Earth Moving Equipment manufacturers bank on new markets and specialised machines for growth

With urban development projects in a slow mode, it is the infrastructure projects in the country side that are attracting earth moving equipment manufactures. Manufacturers like JCB are already focusing on the rural markets with the hope that smaller, more focused infra projects in the rural and semi rural area of the country will bring better growth. Vipin Sondhi, MD and CEO of JCB India is known to have said that rural roads are the basis of future growth of India.

Entering into details, the company went to the extent of dubbing its rural marketing strategy as 'Bharat'. Strong in backhoe loaders, JCB developed a backhoe loader called 2DX for the rural markets in 2011, a smaller form of its flagship product. JCB is not alone, there are others who are increasingly focusing on the rural markets for growth.

Focus is also on the implementation of infrastructure project by the government towards the upliftment of rural areas, increasing their connectivity with the urban areas for a more sustained economic growth as well as development. Implementation of government projects, which are said to have been delayed, is shifting focus of infrastructure companies to rural areas as urban projects seem to hit a sluggish patch. As work on the rural projects starts, the demand for earth moving equipment gains momentum, in a way, dictating the attention of earth moving equipment manufacturers towards the rural markets. With over 400 dealers, JCB India has been working to increase the number of dealers in the rural areas.

This, in addition to the 2DX it developed to cater to the rural markets where the needs of projects are claimed to more exacting and specific. Terex, a US-based manufacturer of earth moving equipment entered the Indian market in 2006, and has been increasing focusing on the rural markets in the country. Working towards providing advance technologies at customer's doorstep and that too at an affordable price, coupled with world class after sales support, the company is keen to see its backhoe loaders and mini excavators find more takers in the rural markets.

According to an industry source, more farmers cum entrepreneurs are coming up to own machines like the backhoe loaders and mini excavators, acknowledging their versatility and usefulness. Another company to enter the backhoe loader business, perhaps with an eye on their rising consumption in the emerging rural market, is Mahindra. The company launched its first backhoe loader in 2011.

With relatively lower technology products like backhoe loaders and mini excavators find higher acceptance in the rural markets, growth in the urban markets is riding back on the back of more efficient and specialised equipment. Excavators have seen a growth of over 20% in the last five years in India. Projects on hold, or running in the delayed mode are exerting pressure. They are adding to the pressure exerted on the earth moving equipment industry by factors like high interest rates, rising input costs and the fluctuating Indian Rupee.

To beat the odds, manufacturers are increasing focus on localisation and a renewed focus on emerging markets, some of which are clearly the rural markets of India. The earth moving equipment market recoding growth in the first half of 2012 as compared to the performance during the same period in the year 2011, the growth simply isn't as strong. Riding out of the recessionary blip of 2009, the industry recorded sale of 54,793 units in 2010. In 2011, the industry performed better, selling 72,162 units. Sluggish market sentiment in the year 2012 saw the industry selling an estimated 66,000 units. The down turn has not waned the optimism of off-highway equipment manufacturer. They expect the sales to reach 105,730 units by 2016.

With challenges in the infrastructure projects mounting, companies are opting for specialised machines that offer an ability to execute the task faster and in an efficient manner. Such machines come with electronically controlled engines, electronic monitoring and control systems. These machines are also fitted with efficient hydraulic systems that result in efficient operation and higher results.

The approach is clearly in line with the calculation pertaining to whole life costs. This includes rising fuel costs, maintenance costs, and performance. Profit margins are under pressure like never before. Delayed projects and a slowdown overall is escalating costs. Both at the urban end of the market as well as the rural end of the market. While specialised machines are finding higher acceptance in urban areas where space comes at a premium, have lesser or no swing angles at all, the rural markets are clearly looking at machines that cost less and are well suited for specific needs. To be more specific, India is the biggest backhoe loader market - a market that seems to be shifting to rural belts. In terms of numbers, over 30,000 backhoe loaders were sold in FY11-12 in India. By 2015, the numbers are expected to cross the 35,000 mark. Crawler excavators are expected to do over 35,000 numbers by 2015. In the year 2011, an estimated 14,500 units of crawler excavators were sold in the country. If the Indian market is slowly and steadily moving towards more specialised and work oriented machines, the fact is, growth is here to stay and get stronger. Not withstanding delays, or policy paralysis, the reasons that are attributed to the current slow down.