Home Articles New Trends Impacting the Equipment Sector: An Analysis of the Driving Factors

Trends Impacting the Equipment Sector: An Analysis of the Driving Factors

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Equipment Sector

In India, there is a potential ground of opportunities for the construction sector. The country is in a crucial phase of development where numerous projects are running in different regions, propelling the demand for construction equipments. Analyzing the developments taking place over the decade, there has been significant advancement in the sector. On the supply front, the market has evolved on technology, product utility, variants and price fronts. Almost all major construction equipment companies across the globe have established presence in India either as joint ventures with Indian companies or as independent entities. Similarly, on the demand front, the Indian consumer has realized the importance of value proposition rather than money, thereby shifting the demand curve towards value driven products, more importantly quality services. The Indian construction equipment industry is projected to exhibit a cumulative annual growth rate of 19% during 2013-2018.

Keeping tab on the upcoming construction projects in each application industry such as power, roads, ports, mining etc. is important to assess the demand for construction equipments. Tabulation of the number of upcoming construction projects in each application industry in each state is vital at present. It describes the latest industry trends, challenges, government policies and initiatives which need to be considered while devising business strategies. Descriptive profiling of key competitors reflects their businesses, product offerings, dealer network, and strength-weakness analyses.

Present Scenario

India Ratings and Research (Ind-Ra) has maintained a stable outlook on the construction sector for FY18, driven by the expectation that the slow but steady increase in revenue and improvement in EBITDA margins seen during FY16 and 1HFY17 will continue in FY18. The sector is likely to witness a gradual improvement in credit metrics.The sector has seen improvement in liquidity position, with a significant improvement in cash flow from operations (CFO) in FY16, although it continued to remain negative. Liquidity is likely to improve further, with CFO improving over FY17-FY18 to reach near-zero levels. A positive CFO is imperative for the sector to fund its working capital, as bank credit growth to the sector plunged over FY16-FY17. However, maintaining improvement in cash flows over the medium term would depend on a prudent accumulation of orders.

India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply, and airport development. The construction sector has registered double-digit growth during the last few years and its share as a percentage of GDP has increased considerably as compared to the last decade. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan.

In the Union budget 2017-2018, released on 1st February 2017. In regards to the Government’s aim of the ‘Housing for All by 2022’, the Finance Minister in his Budget speech proposed to give ‘infrastructure’ status to affordable housing. Banks can now lend money to affordable housing projects under infrastructure category this move is expected to boost the volume of construction activity across the country. Talking about construction equipment, Asia-Pacific is projected to register the highest growth in the heavy construction equipment market from 2016 to 2021 with India projected to be the fastest-growing market in the region. Overall volumes of construction equipment have increased to a four year high with 41.5% growth accounting to 52,100 units in 2016 compared to 36,800 units in 2015. With the Indian Government’s target of investing about $377 billion in infrastructure by 2019, the construction equipment market is expected to witness a high growth in this period.

 

 

The Market Move:

Sustainability;

The road sector produces the highest level of greenhouse gas, directly, through fossil energy used in mining, transportation, paving works… and indirectly through the emissions coming from vehicles. Indeed, the constant increase in the number of road vehicles and therefore of the traffic generates a substantial increase in pollution and noise disturbances. Besides, huge challenges await the road construction sector such as a cheaper and better production, construction and of course maintenance, all the more as raw materials are becoming scarce and the environmental laws are getting stricter regarding air pollution and noise disturbances. Like the rest of the sectors, the road construction sector needs to face the challenge of sustainability.

If we compare global market the stands have been taken a long back. In Europe, European Road Assessment Programme (EuroRAP) aims, through a constant assessment of road risks, to build a safer road system and to reduce the number of deaths on the road. In 2010, the Road Safety Foundation (UK charity) released the EuroRAP Star Rating results in the UK to demonstrate the efficiency of a well-thought-out road design and layout in the protection of road users. According to the results of the EuroRAP Star Rating of the trunk roads in England, half of the motorways are rated 4-star. This is an example of how sustainability can be implemented in a road construction context. The USA are also very committed when it comes to implement “green” actions in the road sector. Indeed, most of the green road rating systems on the market have been initiated by the USA. Some have academic origins while others come from local departments of Transportation. Amongst those rating systems, we can find Green-roads (University of Washington), GreenLITES (New York State), I-LAST (State of Illinois), INVEST (Federal Highway Administration), STEED…The latter, which acronym means Sustainable Transportation Engineering and Environmental Design, has been initiated by H.W. Lochner which provides civil and structural engineering, environmental and construction services for transportation projects in the USA.

