As the old adage goes, it makes real sense to leave aside sentiments and instead have a practical approach to counter the ongoing and future developments. The approach has positively proved itself in the history of survival. The thought has its rationale in businesses as well. Instances galore where fragile business decisions or indecisiveness have made organizations succumbed to the vagaries of market developments. The excavator manufacturers in Indian construction market are indeed not willing to be out of the realm of the approach. Followed by making large scale capital investments for manufacturing the base equipment in Greenfield facilities and also towards brown-field expansions production capacities, it has really been hard for the manufacturers to reconcile the negative developments in the market, driving demand deep south at least by 25-30% as compared to last year. However keeping aside the negative business sentiment, preparedness is steady at the manufacturers’ camp for the present and future.
The basis behind the readiness backed by the diverse business strategies to expand and consolidate market presence, lies in the mammoth projected figure of the demand of excavators escalating to 40,000 units by 2016 led by a forecasted double-digit economic growth. However, the logic behind the business plans, also lies in the cyclic nature of the market. This is while taking cognizance of immediate past demand trends, when after seeing a significant decline in 2009, the demand for excavators witnessed an extraordinary growth with market touching the level of almost 15,000 units. The cyclic nature of the market determining demand is also expected to turn volatile, which is well unlikely to leave manufacturers unscathed by stiff competition, thereby making them imperative to continue in action.
The Korean manufacturing entity proposes to take on to the situation by focusing on customer service and support. Mr. Mohan mentions, “Sizeable chunk of our sales comes from our 20 tons segment which have been able to make encouraging presence. We will keep focusing on marketing the products of concerned capacity and also by extending service support to our existing customers. We will also maintain market presence with supporting our Doosan excavators. Doosan has a fleet of 5,000 working excavators in the market.
Owing to subdued demand & current price war in the market, Doosan will take decision for capital investments to set up production unit only after evaluating the market situation properly.”
While Doosan claims to maintain decent presence in the 20 ton class segment, the competition in the higher capacity units comprising 30 tons and beyond is also increasing. The company has a product portfolio of 30-34-50 and other higher capacity. According to Mr. Mohan, “The market size of 30 tons class is modest in India as of now due to mining segment, not showing any growth. Doosan markets excavators of various capacities comprising 8-15-20-22.5-30-34-50 tons.
Though demand volumes of higher capacity units is modest in India, a major jolt to the demand has been due to slowing demand from the Road Construction & mining industry due to various reasons.. The situation is likely to maintain its status quo. This is likely to insulate the segment from pricing disparity that manufacturers may resort to build up their presence at present. The pricing parity in higher capacity excavators in the Indian market is also likely to remain, in fact due to low volumes, all the major manufacturers will keep importing the products from their parent companies.
Notwithstanding, the spurt in demand of higher capacity excavators is expected to take place going by the cyclic pattern of the economic growth, leading to firming up of the economy followed by present slump in future. Based on the cyclic growth pattern, large scale capacity expansions are planned by the steel sector, notably Steel Authority of India Limited, Tisco. There are good numbers of secondary producers lined up for financial closures of their planned expansions, one being Electro Steel Castings. Capacity expansions are also being planned by cement and other mineral sectors which will lead to the requirements of higher capacity equipment.
It will be quite interesting to see that with demand unfolding for the higher capacity units in future; what will be the nature of pricing and which will be put in place for bigger excavators by manufacturers to build up market network? This is evaluating the fact that certain manufacturers have established manufacturing presence backed by sound vendor base and an elaborate market network, brand recall added by strong geographical presence in important demand pockets. The market size of higher capacity excavators beyond 20 tons is estimated to be between 1-18% out of the total sales. Among this, 34-37 tons commands the highest percentage of 18%, 30 tons at 5 percent, 38-40 tons at 1 percent and that of 40-50 tons at 7 percent. The higher capacity segment have more or less maintained similar percentage of among the total segment of excavators during the previous years.However, led by slow down in mining the percentage of sales of higher capacity expected to shrink during 2012.
Total excavators sales during 2010 varied between 11,455- 14,650 units. Sales for 2011 were closed at 14,700 -14,900 units. From January-October 2012 manufacturers have registered sales at 11,729. According to industry estimates, sales for 2012 are expected to close at around 14,000 units.
Banking on BaseThe key to maintain presence amidst slowing demand and stiffer competition will be to make the cost of competitive products and services available. Sustained ability to make equipment and customer support at economical rates, even after post warranty period, will contribute towards brand recall.
Liugong derives 35% of its sales from corporate and remaining from the retail buyers, will also look to expand its footprint by exploring various applications market. The Chinese manufacturing entity will develope its products to tap the precise applications market. According to Mr. Sapru, “The appropriate product positioning will be the key of our strategy. By addressing the requirements of the special application market, we will work on the products, in order to deliver higher on fuel efficiency and productivity. To ensure that the products have higher uptime, Liugong’s sustained technical support through regular parts and operations support will be in place. Operation support will be provided through our well-established training at our Greenfield facility in Pithampur. Besides, onsite support will also be there at par for the equipment working for conventional applications.”
