In India, the emission norms for air compressors segment are expected to be rolled out by 2020-21. Dr Jairam Varadaraj believes firms that are agile to incorporate technology improvements while addressing changes in customer behaviour will gain a competitive edge. 

 

India is a maturing compressed air market when compared to markets such as the US and Europe. Specifically, there is more emphasis in western markets on areas such as energy efficiency, air quality, and service. Indian customers are starting to demand such attributes and, thus, it presents an opportunity for compressed air solutions providers to provide this information. 

 

Customer expectations

 

Some of the key expectations of customers are as follows:

 

 

Global market size

 

The global air compressor market is roughly $ 16 billion with the US and Europe comprising 30% each and 50% deriving from Asia. The Indian market is between $ 600 million and $ 700 million. 

 

India vs global markets

 

From a growth perspective, India, China, and other Asian markets will be the key growth drivers owing to both capacity expansion and the emergence of new industries. Western markets are more stable and, thus, conducive for customers to replace their older machine with newer, more efficient machines.

 

India’s equipment industry has witnessed healthy growth overall during the past decade and its long-term prospects looks solid. Infrastructure demand is the primary factor driving construction equipment industry’s growth.

 

There has been a slowdown in domestic demand due to uncertainties during the initial introduction period of the largest tax reform in the country, Goods and Services Tax (GST). But, the situation has improved progressively and it will continue 

to improve.

 

What to expect by 2020?

In India, the emission norms for air compressors segment are expected to be rolled out by 2020-21. 

 

While technologically, there is little difference between India and the western markets, customer behaviour varies. Specifically, western customers exhibit more awareness of attributes such as power cost and air quality, while Indian customers tend to be more price driven.

 

In certain countries, government mandates also shape this behaviour. For example, the California state government offers incentives for customers who procure machines with variable frequency drives (VFDs). VFDs reduce motor speed and, thus, power consumption during fluctuating air demand. 

 

Manufacturers are also responsible for this distinction, as dealers and suppliers in the west engage in more technical and consultative spelling across multiple purchase attributes, while the sales teams in India are more price focused. As Indian customers aspire to improve the efficiency of their manufacturing processes, they will seek more consultative selling, which presents an opportunity for suppliers to offer intelligent compressed air solutions as opposed to merely a machine.

 

Outlook for compressed air market

 

Compressed air’s relevance will be challenged by more efficient energy sources. A good example is the migration from pneumatic or air powered tools to electric tools. 

 

Electric tools consume less energy, are lighter, and more flexible. Thus, to remain relevant manufacturers must address the lifecycle cost of compressed air.

 

While product innovation can improve energy efficiency, air quality, and reliability, firms must also anticipate changes in customer behavior. The customer of the future may not be interested in purchasing a machine and employing resources to maintain it through its life. Instead, they may prefer to pay a monthly fee for compressed air akin to electricity or water. To enable this, manufacturers must transition to a service based sales approach as opposed to products and parts. Firms that are agile to incorporate technology improvements while addressing changes in customer behaviour will gain a competitive edge. 

 

Dr Jairam Varadaraj is the Managing Director of Elgi Equipments Ltd. Through his hard work and sustained efforts, he has positioned Elgi Equipments Limited as one of the top 10 global compressor manufacturers. Dr Varadaraj is also a director in several other companies, the notable amongst which is Thermax Limited where he is the member of the Audit committee and Chairman of the Nomination and Remuneration Committee.