Please comment on GST and its impact on the CE industry.
GST, in the long-term, will surely be a much better regime to work with because it’s an ‘add on and pass on’ tax, wherein, everyone charges, pays and passes on to the next buyer. It is the last-point consumer who has to bear it, which is fine. Therefore, manufacturers and contractors should be in an easier situation and lesser cost of taxation.
The initial two-three quarters will be tough for the industry as there is the issue of cash outflow and cash accounting, as under GST, customers buying a machine will have to deposit 18% GST (earlier it was 28%) and then claim it back. While in the earlier tax regime, customer used to pay 12.5% excise and 5.5 percent VAT but if he had an accumulation in his account, he could set it off,so there was no cash outflow, except for VAT.
As for the small customers, hirers, and rental companies, firstly, they are not too clear on how to operate a GST registration and account. Secondly, they will have to register in every state that they operate in. So, customers are faced with multiple accounts and multiple returns.
The third aspect is that the rate of GST is different for different jobs; even big customers are not aware on how much GST to be charged, for example, for canal building, a road job, mining, bridge building etc., as some states have not been given clarity on the percentage of GST they have to charge.
However, doing business will become smoother in the long run. The system with its rules, laws and regulations should get simplified as we roll on. Currently, they are very complicated due to multiplicity of registrations, no clarity on billing amounts etc., and in spare parts too, there are so many rates of GST - be it engine parts, steel parts, rubber parts etc.
How has the CE business been affected by the GST regime?
If you look at market figures of July-September 2017, business has come down from what April-May 2017 used to be. I won’t count June, because in this month, the market saw a huge preponement by small contractors, and was the highest month in the history of this industry.
The VAT to GST regime has been a very turbulent change, and its effect was noticeably very strong in July and August, but with every passing month, it is returning to normalcy.
Customers are now looking at integrated service providers. Please comment on this new market development.
Many of us have started giving integrated services, full maintenance contracts, and full coverage principles to our regular customers. From knowing about the machines, their production, productivity, performance levels, fuel averages and other aspects, it has become common for customers to ask for the expected lifecycle span of various aggregates, various units, and we have to give an estimation based on our judgement.
With very big companies, policies are based on agreed upon or expected life, and coverages are provided accordingly. This practice has been there for the past 2-3 years. What may happen more is that owners of one or two machines may start looking for some provision for such supports. When that starts happening, we will have to factor in the extra costs involved. Many of our market segments are still not accustomed to giving a cost for additional services that customers look for, and this is yet to percolate down in our industry.
India is a value-driven market, how does Kobelco look on this aspect?
When Kobelco started in 2007, we were amongst the high-priced machines, and still are. We have never compromised on quality and we have built up our performance superiority. Today, we are recognized as leaders in fuel efficiency and productivity. We will gradually upgrade our products with more safety and ease-of-operating features.
In India, Kobelco is manufacturing 14, 20 and 38-tons’ Excavators. The 50-ton and 85-ton units are being imported but we plan to start manufacturing them in India. Localization is quite important to be cost competitive. We have attained 40-45% localization depending on the model. But critical components such as engines, hydraulics and electronics are from Japan. We use Hino engines of Japan, which are one of the most efficient and especially designed for Kobelco machines.
We are finalizing the CEMM Act initiated by iCEMA; it will govern safety, product performances, environment regulations, insurance, registration of the equipment and so forth. The Government is very receptive to the Act, and once it comes into effect, it will be an automatic flow. The industry is getting into a regime that you see in developed countries.
How are automation & Internet of Things (IoT) bringing operational efficiency into your machines?
We can reduce weight of the machine upto a certain level as we also have to look at ground pressures, dead loads, safety aspects such as turning radii, braking distances, ease of operation, drive mechanisms, engines, cooling systems etc. Machines used in material handling do need a certain weight to give them stability.
Kobelco launched a 20-ton Gen 10 machine in April and will now be launching the next Gen 10 in the 38 ton category. Here, the electronics are much superior. We are using systems such as regenerative mechanism, better control panels, display and information to operator. More information is now available to us through the web to enable us to look at the life and safety of the machine and take corrective / guiding actions in time. We are linked through GPS and we get information every 24 hours, which is updated from the machine. In remote and mining areas where GPS is not available, the engineers or the customer can very easily download the data/report and send it to us.
What India-specific R&D goes into Kobelco machines to make them more robust for tough site conditions, adulterated fuel, etc.?
We generally launch the same quality machine all over the world. Of course, we have not reached Tier 4 which is being used in USA, but we are very close at Tier 3. In most of the places, Indian fuel is not very adulterated. If you test the diesel distributed in India by the companies, the Sulphur content is much lower than that found in some of the South-East Asian countries. However, the fuel handling here is not very clean at times, especially while filling barrels and transporting them to the job sites, so external contaminants get in.
In 2008, Kobelco had changed to a triple filtration system, and dropped our filtration to 2μ (two microns). This is one of the best cleaning systems as it is hugely successful in removing contaminants and extending the service life of the engine.
What skill development initiatives are being undertaken by Kobelco for its operators and mechanics?
Currently, our major focus is on training mechanics, but we are also developing a facility for operator training in Chennai, which will start soon. For mechanics within the company as well as at dealerships, we have 2-3 programs going on every month in different parts of the country. In our training centers, our trainers are constantly updating information on the training techniques in Japan, and we have Japanese coming here to train our people.
We have four levels of training L1 to L4. L1 is for new joinees who have to go through other stages and levels of training, after six months. We also specify the number of mechanics required at a dealer based on the number of machines to be serviced, and the training level of the mechanics.
Which machines will Kobleco introduce at Excon 2017?
We will be showcasing our newly launched Gen 10 of our popular model, the SK380XDLC, and explain its differences from our earlier Gen 8 machine. The new Gen 10 is more fuel-efficient, and its structure is tougher as we have moved towards more mining-centric machines in the last 5-7 years.
The Gen 10 is much more enabled in terms of electronics and IT to generate, use, and analyze information for the benefit of customer usage and for the machine. We can get more comprehensive information for timely maintenance schedules, which will help us improve the operations / output of the machines for any application, and take preventive /corrective measures.
Regarding Cabin design, it is much more comfortable and more modern, with operator’s effort reduced by 38%. There is air conditioning from all four sides, brighter panels for easy reading, lever efforts are lesser, so operator fatigue is down by 38%, which is a major improvement.
We will also be launching at Excon, our long-reach 50-feet attachment, suitable for our 20 ton machines that have been designed in-house. These are for application in metros, for irrigation, cleaning of canals, drainages etc, the market for which has grown and will continue to grow.
