We are virtually the best in fuel average and productivity in the 20T excavator segment.”
Vikram Sharma,Chief Executive Officer, Kobelco India.
We are looking forward to a lot of regulatory reforms. For new projects, the approach towards environment clearances needs to be more pragmatic, GOI has to ensure that no retrospective taxation happens, GST needs to be introduced even if some states do not play ball initially. Such actions will get the CE industry going, says Vikram Sharma, Chief Executive Officer, Kobelco India. Excerpts from the interview.
How do you assess the current CE market scenario and its growth prospects in the long term?
There is no worry regarding the long term. There is more than enough to be done in India, and most of the parameters are in place for a resurgence. Once the government gets its act together, which incidentally we are seeing some intent of the markets will be back to high growth. The formation of the Cabinet Committee on Investments, FDI in multi-brand retail, etc, is actions to show intent. However, the next two quarters or even the year, is going to be tough. The mood is of not spending.
Which are the major areas to be addressed on a war footing, and what needs to be done to bring the CE sector back on a healthy growth trajectory?
The Government of India (GoI) has to start spending on infra, and also release money for projects which are held up due to pending payments. Such projects have the minimum startup time since all machinery is in place. The need of the hour is to help these projects to restructure, reduce interest costs and release held up payments.
As mentioned above, surely we are looking forward to a lot of regulatory reforms also. For new projects, the approach towards environment clearances needs to be more pragmatic, GoI has to ensure that no retrospective taxation happens, GST needs to be introduced even if some states do not play ball initially. Such actions will get the CE industry going.
What is your take on the slump in the Chinese CE market? Many are under the impression that it could further impact the Indian market with unhealthy competition....
The danger China poses cannot be ignored, but should not be overplayed. Dumping can be checked effectively with safeguard duty and other some measures. I feel that from 2014, we will see a resurgence of the Chinese market, if not fully substantially at least. This is as per their plan of the new party leadership. But the pricing of the existing Chinese manufacturers present in India, is the bigger concern. We are not able to understand their pricing of the products, as well as their ability to drop further in a tight non-growing Indian market. This can present an unrealistic pricing situation, which could be very damaging for all.
Given the devaluation of the rupee, high cost of funding, and ever-increasing cost of input materials, what have been Kobelco's strategies to bring competitive cost?
At Kobelco, we have worked on many programmes, the most focused being localisation and material cost reduction. Also whenever a window is provided on Forex rates, one has to do future cover. But despite all actions, it is impossible to protect customers against price increases, especially in the background of a 30 per cent increase over 18 months in yen value against the Indian rupees. I feel that the whole CE needs to make customers agree to the need for periodic price increases, since for the last few years, the Indian CE regularly has been absorbing a lot of costs and not remaining profitable.
The cost of average equipment in India being very low, how long will you be able to sustain the same pricing levels?
Our CE industry is the lowest priced market, even lower than neighbouring countries, leave alone developed nations. These levels are unsustainable by anyone for long.
What is Kobelco's core focus on value addition?
We have constantly tried to reach closer to customer locations, by increasing our service outlets. Also the quality of parts and service is being improved consistently. We are now focusing also on customer specific programmes on after sales support.
What has been Kobelco's overall performance so far in 2012?
Till November 2012, the excavator market was -7 per cent, but in volume terms, we have grown by nearly 14 per cent. However, the leaders of the industry have lost, both on volumes and share. The bottomline stayed as per our plan, since we had anticipated the market slowdown by the middle of the year and redrawn the plans.
How do you differentiate your product in terms of the competition?
In the competing categories, we are one of the best. For example, in the largest segment of 20T, we had been virtually the best-in-fuel average and productivity. In the last one year, competitors have introduced many new models but we maintain superiority with our existing model. Similar is the case in 14T and 35T. This is due to the fact that we introduced our latest series right from the start of Kobelco India. Hence, we maintained the superiority of Tier 3 Hino Engine with its unmatched fuel average in 20 and 35T. In 20T, despite being a 4-cylinder, it gives higher HP than almost all competitors` 6 cylinder engines. We have only modified our structures to suit Indian conditions, and did not need to make any changes to engines, hydraulics or electronics, to maintain leadership in technology.
Brief us on Kobelco's initiative on skill and capacity development.
Skill development has to be wholesome in its approach and coverage. We carry out intense technical training not only for our own and dealers personnel but we also train customers` site crew, wherever there is a large fleet. We keep on upgrading the programmes and skill levels. We plan our manpower requirements for at least two years and prepare our company personnel to play a leader's role in the field, and prepare the dealer team for more and more qualitative work. The consideration is to maximise the output from each personnel.
Any more capex/new product launches on the anvil?
We are planning to introduce another model locally from our Sri City factory. Our current capacity is sufficient to do the numbers including the new local model. The capex requirement will be for fixtures, toolings, etc, for this model. Capacity increase may be in 2014, if the market picks up.
How do you see the growth potential in another three years?
I expect the market to be low in 2013 but to attain good growth thereafter. It appears that the industry growth has slid back by at least one year plus, and it may touch the size of 2011, in 2013 again. The CE industry, I presume, has prepared itself for bigger numbers, and therefore the revised numbers in the next three years will not pose any challenge for us or others.
