The challenge for excavator manufacturers in India towards building future sales and retaining existing buyers, amidst present spell of subdued demand, is that, demand largely continues to remain restricted around 20 tons class at present. This is even after mechanization of construction activities started gaining ground from 2005 onwards. Off take remaining restricted below a specified class has eventually been putting pressure on profit margins of manufacturers, which otherwise they might have obtained selling higher capacity machines. Not to mention, it has deterred expansion of product offerings. With demand being restricted to certain tonnage class and crowding of market space by large number of manufacturers, stiff competition is the evident fall out, excavators manufacturers in India presently seem to counter and brace for more in future, till 2015 when demand is likely to expand based on fresh off take of units.
There are numerous challenges for of generating profitable business, following colossal investments being made, when demand is restricted to certain category and falling sales. Continuous and strong engineering innovations have to be carried out, so as to substantiate competitive product placement and the brand name. This is a hard fact which excavators' manufacturers in India are getting gradually reconciled into and carrying out necessary changes in their production systems and products to check brand substitution by customers, in face of ever rising operational costs, on account of growing fuel costs and wages.
The challenge is even more for manufacturers, those who have chosen the promotional line towards offering products that will focus on restricting total operating costs, despite higher initial costs being incurred. The strategy is dicey in the Indian market as buying decision is greatly influenced by the quantum of initial investments, be it good times when rental rates are high or lull when rentals are otherwise.
The initiatives are likely to retain captive sales. To add on revenue and supplement captive sales, Volvo CE has devised its parts remanufacturing programme. He describes, "Our remanufactured program or 'Reman' is to encourage users to keep their Volvo machines genuinely 'a Volvo'. It allows users of Volvo CE to have their used components renovated to the same condition as new with a warranty backup."
However, the challenge is increasing the ratio of generating profitable business in India for Volvo CE. The company invested Rs.90 crores during late 2011 as part of its manufacturing expansion program at its Peenya facility in Bangalore manufacturing excavators and road construction equipment. To ensure optimum capacity utilization, Volvo CE will require expanding its market network. Mr. Muralidharan informs, "We have been strengthening our distribution network periodically. Presently, we have 13 dealers spread across India to offer enhanced sales and support to customers. As the market grows, we will keep investing in distribution and even our dealers will invest in terms of infrastructure and people."
However, focusing on profitable business from the Indian market while ensuring market expansion, Volvo CE has begun to enlarge its class offerings. Seeing lesser competition above 30 tons class segment, Volvo CE has newly introduced EC380D and EC480D, 38-48tons heavier capacity excavators. Mr. Muralidharan claims, "Response for the excavators has been quite positive."
The D-series excavators come with a turbocharged high pressure direct injection Volvo diesel engine offering maximum power of 279 hp and 343 hp (256 kW) delivering dependable power with high torque, along with lower emissions and noise. A new function called ECO mode has been introduced in these machines as a standard function that helps in reducing the fuel consumption in each mode of operation. The other standard features include, machine tracking and preventive maintenance information, ten working modes based on job site requirements. Mr. Muralidharan mentions, "Advanced hydraulics rugged reinforced undercarriage, heavy duty boom and arm are standard on these machines, and high strength tensile steel arms provide durability in strenuous applications."
Officials explain, "Compared to its earlier predecessor, Cat 320D, the 320D 2-series 2 is powered by Cat 7.01 engine that is more robust to inferior fuel. There is a 3% fuel consumption reduction for the 320D 2 series 2 as compared to 320D. The new dual fuel filter technology minimizes owning and operating costs. With the technology, the service interval for 320D 2 series is 500 hours as compared to 250 hours in 320D with a C6.4 Engine. One of the unique feature of duel fuel technology is that when idling, it ensures that less fuel is burned to have the engine running." 141 HP or 105 KW Cat C7.1 engine, in 320 D 2-series meets U.S. EPA Tier 2, EU Stage II regulations and China Stage 1 regulations.
Cat 320 D 2-series is equipped with standard eco-mode power setting, while condition monitoring as part of standard feature is ensured with PL522 which is a cellular based Product Link and is equipped with the latest release of Vision Link® 2.7. According to Caterpillar officials, "The user interface provides customers a mobile optimized web application, the ability to schedule automated delivery of Vision Link reports, and remote access to on-board payload system information. The mobile application is available on, BlackBerry, Android/Chrome and Windows operating systems."
