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his family’s truck business and added two more vehicles to his fleet. But instead of trucks he
bought what he calls “JCBs”.
‘JCB’ has become synonymous with the ubiquitous backhoe loader — one of the largest selling
construction vehicles in India. It can excavate and move large quantities of mud. Vicky loads his
trucks in minutes; makes more shipments; and saves on labour. He even rents out the backhoes
to contractors at Rs 600 an hour.
Vicky’s fortunes mirror the rise of the Indian construction equipment industry. The Indian
market’s estimated turnover may be just $3 billion (about Rs 13,500 crore) compared to the
global turnover of over $75 billion, but it is growing. Through the 1960-90s period, there were
only a handful of players in this sector, including the public sector Bharat Earth Movers
(BEML). But over the past few years, as construction became more mechanised, a large number
of original equipment manufacturers (OEMs) have come in — Japanese excavator major
Kobelco and mining equipment maker Komatsu, US-based construction and farming equipment
major John Deere, Chinese excavator and construction equipment companies Sany and Liugong,
and Korean behemoths Hyundai and Doosan.
“Penetration (in India) is very low. Even today, manual labour is used to a large extent and there
is great scope for mechanisation,” says Pavethra Ponniah, assistant vice-president at ICRA.
Sales, too, have increased from $700 million (about Rs 3,150 crore) in 2004 to $2 billion (about
Rs 9,000 crore) in 2008. ICRA estimates the current market size to be of 40,000-45,000 units a
year, or $2.6-3.1 billion.
Backhoes and crawler excavators sell the most — over 60 per cent of sales is in these categories.
More than 16,000 backhoes were sold in 2009 and only 771 rigid dump trucks.
Though the construction heavy equipment industry posted negative growth of 5 per cent in 2007-
08, it is expected to rebound and see 100 per cent growth in 2009-10 — higher than the 7 per
cent expected in China — riding on increased infrastructure spending by the government and
expansion in real estate.
After the drop in 2007-08, the industry bounced back in November 2009 and has maintained a
healthy growth since, thanks to increased financing available, step-up in infrastructure
investments and pick-up in demand for commodities globally. “We have a very positive outlook
in the medium to long run for the industry,” says Ponniah.
Similarly, Hyundai Construction Equipment India (HCEI), within three years, has set up a
network of service centres at 70 locations (without piggybacking on Hyundai Motors).
Besides servicing, most construction machine manufacturers also provide training to those who
buy the machines. “Knowing how to operate and maintain these machines is very important. It
requires highly trained people to operate these machines,” explains S.R. Subramanaian, L&T
Komatsu’s chief executive. For instance, says Subramanaian, machines often get spoiled as they
are washed with water.
Of course, production is of prime importance. While JCB India’s facility in Ballabgarh, Haryana,
is the largest backhoe loader facility in the world producing 100 units every day, HCEI imports
its excavators. Prabhat Tiwari, head of marketing at HCEI, says even imported machines work
well in Indian conditions. In 2010, HCEI has been able to sell 1,100 units — almost double the
previous year — with 40 per cent repeat orders.
Most companies, however, feel that while some specialised machines can be imported, a
manufacturing base in India is important.
The competition can only get tougher with all the major players offering the same products.
What will finally distinguish one from the other? Will price be the all-important differentiator?
“In the coming months, there is going to be cut throat competition very similar to that in the
automobile sector,” predicts Subramanian of L&T Komatsu. Good news for Vicky.