21 November 2018

Lead - Backhoe Loaders

Loads of work to do


The number of backhoe loader OEMs in India is increasing exponentially. As all the players try to capitalise on infra projects being fast tracked by the Government, Rohan Ambike writes about the global trends



In India, the growth of the infrastructure sector is generally characterized by its own cycles. As the backhoe loaders are an important part of the infrastructure equipment sector, they are no exception to this. In the post 2010 era, the market has grown at a phenomenal rate. The demands are expected to rise and reach a new high of 3400-3500 per month. The market size of backhoe loaders was 22,500 units last year. Attainment of traction has been awaited for long, with the market reporting de-growth by almost 15 per cent in the year ended March 2015. According to Off-Highway Research, the sales of backhoe loaders in India are expected to increase from the 21,192 units sold in 2015 to 28,000 machines by 2020. This means that the rise will be by a 32 per cent. Factors such as the rise of the rental sector, maiden buyers who are keen offload assets owing to paucity of running capital led by extended payments, is an added reason for the positive sentiment.


It is because of the investments by the central government in various infrastructure projects that is acting as the driving force for the sales of the backhoe loaders to rise. Apart from the investment, factors such as change in some of the policies have also started to act as catalysts for the sale of backhoe loaders in India. Additionally new funding initiative is taking place across the country. These factors are expected to underpin growth across the Indian construction equipment sector in years to come, but there are other reasons for the backhoe loader market in particular to enjoy continued buoyancy. Backhoe loaders have gained paramount importance in the construction industry due to their versatility in operations and compact size. The past few years have favored the use of backhoe loaders in the residential construction sector, owing to rapid population expansion and rise in gross household disposable incomes in the developed as well as developing economies. A rapid growth in migration of families and individuals from rural to urban areas has been attracting investments towards the development of sustainable and smart cities. Such developments involve the adoption of technologically advanced machinery such as backhoe loaders that facilitate construction activities. In addition, various governments worldwide are shifting their focus on infrastructure development including the construction of highways, ports, roads, and railways, which in turn is creating newer vistas for manufacturers of backhoe loaders.


One of the recent trends observed in the global construction equipment market is increasing dominance of rental equipment providers. Backhoe loaders being no exception to this trend, several small and medium sized construction contractors prefer rented backhoe loaders in order to save high initial investment. The global backhoe loaders market is highly fragmented, with the presence of a large number of players with varying product offerings and diversity in customization as well as pricing. Additionally, well established players are extending financial support to SMEs by entering into partnerships or strategic alliances with a view to proliferate demand for their product.




Rise of Backhoe loaders


‘Backhoe Loader’ has been around as a common construction equipment in urban engineering and small construction projects for over four decades now. Over the years this construction equipment market in India has gone through evolution. As per industry history, Hy-Dynamic, now a division of Bucyrus-Erie, the manufacturer of Dynahoe was the first company to manufacture a four wheel drive backhoe loader which was able to move over any terrain with considerable ease. The backhoe loader invented in 1953 by J.C Bamford, founder of JCB, began to use the hydraulic-powered backhoe which was developed in 1957 by a small American- based firm in Indiana after acquiring it. Since then, the backhoe loader incorporated within it all the technology that was developed with regards to its purpose. Hydraulics, auxiliary hydraulics, electronics, tech to reduce spillage and offer smoother ride, effect of operator on controls, practical innovation, etc. all these innovative technologies has made the backhoe loader what it is today, an integral piece of equipment in the construction and infrastructural sector.




Global trends


Recently, a novel report developed using proven research methodologies at the headquarters of Fact. MR has identified various prominent factors and trends prompting market growth of global backhoe loaders market. The study is titled as “Backhoe Loaders Market Research Forecast, Trend Analysis & Competition Tracking – Global Review 2017 to 2026”, which deeply analyses the global market trends, with historical data from 2016 and 2017, and projections of compound annual growth rates (CAGRs) during the mentioned forecast of 2017-2026.


Backhoe loaders are being used on a large scale in small construction projects. Owing to the increasing construction activities, backhoe loaders are witnessing huge demand. With the increasing use, backhoes equipped with attachments such as augers, breakers and grapples and other attachments are being used on a large scale. Manufacturers of backhoe loaders are focusing on design and weight of the backhoe as the heavy weight of backhoe can cause the vehicle to tip. Hence, small frame and precise control in backhoe loaders are being provided by manufacturers.