Fitted with a smaller and high efficiency pilot pump and newly designed main pump, Cat 320D 2-series also claims to have 3 percent enhanced hydraulic efficiency. Caterpillar official claims, equipment efficiency is also increased by minimizing extra gap between gears and gear case in order to reduce oil agitation.
To build up revenue base, Cat India has in place remanufactured support and tailor made customer support agreements, categorized into gold, silver and bronze categories in association with its exclusive dealers Tractors India Limited covering Eastern and Northern India and Gmmco covering Southern and Western India. The US origin company, also offer services like rent to purchase, trading of existing machines, and short term rentals.
Mr. Panda adds, "Strengthening our offerings further, we have also added 9 series excavators in 14T. This is high-end, most advanced excavator in the Indian industry in terms of technology being offered." Hyundai offers excavators from 8 to 120 tons. It presently manufactures 8-22 ton capacity excavators at its Pune facility. To make the products price competitive, Hyundai India claims to have attained 50% localization of the excavators made up from 40% during previous year, allowing it to make its excavators price competitive in India.60-65% sales are from its 20 tons class equipment.
To ensure off take of its new range of excavators, Hyundai India has 29 dealers with 100+ service touch points across the country. To cater to the rapidly growing customer base in Southern India, Hyundai recently added, V Engineering Enterprise and Asha Atuomines Pvt. Ltd as its new dealers. Strengthening to dealership network is vital for Hyundai to maintain hold on its captive customers. The Korean equipment major derives 40% of its equipment sales in India from its repeat customers, while remaining sales is from the first time buyers.
JCB India will look for expansion and retention of market presence through its available dealership network with 540 outlets supported by 24X7 dealer service van. Product cost control is being looked through enhanced adoption of lean manufacturing systems.
Liugong India hopes to strengthen its brand in India through what it claims as its advanced engineered excavators. Mr. Punjabi claims, "Liugong excavators perform better while digging and loading at lower operating costs. The excavators promoted in Indian market are being manufactured at our plant in Pithampur. The products have been developed to suit Indian job site applications, besides they have been made maintenance-friendly. Our excavators come with tougher, stronger boom and dippers. Heavy-duty stabilizers have been introduced to achieve longer service life in tough terrains. Improved protected hose routings and other hydraulics are designed in segments to achieve lower replacement costs and longer uninterrupted working."
LiuGong India expects to promote sales further by making its excavators technically well positioned for niche applications. Mr. Punjabi 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 are also being evaluated for the optimum performance of the equipment in the Indian working conditions. Further, we are continuing to research for better integration of the excavators with various attachments involving the breakers or buckets of various configurations." He adds, "Business from special applications for LiuGong India has been promising and we see further growth in the segment".
LiuGong has its full fledged R&D facility in Pithampur that Mr. Punjabi claims has been instrumental in designing products suitable for Indian applications. He says, "We are planning to manufacture 6-8-20-36 tons class models locally at Pithampur. Forty percent of LiuGong's business in India is from excavators' sales contributed by 20 tons class equipment, 10-12 tons models contribute 15% of excavator's sales, whereas 6 tons provides 5-6 percent of sales. The Chinese construction equipment conglomerate derives 35% of its sales from corporate and remaining from the retail buyers in India.
Business strategies for bigger quantum of localization, incorporation of advanced engineering to make the excavators suitable for desired job site applications are some of the strategies that may bring dividends for excavators manufacturers in India. However, it cannot be looked in isolation. Strategies would have be to be aligned towards ensuring continuous, prompt onsite product and parts support and most importantly, suitable back up market linkages both at home and abroad, so as to hedge business risks and generate profitable business in mid and long-term in India.
The company has plans to begin local assembly of its 8-11-22 tons hydraulic excavators for the Indian market at its facility in Bangalore shortly. Doosan has hex product range of 3.2-8-15-20-22-30-35-38-42-50-70 tons excavators for the Indian market. Sizeable chunk of business is derived through sales of 20- 22 tons class units.