22 October 2019

Equipmentsphere-Road Construction Equipment

One for the road

 

Transportation infrastructure remains the fundamental lifeline of any robust economy. In fact *research indicates for every 1% increase in highway infrastructure investment, the GDP will increase by as much as 0.24%.

 

India has the second largest road network in the world at 4.7 million km. This network transports more than 60 per cent of all goods in the country and 85 per cent of India’s total passenger traffic. Yet despite having one of the largest networks, the country lacks in road density. India has road densities of 2.75 km per 1,000 people and 770 km per 1,000 sq. km as compared to world averages of 6.7km and 840 km respectively. Further, about 15 per cent of our network carries 80 per cent of the traffic.

 

This presents a serious roadblock to future development.

 

Responding to this need, Government of India has earmarked investments plans of Rs.10 trillion ($ 150 billion) in highways and shipping sector by 2019. The government plans to develop a total of 66,117 km of roads under different programs such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE), and has set an objective of building 30 km of road a day from 2016.

 

Also, several policy interventions like an empowered ministry to decide mode of delivery, increased threshold for project approval, improved inter-ministerial coordination, exit Policy and promoting new e project models like Hybrid Annuity Model are aimed to stimulating investor interest.

As a result, road construction equipment sector in India stands to gain maximum traction. Abhijit Gupta, Brand Leader, Case Construction Equipment, confirms, “The sector has already started showing positive trends since H2 of last financial year and this is likely to continue in this financial year as well.”

 

“The uptick in demand will naturally first consume the established equipment park in the market, followed by growth in the new equipment sector. Government programmes such as ‘Smart Cities’, expressway network, ‘Diamond Quadrilateral, dedicated freight corridors, waterways development, along with development of five industrial corridors, and ongoing programmes for expansion of road, railway, port and airport networks, irrigation programmes are likely to spur significant demand for the earthmoving and construction equipment”, Gupta, added.

 

While ICEMA (Indian Construction Equipment Manufacturers’ Association), confirms that India’s Earthmoving and Construction Equipment (ECE) market is expected to grow by a healthy 20-25 per cent over the next few years to reach 330,000 to 450,000 units sold in 2020, from current levels of about 76,000 units. This would imply a $16 billion-$21 billion market, up from today’s $3 billion.

 

Ramesh Palagiri, Managing Director and CEO, Wirtgen India, Adds, “The demand for green field projects and expansion from 2 to 4 laning and 4 to 6 laning in roads will boost the demand both for road construction and road rehabilitation equipment.”

 

 

 

 

THE RESULTS ARE BEGINNING TO SHOW

 

Amarnath Ramachandran, President, Leeboy India Construction Equipment, “A lot of our equipment have already been deployed at the new projects including Sambalpur-Rourkela road in Odisha, Pink city expressway, Agra-Lucknow expressway, two MPRDC projects - Rewa to Satna and Khajurao to Rewa, Sidhi to Singrauli NH, Thodupuzha to Sabarimalai, State highways  around Mysore, Western Dedicated Freight Corridor.”The construction equipment market in India is primarily segmented based on solution, type, industries, application and geography.

 

 

According to Abhijit Gupta, Brand Leader, Case Construction Equipment, “Almost all types of equipment are witnessing growth, though the market will continue to be dominated by the six most popular products: backhoe loaders, crawler excavators, mobile cranes, mobile compressors, compaction equipment and wheeled loaders.”

 

“Together these equipment will account to 93 per cent of the market in 2020. Among road construction equipment, compaction equipment, which has remained subdued for the last few years, increased by 16 per cent and motor grader sales surged by 98 per cent in 2015.”, Gupta concluded

 

The growth seems uinform with several product categories recording a healthy upswing.

 

“Soil and Asphalt Vibratory compactors are the most selling road construction equipment, with the bias between soil and asphalt continually changing. Currently Motor Graders and Mini Compactors are also witnessing a good demand.”, Rajinder Raina, General Manager- Marketing, Escorts Construction Equipment, added.

 

Besides compactors, pavers and tandem rollers, equipment such as planers (cold milling machines), material feeders, etc., are also set to witness a significant increase in market share.

 

Also with 100 new concrete road projects announced by Nitin Gadkari, Union Transport and Highway Minister, the slip form paving equipment industry is destined to witness a bright future in India. Currently due to the many road projects being awarded in concrete segment, the Wirtgen Slipform Pavers are majorly in demand.” Ramesh Palagiri, Managing Director and CEO, Wirtgen India

 

According to Rajinder Raina, General Manager- Marketing, Escorts Construction Equipment, “2015-16 registered a growth of more than 35 per cent over the previous year. The current fiscal is expected to register a growth of about 20 per cent over the last year.

 

The market for excavators, backhoe loaders and dumper trucks, needed for construction and transport is expected to be $2.8 billion this year. The industry is expected to nearly double to around $5 billion by 2019-20, according to the Indian construction equipment manufacturers association (ICEMA).

 

CHALLENGES

As the concept of infrastructure in India continues to evolve, the sector is facing ambitious demands for quicker and cheaper production and construction. With the time slots available for repair and rehabilitation works becoming tighter, maintenance techniques need to catch up. In addition to this, the sector faces basic intrinsic challenges like dearth of skilled manpower (especially in remote areas), poor returns on investment and scarce availability of good quality aggregates in many states, to name a few.

