24 October 2019

Table of Contents for Industry Focus: Off Highway Equipment





Industry Focus: Off Highway Equipment

Demand skids to Off-Highway

 

As India spends a trillion dollar budget to modernise its creaking infrastructure, there is a concomitant surge in demand for construction and earthmoving equipment.  The two major sectors fuelling demand are infrastructure and mining. While it’s going to be a while till mining activity picks up, infra is already churning up demand. And the biggest segment here is off highway, which is leading the pack among all construction equipment verticals in the Indian market. SATISH P CHAVAN reports.

 

A fast track rollout of projects across infra verticals ranging from power to water, and across transport verticals ranging from roads, ports, and airports, and urban transport infra, are spawning huge demand for off highway equipment. Irrespective of the infra vertical, all these projects will need off highway equipment to prepare the ground for any project. Off highway equipment ranging from excavators, excavators, off highway loaders, off highway cranes, and tipper trucks will be required to execute all construction projects. According to research consultancy Off-Highway Research, equipment sales are projected to exceed 73,000 units this year as the Government continues to place an emphasis on more intensive infrastructure development. The market in the first half of the year was particularly strong ahead of the implementation of the new national Goods and Services Tax (GST) on July 1.

“Almost all types of equipment will witness 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 will account for 93 per cent of the market in 2021,” the Off-Highway Research’s market report says.

 

DEMAND ACROSS VERTICALS

According to available data, construction equipment sales in India is projected to grow by over 10 per cent this year, continuing the momentum of the +36 per cent surge seen in 2016. This will see the market surpass the previous record high of 72,492 machine sales seen in 2011. Looking ahead, Off-Highway Research expects continued buoyancy in the market, although this will inevitably moderate in 2019 due to the general election. However, growth is expected to resume thereafter, with sales likely to exceed 90,000 units in 2021. Earth-moving equipments is the largest segment of the construction equipment sector in India, primarily fuelled by mining and construction sectors. Equipments include backhoe leaders, excavators, wheeled loaders, dumpers/tippers, skid steer loaders.

The construction equipment industry in India is expected to grow +20per cent this year to 58,465 machines, according to Off-Highway Research. The specialist consultant and market forecasting study said sales of construction equipment grew +37 per cent in the first six months of the year, compared to the same period in 2015. The market has seen a turnaround over the last 18 months, with sales falling to a low of 47,889 units in 2014, before enjoying a small increase last year. The expected +20 per cent surge in demand in 2016 is the result of infrastructure investment in India, and this is expected to sustain market growth for the next four years, albeit at more sustainable levels.

“Infrastructure development is a key economic driver and enjoys an intense government focus that should accelerate demand for construction equipment in the country. India needs an estimated investment of Rs 31 trillion ($ 465 billion) over the next five years to keep pace with its growth targets, of which over 70 per cent would be needed for power, roads and urban infrastructure segments. The total budgeted outlay for the infrastructure sector for fiscal year ending March 2017 is Rs.2.2 trillion ($33 billion),” said the report. The general buoyancy of the market is expected to see sales rise to 73,595 units in 2020.

 

 

“An estimated 1800 units was sold to mining and quarry segment in FY 2015; of which 86 per cent were excavators and dumpers. Market for equipment in the mining segment will grow in FY 2017 to touch 2080 units, valued at approximately $0.47 billion, 56 per cent of the market by value is constituted by dumpers and 34 per cent by excavators,” says Rajesh Nath, MD,VDMA India

 

 

 

 

Our product portfolio consists of HCV tippers (both 25T and 31T) which can be customized to suit varied operating conditions and loads. With this portfolio of products, we are successfully able to address key market requirements.
On 25T Tippers, we have combinations of 6 speed/9 speed gear box along with bogie and non-bogie combination. Based on the BLAZO platform, the vehicles are equipped with ‘Fuel Smart Technology,’ which offers customers the option of choosing differing power band based on the requirement of terrain and load.
There are plans to introduce more variants to address varying and evolving market needs of the customers.

