With the new government pledging to provide the required momentum to the construction and infrastructure sectors, players in the construction equipment and earth-moving industry are now optimistic of the growth graph shooting upwards.

With the Narendra Modi government having sent out a positive signal across all sectors, its trickle-down effect is also being seen in the construction industry. In fact, after the slump of recent years, there is once again a strong buzz of revival and industry experts say that there could be a 20 per cent increase in both housing and commercial segments. This should, but naturally, impact the construction machinery and earth-moving equipment sector too. "With the ongoing infrastructural developments and the new projects that will take off soon, the growth potential for construction material in India is estimated to range from 7 to 15 per cent for different material segments," says R K Tyagi, Chairman of Ghaziabad-based Assomac Industries which makes extrusion machinery for wire rods.

As such, one of the biggest contributors to growth in the construction equipment industry is going to be the massive National Highways Development Project (NHDP). Under the first two phases of the project, about 14,279 kilometre lengths of national highways are proposed to be upgraded to four to six lanes. Meanwhile, the NHAI has readied a list of 11 projects to be awarded very shortly at an investment worth over Rs 18,000 crore. In view of this spurred movement in infrastructure development, the construction equipment manufacturing industry estimates that CE demand would go up to around 1,00,000 units during 2014-15, which includes backhoe loaders, crawler excavators and dozers, wheel loaders, asphalt pavers, motor graders, air compressors, dump trucks, concrete and asphalt batching plants, concrete pumps, piling rigs, compactors, and mobile cranes.

"In line with the projected demand, the market value of equipment is expected to be USD 6.5 billion during 2014 with the earth-moving sector expected to command a value of USD 3.7 billion," says Ranjit More, Vice-Chairman of Pune-based Universal Construction Machinery & Equipment Ltd. Given this promise of high returns, over the last three to four years various new entrants have made inroads into the Indian construction equipment industry and these include some of the biggest names from Japan, USA, and Korea. Simultaneously, a number of domestic companies are being seen expanding their capacities or diversifying their product portfolio through collaboration and tie-up arrangements.

Says Ki Young Kong, Managing Director of Hyundai Korea's Indian subsidiary, "For us, the Indian market is a very important and promising market because it holds so much potential. Equally important is the fact that the construction industry is now demanding the best quality equipment." The opportunity that the Indian market offers was realised in 1974 when L&T started manufacturing hydraulic excavators under license from Poclain, France. In 1980 and 1981, two more units, Telcon and Escorts JCB, commenced the production of hydraulic excavators under license from Hitachi, Japan and backhoe loaders under license from JCB, UK respectively.

Escorts JCB was taken over by JC Bamford Excavators Ltd. UK in 2003 and is now called JCB India Ltd. In 1970s Escorts Ltd started manufacturing cranes in collaboration with Faun AG and Rapier & Ransome. Volvo and Terex Vectra came next with the former setting up a full-scale manufacturing unit in Bangalore. Meanwhile, Terex Corporation USA and Vectra Ltd. UK have formed a joint venture which has started manufacturing construction equipment like backhoe loaders and skid steer loaders at Greater Noida and as of now most of the technology leaders like Case, Caterpillar, Hitachi, Ingersoll-Rand, John Deere, Joy Mining Machinery, Komatsu, Lieberr, Poclain and others have established a presence in India as joint venture companies or independent units.

This expression of interest in the Indian construction equipment industry was amply witnessed at the Excon trade fair held at Bangalore in 2013. The Korea Construction Equipment Manufacturers Association brought a business delegation comprising 11 renowned Korean construction equipment component manufacturers and the seventh edition of this event saw the participation of over 730 exhibitors from 18 countries, including Germany, Japan, Italy, Turkey, Sweden and China. "Several analyses and reports indicate that the earth-moving and CE market is one of the most dynamically growing markets worldwide, more so in India," says Vipin Sondhi, Chairman of Excon 2013 and MD and CEO, JCB India Ltd. Backed by the government's focus on developing infrastructure across the country, Sondhi states that the CE sector in India is deploying the best of machines, technology, and manpower.

According to a research report, there are five important trends that would shape the evolution of the industry, including investment in infrastructure sector, the increasing dominance of price and value-focused customers, deeper engagement of global equipment players in India and increasing opportunities for exports. "However, one trend of increasing competition among the products imported from other low-cost countries like China could potentially challenge industry growth and it is an important factor that players would need to address more pro-actively," the report states.

Thus, with a CII-IECIAL study conducted by Accenture positioning the revenue of the ECE industry at USD 22.7 billion by 2020, the emerging trend is now related to incorporating new technologies and higher investments in research and development. "To be a serious player in this segment, you have to keep increasing your portfolio and constantly upgrade the equipment in tune with global standards," opines More. Putting this philosophy into practice, Universal Construction Machinery & Equipment now has three state-of-the-art manufacturing facilities at Pune, Satara and Rudrapur in Uttaranchal offering more than 50 products with four verticals catering to mechanization, concreting, material handling and processes.

"We put a lot of effort in continuously reinventing ourselves to match the construction industry's demands. An example is of our new self-loading concrete mixer, which was unveiled at the Excon exhibition in Bangalore. It has been developed by our in-house R&D team and is available in capacities of 2 and 4 cubic metre per hour capacities. The product is ideal for projects which require constant shifting of machines like canal lining and road dividers as also for windmill and irrigation projects. The machine can self-load the aggregate, batch mix, transport, and discharge the concrete at specific locations. Only one operator is sufficient to manage it," More informs.

This high level of optimism is also reflected by Tushar Mehendale, Managing Director of Pune-based ElectroMech which makes electric overhead travelling (EOT) cranes, electric wire rope hoists, jib cranes and gantry cranes. "Our company's vision is to be the largest industrial crane manufacturer in South Asia in the next five years in terms of volumes as well as value. The growth would come from the expansion of our product portfolio and entry into newer geographies like Africa, Middle East, etc," he states. The company has tie-ups with global leaders in the industry like ABUS & Stahl (EX) from Germany, Sibcranex from Russia and Shuttlelift from USA to bring in technology, diversify its product offering and increase its customer reach.

Infusing added enthusiasm is the fact that this growth story is expected to unfold across the world. "Construction equipment manufacturers around the globe will see significant growth over the next few years, as massive infrastructure projects will be required to satisfy population growth and expansion of the middle-class in emerging markets. This will cause the industry overall to expand sales at a compounded annual growth rate (CAGR) of 6.3 per cent into 2015 - driven by demand in China, North America and India," states a report released by AlixPartners, a global business advisory firm. Interestingly, demand in China remains the largest single factor affecting the global industry, as 60 per cent of all global construction equipment sales are in China - led largely by Chinese original equipment manufacturers (OEMs).

"For the most part, the global OEMs' fundamentals remain extremely strong, and we expect to see solid growth from them over the next several years. Optimising investments and resources to develop global products, while still meeting regional requirements, remains a challenge. But, it's one we think they will meet in the next few years," states Francesco Barosi, managing director in AlixPartners' heavy equipment practice.