These challenges are leading to a new set of trends, which are shaping the markets:

 

Price factor losing its sheen:

 

According to Vikram Sharma, MD and CEO, Kobelco, “While price continues to be the dominant factor in purchase decisions, an increasing number of buyers are considering key aspects like machine productivity, after-sales support, machine uptime, fuel consumption, service life of major components while selecting their equipment”. 

 

Leasing and Renting model continues to grow:

With the private investment sector still hesitant at large, developers are resorting to selective leasing and renting of equipment instead of purchase. Case India adds that this trend is also growing due to the large geographical spread and difficult inter-state movement of RTO registered assets. Most of the large contractors, other than maintaining a captive fleet of equipment for critical project sections, rent out other equipment in multiple wide spread sections of any infrastructure project. However this largely remains unorganised. Also the concept of cost is variable. While rental companies are concerned about the initial cost of the equipment, the captive users are more interested in the total cost of ownership with emphasis on the cost of maintenance and operations. ICEMA adds, that the financing of ECE and the increased use of rentals will infact create wider use by encouraging users that don’t necessarily want to own equipment, especially in tier 2 and 3 towns, where small contractors will drive growth.

 

Product and after sales support:

The need for service expertise continues to grow with the increasing complexity of equipment. Strong product support programs that enable higher efficiencies and a better operating fleet will build on the customer-dealer relationships and ultimately enhance the brand value.

 

The ‘Make In India’ effect:

Many manufactures are resorting to increasing indigenization to fulfill local requirements, helping suppliers improve margins. Escorts Construction Equipment has several homegrown products on its portfolio like ‘Hydra’ and ‘TRX’ series of pick-n-carry cranes and Backhoe Loader ‘Digmax II’ to fully localised Vibratory Compactors and 360° Slew cranes. While Leebhoy, has focused on building a global-spec machine in India. They currently import only key driveline components like axles, transmissions, control valves, brakes, pumps and motors. The rest of the machine is completely made in India. While the company agrees that the ‘Make in India’ campaign is good, the reality remains that India faces a technology deficit. This is one of the reasons why manufacturing contributes only 15 per cent of the GDP. Going forward, OEMs need to shift their focus from saving cost to quality of workmanship to make their products export-worthy. Kobelco confirms, that in spite of substantial indigenisation over the years, there are still some constraints in respect of components requiring high quality or technological standards. Besides some of the leading OEMs still use older technologies and hence the demand for high-tech components is limited. Imports seem to be the only option for now.

 

Spotlight on environment friendly products:

With a rising pollution graph and scares resources, the need for environment friendly solutions continue to alter how products are consumed. Several companies are conscious of this requirement. For example, Wirtgen India emphasises, that their range of Cold Milling and Cold Recycling technology machines contribute towards reduction of use of aggregates and also in the reuse of existing Bitumen.  While Kobelco has an Auto-Idle-Stop feature on their engines, which brings about substantial fuel savings.
 

Innovations take center-stage:

While price and scale advantages continue to drive the segment, manufacturers are increasingly adopting a collaborative role in contributing to the customers’ value creation. These initiatives include customising machine designs and providing data- driven services to increase uptime and fuel efficiency. For example, LeeBoy is coming out with new drilling attachments on their excavators, larger graders–18t and 22t to create higher productivity and improve haul-road maintenance. While, the INDr (Integrated Noise and Dust Reduction) technology allows Kobelco Excavators to work with very low sound and vibration levels, even in very dusty conditions. Escorts has introduced Tandem vibratory Roller HD 85NS – with water cooled engine and new design water tanks with performance reported from the field being far superior to HD85 on various parameters. CASE India emphasises on advanced technology and minimalistic maintenance intervention, be it from regular maintenance point of view (reliability) or longer oil change periods, makes them absolutely trouble free. Wirtgen Group adds that the average age of any of the Wirtgen Group products in the market is around 2 years, and many products like Wirtgen Cold Milling machines, Wirtgen Soil Stabilisers and Cold Recyclers, Surface Miners are at least a generation ahead of competition.
 

Evolution with Telematics:

A major factor for productivity increases rests on users being able to monitor and utilise a more efficient fleet. Manufacturers are fast embracing the evolving field of Telematics to provide value-added insights to their customers. LeeBoy offers the ‘Insta-I’ – its customized telematics solution from Trimble for monitoring critical parameters around the utilization, maintenance and health of the LeeBoy machines across multiple sites. With mobile alerts enabled, the Insta-i system enables real-time data at the customer’s fingertips to aid well-informed decisions. CASE India has recently launched Eagle Eye Telematic System, a real time vehicle tracking and communication based on GPS technology, which enables the operators to monitor and trace geographical locations of CASE Loader Backhoes and Vibratory Compactor equipment. Additionally this system will also provide an update on the use of the machine, fuel & temperature levels and total number hours the machine was in operation.

 

FUTURE ROADMAP

As India continues to surge ahead on the development agenda, we need to reconcile our future transport needs with our social and sustainability goals. Our roads need to evolve from a mere connectivity platform to an intuitive network with multidisciplinary competences geared to meet the demands of our future. This supposes a collaborative approach to road infrastructure with active participation from all stakeholders including users, residents, developers and government.

 

* SOURCE : (Ex: Aschauer, D., 1992, “Is Public Expenditure Productive,” Journal of Monetary Economics, Vol. 23, pp. 177-20; and Federal Highway Administration, Assessing the Relationship Between Transportation Infrastructure and Productivity, August, 1992, pp. 5-6.)