Leading material handling and construction equipment manufacturing company Action Construction Equipment (ACE) is betting big on tractors and backhoe loaders for its next growth phase in the country.
In a conversation with Mobility Outlook, Manish Handa, Vice President & Business Head, Earth Moving & Road Construction Equipment Division, ACE, shared that Mobile Cranes, Tower Cranes, Tractors and Backhoe loaders will be the four verticals that will drive ACE’s growth in India.
Handa said, 'Overall, the construction equipment industry went down by 10% to 25% in the last two years. The business was below expectations. ACE, however, has been able to grow in these tough times as well.'
He further explained that categories, including the backhoe loader, have constantly grown for ACE. Handa credits ACE's ability to cater to customer requirements as the main reason for the company to grow. ACE's AX124 backhoe loader, as claimed, offers savings in upfront and operational costs as well.
'The savings AX124 offers has attracted a lot of customers for us. Savings are a must for the end consumer as most of the construction equipment is sold through the finance medium,' he highlighted.
The backhoe loader, as per a report by Off-Highway Research, was the most popular type of construction equipment in India. Its share of total equipment sales remained between 45-48% from 2015-to 2019, and the country’s backhoe loader sales represented 56% of the total global demand for these machines in 2019.
Expecting To Grow 10% YoY
ACE, for FY23, is expecting to grow by 10%. The company had posted revenue of about INR 1,700 crore in FY22. It is betting upon its range of backhoe loaders to drive this growth. Handa believes that the infrastructure projects worth over INR 102 lakh crore would drive the ailing construction equipment market towards good days.
'The infrastructure projects announced by the government have been driving the growth of the industry. These projects have been the engines fueling the growth. We are hopeful that the same will continue to keep the construction equipment industry on the right track in the coming years also,' he explained.
The company sees no difference in rural and urban infrastructure projects and believes that both have been contributing equally to driving the industry's growth. It is worth noting here that the task force on National Infrastructure Pipeline (NIP) estimates a capital expenditure of INR 773,915 crore between FY20 and FY25 on rural infrastructure development by the Centre and States. Urban infrastructure projects, including Smart Cities, AMRUT, PMAY, HRIDAY, JNNURM and SBM, on the other hand, have a corpus of more than INR 98,500 crore.
'Projects like national highways, state highways and PMAY cut across rural and urban areas. Then we have projects around port connectivity, rural electrification, and more, which also cut across all the geographies of the country. We feel that the growth of the construction equipment industry will be driven by both the verticals,' he said.
As per an IBEF report, the government had expanded the National Infrastructure Pipeline (NIP) to 9,335 projects. About 217 projects worth INR 110 lakh crore ($15.09 billion) were completed in 2020. The average per day of road construction in India was highest at 37 km in FY21 during the last seven years. It stood at only 12Km/day in FY15.
Betting On Technology
The company is planning to bet big on the technological front in order to drive its growth in the country. It is gearing up to introduce telematics in more solutions it offers; the company's prime target is to give owners of these machines the 'first hand' feel of how the machines are being operated in the field.
'Most of these machines are handled by operators in the field. The owner, sitting far away, wants to have a feel of how his machines are being handled and operated. We have implemented telematics solutions in some of our products and will be doing the same in more,' he said.
ACE claims that the telematics solutions it provides to the customer also enable them to get feedback and plan maintenance of their machines. The company is also gearing up for the shift from BS-IV to BS-V technology.
'BS-III to BS-IV shift has brought a lot of electronics on board. The BS-V shift will further make these machines technologically advanced. There will be challenges in the migration from BS-IV to BS-V, but the opportunities will be equally rewarding,' the company official shared.
The company is clear that the data collected by its telematics solutions is from the customer. Hence, the company handles the data when the customer feels that the company should interfere. 'We only take action when a customer wants us to,' he noted.
The construction machinery telematics market was valued at $1.09 billion in 2021 and is estimated to surpass a net valuation of $2.15 billion, registering a CAGR growth rate of 12.04% during 2022-2027, according to Mordor Intelligence.
Electrification Plans
While some of the company's competitors might be looking at electrifying their machines, it does not have any immediate plans. Instead, the company is now focusing on optimising its present solutions and developing better versions of the same.
The electrification plans are for a few industrial segments of construction equipment that are relatively smaller than the usual ones.
'There is a lot of time for the electric adoption to take place in the construction equipment industry. I think the same will first take place in the passenger vehicle industry and then come to the construction equipment industry. I do not see anything happening on this aspect in the construction equipment industry in the near future,' concluded Handa.