satisfaction with product performance and reliability. We have a practice of tracking every service call. We target to close all service calls within 12 hours of a customer calling in, this is a standard that is set much higher than the industry standard. As of now, we are able to close 83% of all service calls within 12 hours. In addition, we have also set up a dedicated call centre for service support that can handle nine languages."
The ability of backhoe loaders manufacturers to reorient their product and support offerings augurs well for the customers as they stand to benefit being offered a wider choice. Nonetheless, it agurs well for manufacturers as well as they get braced up to take the challenges of the volatile market situation both in the mid and long-term taking cognizance of the fact that construction equipment market will always tend to remain cyclic.
Caterpillar will look to expand its share of backhoe loaders banking on its existing exclusive dealers Tractors India Limited and GMMCO. The official explains, "Our dealers have branches spread across India for offering requisite product support. We conduct customer loyalty surveys regularly to collect customer feedback and take necessary responsive measures. Our dealers stock Cat 424B genuine parts and consumables at locations close to customers. Apart from this extensive network, our factory trained service engineers are equipped with mobile service vans to reach the remote job sites in a matter of hours. Customers can contact their local dealers via toll free numbers for any sales or service related queries."
Caterpillar claims to offer value added services to its customers through its dealers based on their rental, used and new equipment business model. Presently, Cat is offering only one 76 hp model in India. It proposes to expand its products range in near future based on market potential and shift in customer requirements. The Indian backhoe loaders market is dominated by 76 HP standard machine which accounts for about 85% of the backhoe loaders industry. Cat sold 1,593 units of backhoe loader during 2012.
Delhi based Escorts Limited (Construction Equipment Division) sold 1196 units during 2012. The company expects to sell around 1400 units during 2013-14. Higher sales expectations are based on the ability of the company for better product placement. According to Mr. Parminder Sachdeva, GM, backhoe loaders, ECE, "We are relatively a new player in the market, however with technically advanced products in terms of higher reaches, higher break out force, better productivity and fuel efficiency, we have been able to brave demand volatility."
ECE's 'Digmax' series of backhoe loaders, which was launched in 2010 is equipped with proven Kirslokar engines. Mr. Sachdeva claims, the engines have higher uptime and better fuel efficiency. The maintenance- friendly engines have a higher maintenance span which are cost effective too."
ECE will look to strengthen the brand of its 'Digmax' backhoe loaders through better product support. Mr. Sachdeva mentions, "We are ensuring 97-98% availability of our backhoe loaders through total packaged services. This involves, operations and parts availability, lubrication maintenance contracts at competitive costs post warranty period." ECE is looking to expand its network through identification of dealers at strategic locations.
Mahindra has created a pool of dedicated dealers for its construction equipment business. However, the company also promotes its backhoe loaders through some of its auto and farm equipment dealers. Mr. Vakharia points out, "We have selected dealers based on their interest in this category and our assessment of their financial and operating ability in this segment." Mahindra has over 150 dealer sales, service and spare parts outlets. The dealers are backed up by twelve area offices, one mother parts warehouse and ten regional parts warehouses.
Retention and sales built up is also looked into by Mahindra by keeping its production costs under control. Mr. Vakharia explains, "On the supply side, we work with vendors who are financially sound and have the ability to withstand market's ups and downs. In our case, volumes to vendors have increased significantly this year with growth in sales and we face no issue at this front."
Mahindra claims of being ranked number 3 in the backhoe loader market in the first quarter of this financial year. According to the company, sales for its 'Earth Master' brand of backhoe loader by 89% in quarter 1 as compared to the same quarter last year. The company sold 800 numbers of backhoe loaders in 2012. Mahindra's manufacturing plant currently has a capacity of 2000 backhoe loaders per annum.
However, the prime strategy to increase sales will be through increasing its portfolio for backhoe loaders. Mahindra has recently introduced two new variants of 'Earth Master' brand to participate in all price segments of the market. Mr. Vakharia mentions, "We had entered the market two years back with a premium product that provided superior features as well as performance and was priced at the top end of the market. We have built credibility with this approach, and have now added products at lower price points that will allow customers with lower budgets to own an Earth Master. The two new variants, Earth Master LX and Earth Master SX will complement our premium variant Earth Master VX." Mahindra also plans to introduce a 4 wheel drive version of Earth Master this year.
About 51% of the Mahindra's present sales of backhoe loaders are derived from its existing customers. The ability to draw sales from existing customers has been through, according to Mahindra, owing to its prompt customer support. Mr. Vakharia informs, "We have invested heavily in customer care. We have an ongoing method of tracking customer satisfaction 90 days and 300 days after a customer purchases a machine. The latest tracks show over 90% satisfaction with product performance and reliability. We have a practice of tracking every service call. We target to close all service calls within 12 hours of a customer calling in, this is a standard that is set much higher than the industry standard. As of now, we are able to close 83% of all service calls within 12 hours. In addition, we have also set up a dedicated call centre for service support that can handle nine languages."
The ability of backhoe loaders manufacturers to reorient their product and support offerings augurs well for the customers as they stand to benefit being offered a wider choice. Nonetheless, it agurs well for manufacturers as well as they get braced up to take the challenges of the volatile market situation both in the mid and long-term taking cognizance of the fact that construction equipment market will always tend to remain cyclic.
NBM&CW OCTOBER 2013
