Within the Indian construction equipment industry, the crawler excavator segment is the largest by value and the second largest, after backhoe loaders, in terms of number of units sold. Now, the shrinking market and intense competition have forced OEMs to focus more on value additions. Concepts like low lifecycle cost, faster ROIs, lowest cost per tonne all have made it imperative for OEMs to innovate, both on the product design and service fronts. Agith G Antony takes a peek at the prevailing trends.

It is not just numbers game; rather, it is a true indicator of how badly the excavator market has been hit by the prevailing slowdown. The current projected demand for crawler excavator by 2017 is 23,000 units, as compared to 2012 projection of 40,000 units by 2016 a contraction of the projected market by almost around 50 per cent. However, this doesn?t mean the OEMs are hibernating; on the contrary, they are ever more actively innovating on their key offerings, hard and soft, that they can retain their customers and add new ones to the existing base. The 2013 edition of Excon witnessed upgraded models and new launches in the excavators segment, apart from new players entering the fray; and what was more, a couple of players still waiting for an opportune moment to enter the arena.

Changing value
There is a continuous shift in preference from the machine?s buying price to reliability and performance. Demand in value is a very natural phenomenon in a maturing market. The new demand trend is more about value propositions and the rules of the game are changing fast. Of course, branding still plays a major role, but as per the pulse of the market, the customer is becoming more aware, which then reflects in their purchasing pattern. Says Kamalnayan Agarwal, Proprietor, Agarwal Enterprises,?I have been in this business since a long time, and I have three Tata Hitachi excavators. When I decided to go in for a new machine, I looked up the possible options. I became familiar with the Cat320D through the GMMCO team. We did a comparative study of all brands and perceived the Cat advantage. Hence, we went in for the Cat320D.? The criteria for selection of an excavator is heavily influenced by market trends but what made Agarwal opt for another brand was his experience in the field and the specific performance requirements he was looking for.

Many times specific application requirements determine the choice of a machine. According to Ram Matte, Owner, Matte & Associates, specialists in demolition activities, any demolition equipment must deliver on safety, comfort, reach, power and control to make a difference. In fact, the first two - safety and comfort are critical because demolition is hazardous business. Ram Matte says,?The Volvo series excavators deliver on all counts. Featuring demolition-grade hydraulics, a robust under-carriage system and top-of-the-line operator cab, a typical Volvo excavator can undertake the most demanding demolition tasks in the stride. Our business is all about clearing things up in minimum time with minimum fuss and stress. And who can do all that better than a Volvo??

As the market is slowly but steadily getting fragmented, it is the customer who is benefited with more of a choice. According to Rohit Punjabi, Assistant Director, LiuGong India, fragmentation is bringing a lot of choice to the customer. He says,?As the market is growing, the number of manufacturers has also increased, thereby bringing the best of technology to Indian customers. We expect the market leaders to command market shares along 12-15 per cent only in the longer run, while the volumes go up for each player.? As per Off-Highway Research statistics, around 86 models of excavators were actually sold in the country in 2012, a fact that underlines the diversity of demand and the choice the customer has for excavators.

Concepts that sell
In any market, you have different segments of customers and the usage pattern, too, varies; some look for value additions that help them better their profit margins, some look at the initial investment, and others are keen on the long term benefits. That explains why concepts such as low lifecycle cost, faster return on investment, low cost per tonne /cubic meter, have struck a chord with the end user segments. Today, there is a perceptible shift where end user segments are tilting towards value addition, which earlier, used to be OEM driven. However, that is changing fast.

Says AM Muralidharan, President, Volvo CE India,?In the excavator segment, you have almost 50-60 per cent of customers looking at the value additions, whereas 30-40 per cent are looking at the initial investment.? Muralidharan adds,?Value-additions are not OEM-driven anymore, though it used to be. Today there are much more understandings among the customers on product applications and usage patterns, etc. If the earlier customers were worried about the initial investment, now there is a requirement from our customers wanting to know more about the complete lifecycle of the machine, and the long-term benefits that they can get. There is lot of awareness now.?

According to Amarnath Ramchandran, Vice-president, Product Engineering, LeeBoy India Construction Equipment, the retail segment is undergoing a massive transformation. While there is a myth that those who hire lag behind corporate customers when it comes to maintenance and domain knowledge, this is actually untrue. He says,?The hirer appreciates quality more as he extracts maximum value from the machine. There is a paradigm shift in the way work is contracted out; it is now in terms of cubic metres of earth rather than time. So the old notion that hirers need slower and hence cheaper machines is wrong. Consider the fact that if there is three months? work at a particular site and a machine is 30 per cent quicker, it would mean that the contractor can execute the same in two months and do more work.?

