The Big Ones Get Better
Sales of crawler excavators, which grew until 2008, declined by 20 per cent in 2009 but recovered strongly to 11,453 units in 2010, a growth of 44 per cent. They then further increased by 30 per cent in 2011 to peak at 14,940 units or $1,326 million. As per Off-Highway Research forecasts, crawler excavators will be the fastest growing segment in the coming years and the sales are projected to reach 40,000 units or 3,223 million in 2016. Energy saving technology in the excavator market is expected to play a significant role in the future. Cost optimisation and a grasp of the customer?s needs and industry trends are the biggest challenges facing excavator producers. Agith G Antony trains his sights on the latest developments in the excavator market.

The CE industry foresees a very buoyant trend for earthmoving equipment in the next five years. The government investments have been articulated clearly for the 12th Five Year Plan and when these investments are translated into equipment worth, it clearly signifies the emanating demand of equipment. As per Off-Highway Research projections, crawler excavators will witness the highest growth rate among construction equipment and well may catch up with backhoe loaders with annual sales of 40,000 units in 2016. Every major global player has set up facilities here as intense competition is slowly changing the rules of the game.

Global trends

As per reports, the global excavator market has significant growth opportunity in the near future as the world economy is recovering rapidly and worldwide construction industry is resuming its growth trajectory. The global excavator market experienced a significant decline in 2008 and 2009 mainly due to the economic downturn in the mature markets like the US and Europe. But in 2010, the market registered growth compared to 2009, and this is attributed to the growth in emerging countries like China and India. In 2010, China recorded a significant growth in the real estate industry, which had a positive effect on the excavator market; also, China accounted for the highest excavator sales compared to other countries. Within the Chinese excavator market, the sales of excavators with moderate operating capacity (20-30 T) were higher compared to the other categories of excavators. Even though the excavator market in North America and Europe experienced declining sales in 2008 and 2009, markets in North America, Europe and other countries like China, India, Africa, and the Middle East registered growth in 2010.

Indian market forecast

According to Samir Bansal, Country Manager ? India, Off Highway Research, following the period of growth from 2003 to 2007, the market declined in 2008 and 2009 to reach a low of 40,859 units. However, it has since shown a sharp recovery, growing by 45 per cent to 59,130 units in 2010, and 22 per cent in 2011 to peak at 72,162 units. Current indicators point towards a strong outlook of growth for the next five years.

Sales of crawler excavators, which grew until 2008, declined by 20 per cent in 2009, but recovered strongly to 11,453 units in 2010, a growth of 44 per cent. They then further increased by 30 per cent in 2011 to peak at 14,940 units or $1,326 million. Off-Highway Research forecasts that crawler excavators will be the fastest growing segment in the coming years and the sales are projected to reach 40,000 units or 3,223 million in 2016.

Says Vipin Sondhi, Managing Director & CEO, JCB India, ?The construction equipment industry?s performance is directly linked to the investment in infrastructure, which is of high priority in India. As a nation, we face challenges with the volatility in oil and commodity prices and inflationary pressures but we are sure we will overcome them. The construction equipment industry will grow in tandem with the growth in the infrastructure sector. Today, one can find that most of the major international construction equipment manufacturers have set up facilities in India. Roads and highways is one huge growth enabler for the construction equipment market including excavators. Mining, bridges and dams and real estate are also expected to boost the requirement of construction equipment. The overall scenario in the medium term is positive. The infrastructure sector is bound to see growth.?

The construction equipment market will continue to be driven by the development of infrastructure and the economic growth of the country. Despite the subdued economic growth of 2011, the government has set very ambitious targets for infrastructure development in the 12th Five Year Plan. The government is likely to more than double the infrastructure sector?s expenditure to over $1 trillion, which will have a positive impact on the construction equipment industry. It is also taking policy measures to improve investor confidence and attract foreign investment, and is encouraging increased public private participation (PPP) for infrastructure development. These measures are likely to insulate the infrastructure projects from the cycles of economic growth.

?We see a very buoyant trend for earthmoving equipment in the next five years. The government investments have been articulated clearly for the 11th and 12th Five Year Plans and when these investments are translated into equipment worth, it clearly signifies the emanating demand of equipment. Seeing the demand ahead, we have invested further in our local facilities and have planned some new investments in the start-up facilities. We will see the demand and supply situation even out in the future. The market of hydraulic excavators in India was 14,500 units in 2011and this is expected to more than double over the next five years. However the focus is now shifting to the retail segment also and we plan to become a major player in the medium size excavator market in the next four or five years,? says Sunil Sapru, President, LiuGong India.