India too is adopting the nuisances of sustainability adhering to ecological threat. With the advancements in the field of road construction technology, the construction of rehabilitated roads, which support environment providing long durability to road infrastructure, is required utilizing alternative materials, industrial and construction wastes and by products, facilitating road travel, travelers comfort and safety together with cost effectiveness and sustainable development. Go green movement is gaining strength with increased global warming and climate changes. Going green in transportation projects implies environment friendly construction of roads with the availability of alternative materials and the unique question of disposal of non-decaying waste posing a problem for environmental protection. With increased industrialization and growth of population with increasing quantities of waste world over together with increased demand for traditional road construction materials such as bitumen, cement, aggregate etc, the question is of sustainable development. With advances in science and technology, the use of non-decaying materials such as Plastic, Blast furnace slag, Fly ash, Scrap tyres, Mine wastes, Marble dust etc, offer an economically viable and sustainable alternative towards increasing demand for better road construction. In this way these materials can be utilized in an eco friendly way, providing solutions to their disposal with a commitment towards development of infra. Green road construction technology aims at low cost road construction, offering employment opportunities to the masses generating income at the disposal of the people involved thus improving the standard of living of the community at large. The technology also leads to appropriate and optimum resources utilization enhancing the country’s potential to grow faster by eliminating the possibility of resource erosion (depletion), it also provides an opportunity to employ alternatives which are cheaper, easily available and are eco friendly. The need of the hour is to develop and accept the designs and technology which is environment friendly and economical feasible adding an edge to Road construction with lower cost and less maintenance.

Increasing automation and IOT especially in Material Handling equipment

At present, there is a shift towards increasing automation, production enhancement, and safety. A lot of innovations are also taking place to develop equipment specifically customized solution. There is an adaptation of control methodology in relation to accuracy, repeatability, and efficiency Firms are using modified mechanisms and electrical sensors to ensure safety guidelines. There is a definite shift towards adoption of newer technologies for industries as well which can be seen in specifically in the crane system modulation. With changing times there is a demand for the MHE model that yields a quicker ROI than ever before. Even companies who are replacing or upgrading their existing range of material handling equipment are inclined towards technology that is efficient.

The Internet of Things (IoT) is one of the hottest topics in the construction sector, and with good reason. It influences the interaction of technological, economic, social, societal, and individual changes. IOT is being implemented in construction for data gratification and safeguarding of products. JCB India offers an in-built Compaction Meter in its range of Compactors. A Compaction Meter enables the operator to exactly know the number of passes required to achieve the desired compaction density and thus avoids over or under compaction of the layers. This leads to uniform compaction density and savings in fuel as well as in time. In order to make compaction operation as efficient as possible, the JCB COMPATRONIC systems can be fitted to JCB116 as an option. The accelerator sensor measures the reaction from the ground and provides feedback. JCB COMPATRONIC system displays the relative compaction value, warning lamp for jump operation and LED display for vibratory frequency. This system also looks for weak compaction areas which helps in determining the reduction in number of passes & avoid over compaction. The JCB116 comes with an advanced telematics technology the JCB Livelink. This state-of-the-art technology enables users to get SMS alerts on their mobile phones or smart devices regarding service alerts, operations and security of their machines. The information is available in real time regarding the health of the machine including engines and gives vital information to the customer in terms of number of hours the machine has been operational, service intervals, fuel levels, malfunctions if any, etc.

Another trend in material handling equipment is the growing popularity of voice-recognition systems. People understand the benefits of using a hands-free communication system and being trained to use this technology for minimal error in operations thereby leading to increased productivity. Another significant development is the emergence of M2M communications space which allows communications to happen between Machines. There is also a move towards the products are environmentally-friendly without sacrificing the cost competitiveness. The advent of sophisticated electrical controls through various sensors and inverter drives, it is possible to achieve the same level of control and smoothness of operations using electrical drives.

