Looking to tap the growth opportunities and potential of the Indian market, German construction equipment manufacturer Wirtgen opens a new facility near Pune. On the sidelines of inaugural function, Stefan Wirtgen, President of Wirtgen Group and Ramesh Palagiri, MD & CEO of Wirtgen India speak to B2B Purchase 
Stefan and Mr. Palagiri, first of all, heartiest congratulations from B2B Purchase. Could you please tell us about the strategic importance of this manufacturing facility in India?Stefan Wirtgen: We believe, today if any Company wants to grow as an International player, it is important to enter overseas markets like India. There is a lot of optimism within the country. We have 4 major plants in Germany. This is our third manufacturing plants outside Germany, we have one each plant in China and Brazil.
So more investments in India and China…?Stefan: We are in the process of opening a new plant in China. The previous plant in China is too small and the space is not ready for expansion, that’s why we are opening a new plant there. The investment for this plant is around 35 million Euros. As far as India is concerned, we wish to be a prominent size company. We are just stepping in and it’s just beginning to start with one product, we assure that more products will follow and more investments will take place.
Please tell us about the investment and production capacity of this new facility. Ramesh Palagiri: We have invested around Rs 57 crore for this facility with a capacity to produce 400 machines. The unit also has a workshop and training facility, it will be an addition to our existing business.
To begin with, we will be manufacturing only one product with three variants. But at a later stage we will be looking at more products. How feasible it will be with just one product in manufacturing line?Ramesh: We are talking about now. We are also planning more  products in future. The second product would be 9 tonne two-drum roller. We have also set up an after market business, which includes refurbishing old machines, since Wirtgen has been in India for over 15 years. We will be going for products which has high volumes as required by the Indian market and where we have to meet the target prices.
With this facility, what is the kind of turnover you are expecting from Indian market?Ramesh: In India, last year we did around Rs. 250 crore turnover though we didn’t have this facility then. With this new facility and local production of Hamm 311 single drum vibratory compactor, we expect a turnover of around Rs.350 crore.
Compared to earlier import process, what margin you expect out of assembling or manufacturing here?Ramesh: Initially, the product Hamm 311 was not being sold in India. However models equivalent to the ones in Germany were available. Our competitors were producing this type products in India. In order to be competitive, we had to start manufacturing locally and that is exactly what we have done.
With the Indian facility, will there be any difference in terms of pricing compared to the current one? Ramesh: Definitely. In comparison to the machine that is fully imported from Germany, this machine is priced at the moderate cost where we can compete in the Indian market.
Can we expect further expansions in near future?Ramesh: As of now this unit is good enough to meet our requirement for compactors here and once we reach that level, then we will expand as per the necessary requirements. We will certainly need another shed structure to create more space to accommodate finished products.
How do you maintain the quality standards?Ramesh: In India, we have the same quality control process that is being followed in Germany. Our officials are trained by the German engineers and they frequently visit India. So the products that are manufactured here will have the same quality standards as produced in Germany. We are not going to produce all the products in all the countries. We’ll use the manufacturing base in various countries for selling products in that country and sometimes for export purpose. That’s how we will be able to maintain the quality standard whether its China, India or Germany. The products that are manufactured in this unit is exclusively for Indian customers only.
Brief us about your recent order bookings….Ramesh: We have started working on a Larsen and Toubro project last month. We also have bagged contracts from some of the major contractors in the road building segment. We are hopeful of doing good business here as several projects are expected in the near future. What kind of employment opportunities can be expected with the opening of this plant?Ramesh: We not only create employment in the factory, but also generating indirect employment  by sourcing a lot of components from local vendors in Pune. Secondly, we are having an operational training school here where we are going to train around 400 operators every year that will help to meet the current shortage of operators in the market especially in our specialised machines segment. We will be training them on operation maintenance of machines and practical troubleshooting for three months. Once they become certified operator, we will hand them over to the customers.
With so many competitors in this compactor segment, what will be your USP?Ramesh: To begin with we are offering compactors with the same technology as is currently being sold in Europe. Secondly we are busy in production for Cummins India which has lot of competitors and third for any road contractors we are ready to offer a complete range. There are lot of companies who cannot offer an entire range, for example, we can offer compactors, weighing machines, paver, packages etc. It is a highly sensitive and competitive market. Though, we are one of the last entrants, we have one of the decent market shares. We may not become the market leader but are confident of getting a healthy share.
How do you see the changing scenario of road building and maintenance here?Nowadays, ownership of roads on a temporary basis is getting transferred from government to private contractors. They have to build the road and maintain it for the next 10 – 15 years. So definitely they would like to use technology which helps them to build roads for a longer time or longer lead time before they have to repair the roads, that’s the only concern. Contractors will definitely go for technology that will help them to gain profits because they cannot just build a road and get away with it, they have to maintain it and they spend more money to repair it. So according to me, the accountability factor is more.