R C Mangal, Sr. VP – Sales & Mktg, Truck And Bus Division, Mahindra & Mahindra Ltd.

 

 

EXCAVATORS

Of the total value of India’s construction equipment market, analysts have forecast the excavator segment at $16 billion to $21 billion industry by 2020. Major Consultant Technavio's analysts have forecasted the excavator market in India to grow at a CAGR of 7.86 per cent over the period 2014-2019. With the new push from infra EPC projects, mining, and real estate, the demand for excavators across types and capacities is projected to have robust growth next five years.  Especially in the case of mining, the government’s focus on doubling metals and minerals’ production bodes well for India’s excavator market. The mining sector is currently making a big push towards mechanisation which in turn will churn up robust demand for mining excavators with higher capacities.

Within the overall excavator market, Off Highway Research says, crawler segment is largest by value and second largest after backhoes in terms of units sold. It forecasts the crawler excavator to be the fastest growing equipment type, which will account for 29 per cent of the market in 2018. And will have the strongest long-term growth expected to double in size by 2020 to 22,000 units per year.

While mining, power, and transport verticals will be major demand drivers for excavators in big and medium size capacities, there is now a major demand for mini excavators driven mainly by urban transport infra projects. According to RNCOS’ latest research study, “Indian Mini Excavator Market Outlook to 2017,” the company’s analysts have identified and analysed the market trends and clearly highlighted various factors sustaining the Indian mini excavator market. Thus, the mini excavator market in India has been estimated to grow at a CAGR of around 24 per cent during 2013-2017. Kubota dominates the mini excavators market in India.

India has most global excavator majors, including Volvo CE, LeeBoy  Kobelco, JCB, Caterpillar, Komatsu, San, Hyundai,  Liebherr, LiuGong, Sany, Doosan Infracore, etc. Indian players include Tata-Hitachi, BEML, and Harsha Engineering offers Terra, India’s first micro excavator. Most of these OEMs are exporting from India.

 

LOADERS

The next category of off highway equipment, loaders also have substantial demand in India’s off highway market. While wheeled loaders are mainly in demand in the infra verticals and the mining sector, it is the backhoe loader that dominates the off highway segment. The most versatile and multi tasking machine among all construction equipment verticals,  the backhoe loaders (BHL) remains extremely popular in India, with 24,500 such machines expected to be sold this year, accounting for 42 per cent of the market in volume terms, according to Off-Highway Research. 

They account for more than 65 per cent of heavy earth moving equipment segment (followed by excavators) and 40 per cent of total demand of construction equipment in India.

Again most global players have a major presence in this segment in India, and many of them are using India as a global manufacturing base for their global markets. In fact JCB, which sells maximum number of BHLs across the world, have the world’s biggest BHL factory at Ballabgarh in India, which supplies its global market. Other global players include Case Construction, Liebherr , Volvo CE, LeeBoy, Caterpillar, ACE, Escorts, Terex Equipment, etc. Most types and capacities of loaders are available in the Indian market, but the BHL will continue to dominate this category of off highway vehicles.

 

TIPPERS

This segment of off highway equipment is very robust in India. Demand will be driven majorly by segments ranging from infra to mining to urban infra transport. Most global majors are present in India and they are making gradual inroads eating into market share of a duopoly that long dominated India’s trucking industry. Demand is robust across all capacities, and flexible across the price spectrum. In fact an early indicator of this was the 40 per cent rise in tipper demand during April-August 2016, when overall medium and heavy truck segment reported a decline of five per cent in the same period, according to the Society of Indian Automobile Manufacturers (SIAM).  Tipper OEMs later confirmed that the orders were not part of the replacement cycle but fresh demand from various sectors. That trend has amplified now as the traditional demand drivers witness increased activity in the mining and EPC infra sectors.  According to Consultancy Race Innovations, the market remains largely duopolistic with Tata Motors and Ashok Leyland holding a combined market share of about 77 per cent. It also underlines a significant shift towards higher GVW (gross vehicle weight) vehicles, higher horsepower, and increased safety features.