Customisations:

The fast-changing and varied requirements of a developing nation. It is no longer enough to create one machine and expect to suit the needs of all. Buyers have become more educated and demanding in terms of wanting machines suited to the kind of work and environment that they work in. The biggest example of this is the motor grader of international brands being obsolete for use in the construction of narrow rural roads due to its size despite the technology being more advanced and quality of machines being superior. There is no doubt that customisation is now key when it comes to the world of development. Customisations have to be in sync with the market and the on-ground realities for making the most of it.

According to Sachin Nijhawan Vice President and Business Head, Mahindra Construction Equipment believes, ”For most developed countries, there is only one single language that is used for communication across the country. But with a country like India where there is no unifying language and different language is spoken in every district and state, it becomes counter productive to have all instructions about the machine in a single language. This simple customisation helps interact better with the operator. Machine Abuse And Fuel Theft Are Major issue across the country. Uncertified operators tend to work the machines inappropriately. Simple software customisations help keep a log of the machine’s data for future reference. It also helps keep track of the machine’s numbers in terms of efficiency and fuel consumption. The customised software help run troubleshooting and diagnostic measures to ensure safety and efficacy of the machines’.He further explains, ‘Internet of things is becoming increasingly popular with construction equipment too. This kind of technology integrated with the machine lets the operator get a Fuel Efficient machines from Mahindra better picture of the job site anyhow to get it done best and fastest. The software has been developed to bring down the time required to get a certain job at hand done. Small customisations go a long way with a developing nation on the fast track’.

‘Value Engineering Programme’

The Ministry of Road Transport and High-ways, has decided to implement a ‘Value Engineering Programme’ to promote the use of new technologies, materials and equip-ment in highways projects executed either under PPP mode or public funding mode.

The programme aims at using innovative technology, materials and equipment to reduce the cost of projects and make them more environment friendly. It will simultaneously ensure that the roads or bridges and other assets get constructed much faster, and are structurally stronger as well as more durable. The ministry has also reconstituted a nine-member experts’ panel for approving proposals for use of new technologies, material and equipment. The reconstituted panel is chaired by SR Tambe, former Secretary, PWD Maharashtra and co-chaired by Prof Ravi Sinha, IIT Mumbai.

The NPE (National Panel of Experts) will examine all technical matters involving the new technologies, materials and equipment referred to it by the concerned Engineers or concessionaires/ contractors. The NPE will also resolve the technical issues which arise as a result of difference in views between engineers and contractors regarding implementation, besides deciding about the need for field trials of any new or innovative technology/ materials/ equipment before its adoption.

Conclusion:

‘Infrastructure sector is one of the core sectors of the Indian economy and thus, hold immense importance in the overall growth of the country. Government’s concerted efforts in the past three years through various policy reforms, programmes and budget announcements have played a key role in the revival of the Infrastructure sector and the Earthmoving & Construction Equipment (ECE) sector;, believes Jasmeet Singh, Head – Corporate Communications and External Relations, JCB India Ltd. He adds that this growth currently is primarily driven by the Roads and Highways closely followed by key sectors such as Railways, Irrigation, Mining, Affordable Housing etc. There is a requirement for building a world class road network in India, both in the urban and rural parts of the country. Significant allocation in successive budgets coupled with Government’s focused approach towards the sector has led to the considerable growth in the sector. However, sustained growth in this segment needs timely announcement and on-ground implementation of projects.

Growing public & private infrastructure, FDI reforms for construction sector, highway projects and growing economy has led to the overall surge of construction equipment market in India. In comparison with procurement market of construction equipment, rental market in India is at nascent stage but shows higher growth rate. As compared to other developed countries, India’s rental market penetration of construction equipment is lower and is limited to Tier-I & II cities. Construction equipment for procurement market is mostly dominated by construction vehicle segment comprising of dumper, tanker and tipper trucks, followed by earthmoving equipment segment such as excavators and loaders. According to 6Wresearch, India’s construction equipment market is projected to reach 131 thousand units by 2022. The market declined during 2012 to 2014 owing to factors such as delay in project clearance issues and land acquisition delays. However, in coming years, owing to several construction projects in pipeline, the market for construction equipment is expected to witness growth led by surge in construction vehicle segment, followed by earthmoving segment.

References

  • https://www.ibef.org
  • deccanchronicle.com
  • Economictimes
  • Times of india
  • Maiervidorno.com
  • concretepavements.org
  • http://www.rncos.com/Market-Analysis
  • http://www.6wresearch.com
  • http://www.ipfonline.com
  • http://www.worldhighways.com

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