Indian earthmoving & construction equipment (ECE) industry to grow 5-fold by 2015 : Mckinsey | INRnews
Commented Vipin Sondhi, Chairman, Excon 2007 and Managing Director & CEO, JCB India Ltd., “The McKinsey report states that the industry's revenue and volume have recorded 40% growth year- on- year between 2004 and 2006, reaching US$ 2.3 billion today and uncovers a $40 billion opportunity for the industry between now and 2015.”
The study discusses the five trends that will shape the evolution of the industry and highlights the imperatives to realize this opportunity. Of these five trends, four are growth opportunities–investments of $750 billion in infrastructure development; the increasing dominance of price–and–value focused customers; deeper engagement of global equipment manufacturers in India; and increasing opportunities for exports. However, one trend increasing competition from product imports from other low cost countries like China–could potentially challenge industry growth and is force that players need to address proactively.
Conservative estimates suggest that “as usual” growth will create a market of $8 billion by 2015. But a concerted push by the industry and government alike could result in an additional $ 4 billion opportunity, equally spilt between exports and the provisioning of India specific products.
Said Adil Zainulbhai, Managing Director – India, McKinsey & Company, “For the industry to achieve its full potential players need to embark on three strategic initiatives – (i) introduce India specific products that includes introducing low-priced multi-purpose equipment to attract new customers and to increase mechanization in important areas, adding features to products that make suitable for use in India and launching new applications and products for missing applications; (ii) improve cost positions to better deal with the onslaught of competition from LCCs; and (iii) pioneer efforts to boost exports in areas like engineering and design services that leverage the India’s technical prowess.
Added Rajat Dhawan, Partner and Co-leader of McKinsey’s Automotive & Assembly Practice in India, “In addition, companies need to pursue four growth-enabling initiatives to expand the market. These include enhancing the quality, delivery and price of after sales-services to increase share of service revenues from 2% of total revenues to the global average of about 8%; addressing key gaps in financing to catalyze latent demand particularly in rural areas and small towns; expanding dealer and channel network coverage to address buyer fragmentation and quality and proactively strengthening supplier capacities and capabilities.”
The study concludes by outlining imperatives for the government. It emphasizes that to complement the initiatives of industry players the government, must on focus on three fronts – increase availability of trained manpower as at the current pace the industry is likely to face a shortfall of 0.3 million trained operators by 2015; remove tax anamolies to encourage exports and lower tax burdens that impede demand; and institute policy measures that strengthen the industry capabilities. Key policy measures include – provide tax benefits to players to encourage investments in research and development, establish an industry focused R&D center, incentivize exports by exempting them from excise and local levies; and contain imports of used equipments as done in other emerging market economies.
It finally states that CII, IECIAL must work with the industry and government to create an enabling environment that results in the desired regulatory changes, and exports the Made in India brand to international shores.
The ECE industry has a critical role to play in making India one of the world's top five economies by 2025. Construction equipment players have a unique opportunity to help realize the potential of this sector and, in doing so, garner their share of the US$12–13 billion revenue potential.
By INRnews Correspondent