We are looking forward to a lot of regulatory reforms. For new projects, the approach towards environment clearances needs to be more pragmatic, GOI has to ensure that no retrospective taxation happens, GST needs to be introduced even if some states do not play ball initially. Such actions will get the CE industry going, says Vikram Sharma, Chief Executive Officer, Kobelco India. Excerpts from the interview.
How do you assess the current CE market scenario and its growth prospects in the long term?
There is no worry regarding the long term. There is more than enough to be done in India, and most of the parameters are in place for a resurgence. Once the government gets its act together, which incidentally we are seeing some intent of the markets will be back to high growth. The formation of the Cabinet Committee on Investments, FDI in multi-brand retail, etc, is actions to show intent. However, the next two quarters or even the year, is going to be tough. The mood is of not spending.
Which are the major areas to be addressed on a war footing, and what needs to be done to bring the CE sector back on a healthy growth trajectory?
The Government of India (GoI) has to start spending on infra, and also release money for projects which are held up due to pending payments. Such projects have the minimum startup time since all machinery is in place. The need of the hour is to help these projects to restructure, reduce interest costs and release held up payments.
As mentioned above, surely we are looking forward to a lot of regulatory reforms also. For new projects, the approach towards environment clearances needs to be more pragmatic, GoI has to ensure that no retrospective taxation happens, GST needs to be introduced even if some states do not play ball initially. Such actions will get the CE industry going.
What is your take on the slump in the Chinese CE market? Many are under the impression that it could further impact the Indian market with unhealthy competition....
The danger China poses cannot be ignored, but should not be overplayed. Dumping can be checked effectively with safeguard duty and other some measures. I feel that from 2014, we will see a resurgence of the Chinese market, if not fully substantially at least. This is as per their plan of the new party leadership. But the pricing of the existing Chinese manufacturers present in India, is the bigger concern. We are not able to understand their pricing of the products, as well as their ability to drop further in a tight non-growing Indian market. This can present an unrealistic pricing situation, which could be very damaging for all.
Given the devaluation of the rupee, high cost of funding, and ever-increasing cost of input materials, what have been Kobelco's strategies to bring competitive cost?
At Kobelco, we have worked on many programmes, the most focused being localisation and material cost reduction. Also whenever a window is provided on Forex rates, one has to do future cover. But despite all actions, it is impossible to protect customers against price increases, especially in the background of a 30 per cent increase over 18 months in yen value against the Indian rupees. I feel that the whole CE needs to make customers agree to the need for periodic price increases, since for the last few years, the Indian CE regularly has been absorbing a lot of costs and not remaining profitable.
The cost of average equipment in India being very low, how long will you be able to sustain the same pricing levels?
Our CE industry is the lowest priced market, even lower than neighbouring countries, leave alone developed nations. These levels are unsustainable by anyone for long.
What is Kobelco's core focus on value addition?
We have constantly tried to reach closer to customer locations, by increasing our service outlets. Also the quality of parts and service is being improved consistently. We are now focusing also on customer specific programmes on after sales support.
What has been Kobelco's overall performance so far in 2012?
Till November 2012, the excavator market was -7 per cent, but in volume terms, we have grown by nearly 14 per cent. However, the leaders of the industry have lost, both on volumes and share. The bottomline stayed as per our plan, since we had anticipated the market slowdown by the middle of the year and redrawn the plans.
How do you differentiate your product in terms of the competition?
In the competing categories, we are one of the best. For example, in the largest segment of 20T, we had been virtually the best-in-fuel average and productivity. In the last one year, competitors have introduced many new models but we maintain superiority with our existing model. Similar is the case in 14T and 35T. This is due to the fact that we introduced our latest series right from the start of Kobelco India. Hence, we maintained the superiority of Tier 3 Hino Engine with its unmatched fuel average in 20 and 35T. In 20T, despite being a 4-cylinder, it gives higher HP than almost all competitors` 6 cylinder engines. We have only modified our structures to suit Indian conditions, and did not need to make any changes to engines, hydraulics or electronics, to maintain leadership in technology.
Brief us on Kobelco's initiative on skill and capacity development.
Skill development has to be wholesome in its approach and coverage. We carry out intense technical training not only for our own and dealers personnel but we also train customers` site crew, wherever there is a large fleet. We keep on upgrading the programmes and skill levels. We plan our manpower requirements for at least two years and prepare our company personnel to play a leader's role in the field, and prepare the dealer team for more and more qualitative work. The consideration is to maximise the output from each personnel.
Any more capex/new product launches on the anvil?
We are planning to introduce another model locally from our Sri City factory. Our current capacity is sufficient to do the numbers including the new local model. The capex requirement will be for fixtures, toolings, etc, for this model. Capacity increase may be in 2014, if the market picks up.
How do you see the growth potential in another three years?
I expect the market to be low in 2013 but to attain good growth thereafter. It appears that the industry growth has slid back by at least one year plus, and it may touch the size of 2011, in 2013 again. The CE industry, I presume, has prepared itself for bigger numbers, and therefore the revised numbers in the next three years will not pose any challenge for us or others.
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