Amarnath adds,?Customers today do not want a stripped-down machine. There is an increasing awareness amongst them that true value-added features are not just about frills but actually designed to suit the local conditions and context and thereby maximise uptime and reduce maintenance costs.?

Tech trends
The crawler excavator is one of the most competitive product segments in the Indian construction equipment market, and the models which are currently available in the market offer varying levels of technology. Samir Bansal, Country Manager, India, Off-Highway Research says,?A very significant point to note is the varying levels of technological sophistication in excavators that are currently being promoted. This varies from the basic technology to the latest generations of machines from Caterpillar, Hitachi, Kobelco, Komatsu and Volvo, with varying levels of technology in-between. Contemporary machines have electronically controlled engines, electronic monitoring and control systems with automatic mode selection. They are fitted with efficient hydraulic systems, which results in higher breakout forces, faster cycle times and greater fuel efficiency.?

Machine control technology
Most of the OEMs who supply excavators have made machine control technology a standard fitment. Muralidharan says,?Volvo CE was the first manufacturer to introduce a telematics system called CareTrack in India which allows customers to monitor a machine through GSM connection and provide suitable maintenance suggestions. With CareTrack, a customer gets the knowledge and information they need to make the right decision about their machine and thereby increase profitability. Volvo CareTrack is a part of the D series excavators and has been thoroughly tested on several continents, and described by many users as invaluable.?

The Cat 320D2 is equipped with PL522 which is a cellular- based Product Link and is equipped with the latest release of VisionLink? 2.7. This intuitive user interface provides customers a mobile optimised web application, the ability to schedule automated delivery of VisionLink reports, and remote access to on-board payload system information. Ajay Shankar, Country Manager, Caterpillar India says,?VisionLink provides timely visibility to the information a business needs through daily, weekly and monthly reports scheduled in advance and delivered via email to those who need to know. The Cat Product Link is a robust remote monitoring and asset management solution, enabling powerful tools that transform data from an entire fleet into the essential information required to boost productivity, reduce costs and manage risks. Product Link?s intuitive interface, VisionLink, makes it easy for a manager to monitor data from the whole fleet and then to zoom in for a detailed look at individual assets.?

?LeeBoy has developed the 523lcm which has a Cummins mechanical 6BT 5.9 at its heart. All the analog signals are converted to Canbus and used for further programming of controls using very robust field proven controllers. This data is also used for Telematic feed via Satellite with a GPRS backup. The controls include auto idle, infinitely variable horsepower control, lubrication control, safe load position indication, hydraulic oil filter condition monitoring and air intake restriction indicator,? Amarnath says.

FTBs? finance woes
Almost all the manufacturers have signed agreements with NBFCs and banks for providing loans to their customers. However, the country is currently passing through difficult times and there is a slowdown in the economy and in business activity, therefore, many buyers/customers do not have a good credit rating/repayment track record. As a result, the real challenge lies in getting equipment finance at reasonable terms. According to S Manjunath, General Manager Sales, Doosan Infracore, close to 30 per cent of the first-time buyers gradually shift from backhoes to excavators up to the 14-tonne segment; the shift to the 20-tonne class is somewhere around 15 per cent. He says,?Financiers have become very cautious in funding FTBs due high delinquencies and poor AR from existing accounts. So there is an issue of lack of financing options today.?

Muralidharan says,?There is an increasing demand for excavators less than 10T today where the FTBs are the prominent buyers. It is not replacing the backhoe market but finding its own niche applications in terms of 3T, 6T and 8T class; so first-time buyers are in the range of less than 10T class. When it goes above 10T, the first-time buyers need to have contracts in hand, and we don?t see many contracts coming into the market yet.? According to him, the issues for the FTBs are not finance but lack of contracts in hand. He says,?It is not the finance part of it, rather, it is the contracts; it is connected how the FTB is going to repay, then only does the finance angle comes in. If the financers see that there is no strong back-up of contracts, there won?t be good money flow to the first-time buyers. So as long as there are contracts, there won?t be any issue of finance for FTBs.?