According to Ratings agency ICRA The Indian CV industry will likely register overall volume growth of 5-6 per cent in financial year 2017 over the previous year. Over the medium-term, ICRA expects the segment to register a CAGR of 8-10 per cent per fuelled by healthy demand from infrastructure-related segments, improving macro-economic scenario and favorable regulatory developments such as emission and fuel efficiency norms etc. The replacement market is estimated at 75,000 units, adding 8-10 percent to industry growth over the next two years.  

The German mining equipment association VDMA, found that a whopping 56 percent of the Indian market by value, is constituted by dumpers, other types of mining equipment account for the rest of the market. Major players include Tata Motors, Ashok Leyland, Eicher Trucks and Buses, Volvo Trucks (their JV is VE Commercial Vehicles), Scania Commercial Vehicles India, Daimler India Commercial Vehicles (DICV), MAN Trucks India,  Caterpillar India, AMW, etc.


 

 

“The renewed vigor in the industrial, construction, and economic activity, would support growth in demand for all minerals including coal, iron ore, lime stone and bauxite, which bodes well for the growth in demand for mining equipment.”  He adds, “Off-Highway Research is optimistic about the future growth of the rigid dump truck and crawler dozer market in India and forecasts it to grow 40 per cent in 2017 and a further 18 per cent in 2018,”  confirms  Sameer Bansal, General Manager, Off-Highway Research India.

 

 

 

"SEM will offer our customers the deeper portfolio of product offerings to match their application needs as we are committed to do everything possible to help our customers succeed as they enable build a new India"
Vivek V, Country Manager, Caterpillar India.

 

 

DEMAND DYNAMICS

Other segments in off highway include mobile cranes, skid steer loaders, etc. But their market volumes and values are still small. Most off highway vehicles are either tracked or wheeled for free movement with heavy loads in rough terrain.  All high end models will have smart technology like GPS and terrain mapping radar for automatic movement. The major focus of Indian customers is now shifting from initial cost to Total Cost of Ownership (TCO), and the overall market for off highway equipment has turned competitive with products across the price spectrum. With global majors playing in the market the overall population of OEMs is substantial, making market more competitive. India is now a Buyers’ Market, where Aftermarket Services and the TCO are differentiating the market leaders.  The robust Indian market is forecast to go from strength to strength. Equipment sales grew a remarkable 40 per cent last year thanks to increased investment and a pick-up in project implementation in the country’s infrastructure market. This is expected to drive consistent and steady growth in Indian construction equipment sales for the next five years, and as the industry matures India could emerge as a significant regional manufacturing hub.

An estimated 1800 units of earthmoving equipment was sold to the mining and quarry segment in FY2015; of which 86 per cent were excavators and dumpers. It is estimated that the market for earthmoving equipment in the mining segment will grow in FY 2017 to touch 2080 units. The market in mining segment is valued at approximately $0.47 billion, 56 per cent of the market by value, is constituted by dumpers, and 34 per cent by excavators.  Although it is less than half the size of the Chinese market, Indian market for ECE is registering robust growth, equipment sales grew a remarkable 40 per cent last year — it was one of the few countries in the world where equipment sales rose in 2016 — thanks to increased investment and a pick-up in project implementation in the country’s infrastructure market. This is expected to drive consistent and steady growth in Indian construction equipment sales for the next five years, and as the industry matures, India could emerge as a significant regional manufacturing hub. In fact global majors JCB and DICV have established a global manufacturing base in India to supply their global markets.

The Indian market remains strong, with a 10 per cent sales growth forecast for this year, continuing the momentum of the 36 per cent surge in demand seen in 2016. This will see the Indian ECE market surpass the previous record high of 54,065 machine sales seen in 2011

Global construction equipment sales are expected to increase 16 per cent this year, according to Off-Highway Research. Worldwide sales are expected to exceed 810,000 units in 2017, with a value of more than $80 billion.




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