“A long-term plan for investments and activities in infrastructure over the next 10 years or so will significantly guide manufacturers in planning for the future”, says Rahul Shorey, National Head – Construction, Tata Hitachi.

How is the revival of the earthmoving equipment market in India after the pandemic impact? 

It is important to set the context first, before looking at the current situation. The earthmoving equipment industry was down by 13 percent even before Covid-19 hit us. The financial crisis in the aftermath of the IL&FS default had already impacted our industry, especially because of our heavy dependence on NBFC funding. 

The lockdown in 2020 and its immediate aftermath almost brought the business to a complete halt. Factories were largely shut, and movement of finished goods and inputs were affected. On the demand side, work at project sites were impacted because of migration of labour and restriction of movement. Q1 FY21 volumes were down 60 percent YoY. There was a rapid recovery in Q2 FY21 when volumes grew by over 25 percent, but this was also due to a low base in the corresponding quarter in 19-20. Overall, hence, H1 FY21 registered a degrowth of around 15 percent. 

In this period, the industry recovered rapidly with the drop in Covid-19 cases and opening up of the economy. The earthmoving industry grew by over 45 percent in the second half of FY21 on the back of the government’s continued focus and significant investment in infrastructure and the rapid construction of national highways with execution hitting over 60 km per day in Q4. Last year, the domestic earthmoving industry grew by 15 percent despite the Covid-19 lockdown.

However, with the onset of the second wave of Covid-19 and the ensuing lockdowns, earthmoving equipment sales were again hit in April and May as compared to the last quarter. But, due to a low base of Q1 of the previous FY, this year earthmoving equipment sales grew by over 75 percent in Q1 FY21- 22 as compared to last year.

What are the new technology advancements in earthmoving equipment? 

The technology trends are moving towards minimising input as well as operational costs and increasing efficiencies. In terms of reducing input costs, migration towards more efficient emission norms is already taking place. We have remained at the forefront of this migration and launched our CEV-IV compliant backhoe loader Shinrai PRIME and wheel loader TL340H PRIME. We have in any case accorded special focus to ensure that our machines across segments are highly fuel efficient on the back of technologies like HIOS in our ZAXIS machines, and hydrostatic technology in out wheel loader.

Further operational costs are optimised through our telematics solutions InSite and ConSite. These solutions help identify losses in operations, which can be used for course correction to ensure optimal usage of the equipment. Our telematics solutions also alert customers both during and before breakdowns, thereby reducing unnecessary downtime. Telematics also helps our service engineers to prepare reports and proposals real time and, on the spot, further reducing downtime.

What are the key challenges faced by the earthmoving equipment market?

The key challenges faced by the earthmoving industry are: 

• • The steep rise in commodity prices, especially steel, have put enormous pressure on the manufacturers, who have been forced to pass on some of the cost increase to customers, which has led to increasing cost in the entire construction value chain. This has brought pressure on margins for OEMs and threatened to hinder investments in the future. Further with the increased cost, customers may defer procurement, further putting pressure on revenues of manufacturers
• Increased cost of freight – both inland as well as ocean – will also affect exports as our products become uncompetitive.
• Although the government is following the National Investment Pipeline (NIP) for targeting investments in infrastructure till FY24-25, a long-term plan for investments and activities in infrastructure over the next 10 years or so will significantly guide manufacturers in planning for the future.
• The government is implementing emission standards at a faster pace in trying to catch with the rest of the world as well reduce impact on health of the citizens. However, the period between revision is as little as three years, which is creating pressure on manufacturers towards managing the change and recovering investments made.
• In case of non-road construction equipment, there are still no clear timelines in transitioning to the new emission norms.
• The industry has invested in training infrastructure to promote skill India for operators by imparting proper and efficient ways of operating and maintaining machines. However, the reimbursement of this training hardly covers the cost.

How is the demand trend from rentals for excavators and backhoe loaders?

The market in India lags behind global markets in terms of having an efficient and sizeable rental business model for excavators and backhoe loaders. Post Covid however, there will be a move to expand this business as companies shift to efficient allocation of resources and capital. 

Having said that, we must bear in mind that while the potential for growth in rentals is significant, this business is still at a very nascent stage in India and is mostly concentrated in the unorganised sector. We are however, seeing an initial movement towards organised rentals and the benefits of cost, quality and customisation is being recognised. 

We have already started our rental business in excavators and backhoe loaders on a pilot scale last year. We also look to expand machines with special attachments and customisation. These will be backed by a commitment on upkeep of the rental units and an assurance of usage hours.

What is your outlook on the market for excavators and backhoe loaders in the coming years? 

In the Budget 2021, the government announced an over 25 percent increase in capex amounting to `5.54 lakh crores. Most of this is in infrastructure development. Significant investments were announced in roads and highways, highspeed rail and capacity expansion and DFC in Railways, apart from PMGSY, PMAY, AMRUT, metro rail and Urban Swachh Bharat Mission. A big increase is seen in allocation of `50,000 crores for water supply under the Jal Jeevan mission. All these will drive the industry growth this year. 

The mining sector is expected to continue as a driver of sustained demand on the back of coal mine overburden contracts awarded last year to enable quick increase in coal production to meet the growth needs of the economy. Further demand is expected from Coal India’s accelerated investment in coal production, as well as iron ore mines auctioned in March 2020, which are also currently starting to operationalise. Demand is also anticipated from limestone mining as cement companies modernise their fleet to prepare for future supply.