He explains, “To make the right product positioning for niche applications, say rock breaking, we will keep researching on the right hydraulic oil flows that may be required for the breakers to function optimally. Comparative aspects like tonnage to weight volumes will also be evaluated for the optimum performance of the equipment in the Indian working conditions. Further, we will continue to research for better integration of the excavators with various attachments involving the breakers or buckets of various configurations. Business from special applications for Liugong has been promising and the company sees further growth in the segment.” However, he declined to comment on the level of business, Liugong has been deriving from the segment at present and future expectations.
Ability of Liugong to offer excavators, customized for Indian conditions both standard and niche applications are based on its full fledged R&D facility in Pithampur. Mr. Sapru mentions, “We are planning to manufacture 6-8-20-36 tons class models locally at Pithampur. Our R&D facility will offer key knowledge support towards indegenising the products.” 40% of Liugong’s business is from excavators’ sales contributed by 20 tons class equipment, 10-12 tons models contribute15% of excavator’s sales, whereas 6 tons provides 5-6 percent of sales.
Promoting newer products for conventional applications or niche applications necessarily calls for strong product back up support. This is essential for brand recall. For JCB India, future and existing strategy to promote its excavators will be through expanding its market reach. Acting on existing and emerging competition, which will be getting stiffer, despite growth in absolute volumes, emphasis on marketing backed by new product launches is the future roadmap for JCB India Pvt. Ltd.
Adding MuscleThe vital ongoing strategy to keep business moving during the tougher times is increased focus on localization, in order to reduce manufacturing costs. Hyundai Construction Equipment India pvt ltd seems to get the logic well adapted in its business in India. The company presently manufacturer’s complete range of 8-34 ton capacity excavators at its Pune facility with localization component being 35-40%. While excavators of 50-80 tons capacity are imported by the Korean company. The company’s 60-65% sales are from its 20 tons class equipment. The range of excavators made available by the Korean company in India comprises 8-11-14-20-22 tons class units.
According to the company, phase wise localization of its products backed by requisite customer support, since its inception in India in 2008, has allowed Hyundai attain close to 20% market share in excavators. The company derives 90% of its sales from the retail segment with the remaining being from the corporate buyers.
Strengthening its presence in the 20 ton capacity segment, Hyundai has recently launched its advanced 9-series excavators to its predecessor 7- series. The 7-series of excavators comprises Hyundai’s ‘Robex’ range of 210,215, and 220. The new 9-series bear’s model numbers of R-220-9S, which is expected to compete with higher end models of competition.
Mr. Panda mentions, “Given our well spread sales and service network supported through our 27 dealers having 90 touch points, further complemented by our mother warehouse in Pune and 3 regional warehouses in Kolkata, Hyderabad and Delhi we are well placed to promote sales and support our equipment. The technical support to equipment working at inaccessible sites is ensured through our dealer residential engineers.”
Expansion and preservation of market share is also been initiated by Volvo during the trying times. Volvo India pvt ltd has launched two new higher capacity D-series excavators, EC 380 D of 38 tons and EC 480 D of 48 tons class for the Indian market. According to the company, Volvo D-13 turbo charged high pressure diesel engines, in the excavators offers maximum power of 279 hp (208 kW) (/EC380D), and 343 hp (256 kW) (EC480D) allowing the equipments to have superior cycle times and greater fuel efficiency. The excavators will be marketed by Volvo for heavy production duties such as quarrying and mining apart from trenching, loading, moving rocks or general construction in India.
Volvo intends to market the new D-series excavators on its features, which the company claims makes its products competitive in its positioning. Among the inbuilt features, Volvo will be banking to sell the excavators are rugged undercarriage made from high strength tensile steel, with sprockets and top rollers made from forged steel and deep hardened for long term durability. Track guards and bolt-head protection are some added features of the excavators.
According to Volvo, heavy duty booms are standard on these machines. High strength tensile steel arms provide durability in severe applications. Wear strips welded to the inside of the arm give added protection and the linkage yoke features a support bar for additional strength. The optional boom float function lowers the boom using gravity only, freeing up hydraulic flow for other duties.
At par with other contemporary products available, the D-series excavators also comes with an option for operators to select various modes, so as suit job requirements. The operator can select the work mode, settings and attachment requirements all from inside the cab. There are four working modes (idle, fine, general and heavy) for the operators to choose upon.
D-series comes fitted with standard with ‘Care Track’, Volvo CE’s telematic system. Accessed remotely, CareTrack provides machine information such as fuel consumption and service reminders that allow improved planning and operation. Services support to the machines will be provided by Volvo’s dealers through general and annual maintenance support and operator’s training.