Demand-supply

Samir points out, ?The construction segment accounts for a large proportion of crawler excavators where smaller machines (operating weight 6-22T) are predominantly used. Sales of crawler excavators in this segment grew by 35 per cent in 2011 and accounted for over 90 per cent of total sales. On the other hand, the mining segment (which utilises larger machines) declined by four per cent.? He adds, ?20T class (18.1-22T) of machines is the mainstay of all construction activity, and they are invariably found working on all major infrastructure projects in the country. This size offers the best compromise between price, machine size and overall productivity, as well as being a good match for the loading capacity of locally made on-off highway trucks. It is therefore no surprise that this class represents the single largest segment of the market, and in 2011 accounted for 55 per cent of total excavator sales.?

Says HS Mohan, Chief Operating Officer, Doosan Infracore India, ?The market is continuously driven by 20T excavators with over 50 per cent market share in this class. Over 30T and above, the market has slowed down due to various mining contracts that are getting delayed for execution due to various reasons. But this segment is definitely expected to grow in the near future as the overall excavators segment will grow with CAGR of 30 per cent during the next five years.?

According to Dheeraj Panda, Head - Marketing & Key Accounts, Hyundai India, the market for the 20T class of excavators is close to 50 per cent of the total excavator market. The lower tonnage class comprising 8-14T is expected to do better while the large tonnage market will be steady on account of slower mining activity. The total size was about 15,000 excavators in 2011 and is expected to grow at 12 to 15 per cent in 2012.

Industry topper?

Excavators are the second-highest selling construction equipment in the Indian market after backhoes. Given the fact that excavators are highly versatile, and come with myriad attachments, it can become the most sought-after equipment. As the Indian construction equipment market matures, the role of heavy equipment like excavators is bound to grow, considering the amount of large construction projects across various sectors like mining, roads, irrigation, ports, etc.

Has the growth of the excavator market made any impact on the backhoe loader market?

Says Samir, ?The backhoe loader is the most popular construction equipment in the country on account of its mobility, versatility and price, which is why it is an attractive proposition for first-time buyers. However, there is a huge population of active machines available in the market because of which the rental rates have not been growing despite increase in owning and operating costs. This is adversely affecting the profitability of the plant hirers, which is its largest application segment. Crawler excavators are amongst the core equipment needed for infrastructure development and being specialist machines, have much higher productivity compared to utility machines such as backhoe loaders. Therefore, these machines offer better return to the owners (including plant hirers) despite being expensive and having mobility issues. However, the buyers of crawler excavators generally have experience of using the machines and there are very few first-time users.?

Says Vipin Sondhi, ?We expect the first-time buyers to continue to go for backhoes because of the versatility of the machine. The backhoe loader is popular because of its multitasking ability, while the excavator is a specialised machine. The excavator is gaining in popularity and acceptance in the market; however, we expect the backhoe loader gains preference for first-time buyers because of a suitable equation of return on investment for the customers.?

?BHL continues to be the most popular machine especially in the Indian market. Getting labour is becoming increasingly difficult and hence mechanisation process on a large scale is gaining momentum, where BHL and skid steer loaders are well accepted. In this segment, 8T and 15T class excavators are also growing as some of the BHL customers are also graduating to excavators. However, the disparity of BHL preference will still continue,? says Mohan.

Sunil Sapru points out, ?The price of the excavator below 10T is only slightly higher than that of the backhoe loader. But at the same time, there are certain sections of backhoe loader buyers who are graduating to the 7-8T class excavators. Both these segments will continue to grow simultaneously but the growth in the excavator segment will be much higher than backhoe loader.?

According to Dheeraj Panda, the incremental growth in BHLs is likely to be slower than that of excavators in the future. There is a strong trend which indicates user preference of smaller class of excavators over BHLs; however, the BHL market is expected to go strong owing to huge opportunities in the small and medium size of contractual earth work.

Technology trends

Speaking about the technology trends Samir had this to say. ?A very significant point to note is the varying levels of technological sophistication in excavators that are currently being promoted in India. This varies from the basic technology to be found in the L&T90 and EX200 models, to the latest generation 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.? He further explained, ?Initially, local producers used dated technology but the pressures of time bound contracts, with heavy penalties for delays, have pushed many buyers towards more contemporary machines. The demand for lower technology machines is clearly on the decline, and now stems mainly from smaller, price sensitive contractors. A large number of Indian contractors are also now executing projects abroad and therefore require machines that are compliant with global emissions and safety standards which will encourage the further enhancement of quality in the future.?

