Sanjeev Bajaj, Chief Executive
With the major investments announced for infra development in the 2022-23 Budget, the CE Industry is poised for growth.
The Budget 2022-23 has infused fresh confidence in the construction equipment industry. The government has allocated funds and announced a spate of major projects like the construction of 25,000 kms of national highways in a year, creation of logistics parks, transit hubs, fast track trains, etc. A free hand has also been given to the states to invest in infrastructural activities.
The last two years have been volatile, with lockdowns & pent up demand. The boost from the Budget and the capital allocation are set to drive the CE industry. Now, what we need is optimism in the industry, which must gear up and instill confidence in the government that the projects planned can be completed on time along with a focus on quality construction.
At Escorts, we are initiating measures to be prepared for expected boom, and are working on capacity building, cost reduction, and on sales and marketing to reach customers across regions. We are upgrading our portfolio of pick and carry cranes, backhoe loaders, and compactors by adding more features that will enhance their fuel-efficiency, reliability, stability, and safety, and reduce their operating costs.
CE industry is moving towards more efficient, higher capacity products, so is Escorts.
With Kubota on board, we are now open to exploring more segments outside our current range of equipment. Though every new product has a gestation period, we are not shy; we are cash rich and hungry to invest.
We expect a very high demand for technologically sound construction equipment and machineries because of the many positive macro factors. Plus, there is demand for timely completion and the industry must keep pace with the changes that will happen foreseeably and very fast.
As leaders in the industry, we feel it is Escorts’ responsibility to bring out feature-rich products.
Today, the foremost requirement of the customer is for reliable equipment with safety being its central feature because any accident on site leads to cost escalation and impacts the contractors’ reputation. The response to our White Line range has been positive, especially because of its unmatched features on safety and productivity. In current times, cost of equipment is an important aspect for customer and we make value additions in any equipment there will also be cost escalation. This often makes customers think twice before investing in a new machine. However long-term benefits and their Return on Investment will far outweigh the initial cost of the machine. At the same time it is imperative to also work inwards and keep the costs as low as possible.
A top priority at Escorts is driving the profitability of our customers through standardization and digitalization.
During the last few years, there has been a huge impact on customer behavior owning to the constant project delays coupled with cost escalations. The escalation in the steel prices by 25-30% and BS IV emission norms have also impacted the cost. Our aim is to enhance the profitability of our customers, addressing their needs and difficulties. So first, are working constantly on the cost structuring of our products, manufacturing processes, operations, and sales, so that we can offer customers a more cost-efficient product line that promises improved performance.
We aim to offer standardized products with at least 80-85% commonality of parts.
The CE industry lacks standardization in terms of product mix and commonality of parts, which adds to the costs for customers. For instance, they may end up paying for features that are not really required, or the features maybe required but are not economical enough to be used.
Standardized products with at least 80-85% commonality of parts will ease the process of switching between the machine variants, their servicing, interchangeability, and there will be lesser inventory to manage, and the manufacturing costs will also be reduced.
We believe that IoT should help the customer in his business.
Another focus area at Escorts is digitalization of its machines and their operations, and to connect them digitally with the owners. We believe that investing in digitalization will enable us to measure the performance of our Products and our operations will also become more efficient.
I think, simply capturing data and applications around it may be less important for the customer. Rather, fuel saving, increasing productivity, and accurate billing, safety and all those aspects which help our customer in his day to day business should be the priority areas of the OEMs.
Sub-contractors and rental customers comprise almost 65% of our sales.
In India, the leasing and renting industry is yet to evolve and become more organized. With close to 65% of our sales coming from sub-contractors and rental customers, our aim is to create better solutions for them and help them become more organized. We will offer digital and technological solutions, including telematics for fleet management, upkeep, maintenance, and refurbishing. As regards the hiring rates, there will be a natural balance between the cost of the equipment, viability of the hirer and project, and the escalating prices.
The refurbishing industry has the potential of becoming a strong arm in Escorts. We are trying to bring such capabilities in our channel partners to help customers get better resale value from their machines. Since the focus of the government is to finish projects within the set timelines, the health of the equipment is of utmost importance.
There is a clear transition towards Industry 4.0 across segments.
New technologies will be better accepted and will enable us to offer products that are more advanced and efficient. In the cranes segment, for example, we have seen a clear progression from the relatively entry level cranes to cranes with technologically advanced features that enhance productivity and improve safety.
This is quite evident with the influx of multinational OEMs, setting up their shops in India and promoting safe crane concept. As in the rental segment, long-term jobs demand safer cranes, higher capacity and feature rich, such competition will be good for the industry and will hasten the transition to Industry 4:0.
The real challenge is commercialization of technology.
With our strength in R&D, we launched the world’s first commercialized electric tractor and is already getting exported. While the Government is taking steps to prepare the infrastructure for electrification of the segment, Escorts is focusing on making the technology more suitable and efficient for customers and the infrastructure around it. We also have progressed on other alternate power options and preparing to introduce the products with these technologies at the right time.
Escorts is creating a community to work closely with operators, train them, and keep them connected digitally.
Training of operators is essential for safety of equipment and not just for operational efficiency. An operator must be able to extract the best out of the life of an equipment. Awareness in many aspects does not need hands-on training since most of the operators with even 2-3 years of experience will develop the skills to operate a machine. But they need to be trained on fine tuning, troubleshooting, and on avoiding certain wrong practices, which can be easily done digitally.
Escorts already has an app with 500+ local mechanics along with spare parts dealers and distributors connected to it. It works as a support community for our customers and will continue to make it more active. We are also in talks with certain specialized agencies to train mechanics and operators on safety aspects and to reduce the cost of operations.