As per the latest market research report by Fact.MR, the global backhoe loaders market is expected to witness steady growth. In terms of value during 2017-2026, the market is estimated to register 5.4 per cent CAGR. In terms of volume, 146,518 units of backhoe loaders are estimated to be sold by the end of 2026. Following are the insights on how the global backhoe loaders market will perform in the coming years.




Growing equipment rental business to spur revenue growth of the global backhoe loader market


Small- and medium-sized enterprises (SMEs) across the globe are increasingly preferring rental construction equipment owing to high initial investment and maintenance cost of new equipment. Also, additionally, backhoe loaders used in rental construction equipment on a monthly basis adds to minimising the cost of construction projects. For example, numerous manufacturers, including Volvo and Caterpillar, have been offering backhoe loaders to construction companies on a rental basis, which in turn has enabled these companies in curtailing their operating expenses.


It is also a known fact that the rental equipment further aids construction companies in utilizing the most recent innovations, enabling such companies to divert capital expenditure initially set aside for equipment ownership towards other resources, thereby facilitating business expansion.





Though the industry has a lot of potential involved, the actual process of transforming the potential into a reality is a herculean task for most of the players in the industry. This is because of the numerous problems that the construction equipment manufacturers in India have to deal with. While the potential for growth is tremendous, so are the challenges. A lot of changes are required both inside the entire equipment ecosystem and outside. Here is a brief overview of the current problems hampering the growth of the backhoe loader industry.



Clearance issues:


There has been a long cry about the involvement of multiple agencies that makes the entire process of clearance slow. Also, the lack of co-ordination between the agencies that are involved in this process leads to wastage of time increasing the difficulty in procuring clearance. There are claims about the changes in the policy and basic measures are being taken into consideration for implementation to speed up the clearance process at grass root level.




Finance Matters:


Finance is a sector with inter related issues —lack of interest by the private players, cost of recovery is low, there are long working capital cycles and many more. It is also well known that the profits in case of the backhoe loaders or in fact the entire construction equipment industry. The industry profits come at a slow pace and also after a long gap. Market analysis believes that these causes in the reduction of the number of players in the market and most are left to select from the remaining few.



Land Acquisition:


Indian laws for land acquisition are considered unfair to the corporate. It is believed that due to these laws the acquiring process takes a considerable amount of time. The corporate houses have to take up added responsibility of relocating the concerned people in addition to compensating them appropriately for their lands. The laws and processes for acquiring land for industrial purposes is a task in itself.



Governance issues:


As stated earlier, improper coordination between the local, state and central bodies causes major delay in getting the required approvals and documentation processed. Many experts claim that the local urban bodies are not empowered enough to authorize such large scale proceedings. Lack of integration in the whole process of setting up a manufacturing plant leads to loss of possible investments and employment opportunities.



Lack of accreditation norms:


The required norms to set the standard and maintain the quality of the products and the operators is missing. There is pressing need for formal training of operators and accredited certification for the same. Quality is another standard that needs to be maintained and improved in terms of the products. A lot of private players have come up with training programs for operators of heavy equipment.



Poor rental penetration:


Equipment rental is a profitable space in the CE industry, sadly the concept of equipment rental as a business and service is a relatively new concept and requires a sizeable investment to start with and the profits are yet to keep pace.



Demand supply gap:


There is a growing demand in the market for construction equipment that have supporting software technologies integrated. While the demand and supply are both there, there is a drastic shortage of skilled labor that can make the most of the available technology




Bright future


Construction in India is fast approaching international standards. The profile of Indian demand is characterized by cost consciousness more than value consciousness. Contractors want sophisticated equipments at Indian prices and they want to use them roughly (in-fact abuse them). Also, there is higher awareness about the utility of this machine in rural markets and more farmers-cum-entrepreneurs are starting to own them.


As the backhoe loader machine is one of its kind with a multi tasking ability, it is believed that backhoe loaders will always dominate the market in terms of market share among all construction equipments. Many industry experts have agreed to the fact that there are high possibilities that the backhoe loaders will act as magnets for demand among all construction equipments. Under the ‘Make in India’ campaign, India will set the standard for backhoe loaders in emerging markets.


Entry of new players is well likely to expand the market. Proper product positioning will help the new entrants create a stand in this highly competitive industry. However, viewed from the long-term prospective, existing brands with wide market base will continue to connect their names with product support, an initiative which they will now be making stronger than before for higher brand recall. However, most importantly, India will set the standard for backhoe loaders in emerging markets, considering that many OEMs are, selling globally.


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