Says Vipin Sondhi, ?The focus is on whole life costs which include increasing fuel efficiency, lower maintenance costs and higher performance as there is pressure on margins due to higher fuel costs. Also, the operator comfort and operator- friendly features are gaining attention. He adds, ?As of now, the shorter tail swing machines have not gained popularity in India as it has in developed markets. These machines are generally used in urban areas where there are space restrictions. Thus, higher urbanisation would create demand for such machines. Also, as the Indian market matures there would be higher demand of specialist machines which will fuel demand of short or zero tail swing machines. Mining and quarrying are major applications where tracked excavators are used and account for approximately 30-40 per cent of the overall excavator market in India.?
?There is a positive trend in the mid-sized excavators with clear user preferences for higher technology. This has come in owing to squeeze in project time and stiff competition in rates. The demand is for higher productive machines with lesser fuel consumption and higher component life. The consumption of spares and other running items and the cost thereof is of paramount importance while choosing the make and series of equipment in a project,? quips Dheeraj.

Sunil Sapru adds, ?Product improvements enhance productivity and performance of engine and hence it is an ongoing process for Liugong as well as for other equipment manufacturers. With shifts in trends in machine utilisation, type of applications and hours of usage of a machine several technological improvements are making excavator better. The latest technology machines have electronically controlled engines, electronic monitoring and control systems with automatic mode selection. They operate at higher pressures and hydraulic flow which results in better breakout forces and faster cycle time with leads to better fuel efficiency.?

The challenges

Explaining the major challenges Samir says, the challenges mainly come from the widening current account and fiscal deficits, and the high interest rate regime that was put in place to tame inflation in 2010 and 2011. Other non-financial constraints include problems related to land acquisition, and procedural and approval delays, especially for environmental reasons and forest clearances. The government has been unable to reform its regulatory and administrative structure and it has resulted in the on-going gap between the planning and execution of all infrastructure projects. The never-ending allegations of corruption charges being faced by several political leaders, and the incoherence within the ruling coalition on development issues, are hampering decision-making at every level in the government.

Despite the challenges, Off-Highway Research remains bullish about the long term prospects of the Indian construction equipment market, and forecasts a 13 per cent growth in 2012, with sales reaching 81,745 units. This is likely to be followed by sustained growth thereafter of between eight and 12 per cent annually, to reach 118,040 units by the end of 2016.

A bright future

While the market is growing, the number of manufacturers has also increased, thereby bringing the best of technology to Indian customers. The customers will certainly benefit but it will be challenging in terms of the earnings for the product as there is pressure on the pricing of the equipment. However, all manufacturers are looking to a better future in the Indian market, according to Mohan.

AM Muralidharan, Managing Director, Volvo India, sums it up on a positive note, ?Mechanisation is finally beginning to have a firm grip on the Indian roads sector, and the time duration to finish projects is also reducing. But there has to be a constant upgradation of technology along with the introduction of new technology around the globe and specifically in India.?

L&T-Komatsu Hydraulic Excavator

L&T Construction & Mining Machinery presents L&T-Komatsu PC210LC-8 with Komtrax. This premium-class hydraulic excavator is bringing about a revolution in the 20-tonne class excavator market in India with its new features and a host of user benefits across various applications. A product of breakthrough technology, L&T-Komatsu PC210LC-8 incorporates the unique Komtrax X satellite-based advanced tracking system. This system facilitates you to monitor your excavator?s performance and efficiency parameters in the comfort of your office instead of being at the jobsite.

There are several benefits for the customers that make L&T-Komatsu PC210LC-8 a sure winner. These include:

? Managing the machine from a remote location effectively.
? Receiving regular updates on machine performance online.
? Receiving timely alerts on scheduled maintenance.
? Gives outstanding operator comfort and machine safety.
? Reduced operating costs and maintenance expenses.
? Effective fuel management with ecot3 engine.
? Five working modes for versatile applications.
? Seven spool for rock breaker adaptation.
? LC undercarriage built for better machine stability.
? Autodecel ? saves fuel by automatically dropping engine speed during the idle time.

Product Specifications:

Net Horsepower: 110kW /148 HP @2,000 rpm
Operating weight : 21,600 kg
Bucket capacity : 0.95 -1.2 cu m