Manjunath supports this view saying,?The growth in the retail segment will be phenomenal, provided there is certainty in their earnings and they are backed up by financiers ready to fund loans for excavators and hauling equipment. Enough projects on hand are also an important factor, and this is not the case today.?

Mini-excavators
Mini-excavators are used in niche applications like plantations and in populous urban areas where space is a big constraint. These machines are also used in agriculture applications and construction activities like foundation work, trenching, tunnel works, ditch cleaning and cable-laying wherein the machine has to work in restricted areas. With the increasing shortage of manual labour, dependency on machines will continue to rise and this will help in the growth of the mini-excavator market in the coming years. Samir says,?In contrast to the more mature construction equipment markets of Western Europe, North America, Japan and China, where compact equipment accounts for a large proportion of machinery sales, the demand for mini-excavators in India has remained modest. For the purpose of comparison, in 2012, the mini excavator market stood at 43,391 units in Europe, 22,625 in North America, 24,000 in Japan and 26,650 in China, whereas it was only 363 units in India.? According to Samir, the market for mini-excavators is expected to reach 1,000 units by 2017.?

Growing opportunities
The major factors which will contribute in the growth of the CE industry include rising urbanisation, increasing construction spending and growing global economy. Ajay Shankar says,?The growing global and Asia Pacific population needs more energy, water, roads, schools, housing, power systems, airports, dams. Significant investments are taking place in India in 2014 for developing ports, airports, roads, railways and real estate. To give an example of the rising demand, the Union Cabinet recently approved a declaration of about 7,200 km of state roads as new National Highways (NHs). There would also be adequate funds available for taking up improvement work on the remaining existing NH Network of 21,271 km, which is not covered under any programmes so far. Another example is a $700-million industrial town project being set up close to Chennai.?

According to Rohit, as the Indian market matures, there will be a higher demand for specialised machines like excavators. He says,?Mining and quarrying are two of the major applications where tracked excavators are used, and accounts for approximately 30-40 per cent of the overall excavator market here. Roads and highways are huge growth enablers for the construction equipment market, as also growth enablers of the CE industry because they not only use the large construction equipment but also generate secondary demand in cement, steel and mining, which all require a large number of earthmoving and construction equipment.?

However, there need to be a push from the government?s side that will gather momentum as it moves along. Says Manjunath,?From our point of view, a stable government is a must, which should then come out with clear-cut policies to sort out the various issues in BOT projects. There should be ample focus on river linking projects; there is an urgent need to revitalise the road sector with adequate focus on national highways, state highways and rural road projects; mining needs to be re-opened with proper checks and balances; the government needs to remove bottlenecks in sand and blue metal quarrying. These initiatives will definitely bring the required momentum back to the industry.?

Samir sums up the situation, sounding a positive note. He says,?Within the Indian construction equipment industry, the crawler excavator segment is the largest by value and the second largest, after backhoe loaders, in terms of number of units sold. The demand for crawler excavators stood at a level of 2,500 units in 2003 which increased significantly with each passing year to reach 9,904 units in 2008. Thereafter, it suffered a drop of 20 per cent in 2009 but rebounded to 11,457 units in 2010 and this further increased to its peak level of 15,000 units in 2011. Due to the prevailing unfavourable economic scenario in the country, the market for crawler excavators declined to around 10,500 units in 2013. Then again, given the amount of infrastructure work yet to be completed in India, the outlook for the crawler excavator industry is positive in the long run, despite a drop in sales in the last couple of years. Off-Highway Research estimates that the demand for crawler excavators will reach a level of 23,000 units by 2017.?

Segment-Wise Split-Up

The crawler excavator is a versatile product with applications in all types of construction and mining activities and therefore, it is very difficult to arrive at a consensus on its distribution by application. During their working life, machine applications may also vary from time to time depending on work requirements and the nature of the project.

Rentals remain the most important end-use segment for hydraulic excavators, and it is estimated that nearly 47 per cent of the active machine numbers deployed in this sector.

Quarry operators and aggregate producers, including sand, stone, granite, marble and limestone, account for 19 per cent of the total numbers.

Road contractors? contribution is 11 per cent.

Land development contractors and companies account for eight per cent.

Coal and metal mining segments, which invariably use larger machines, accounts for seven per cent of machine numbers.

Irrigation contractors? contribution stands at six per cent.

There is an increasing demand for excavators less than 10T today where the FTBs are the prominent buyers.