Mahindra & Mahindra being number one in tractor sales globally, sees a strong correlation between the performance of the agricultural vehicles and construction equipment vehicle industries. It is of the view that FY23 will be a better year than the last for the construction vehicle equipment industry.
Jalaj Gupta, Business Head, Commercial Vehicles, Mahindra & Mahindra, told Mobility Outlook, ''FY21, the year that corona virus hit us, was surprisingly very good for us and for the rest of the construction vehicle industry as well. The industry in FY22, the year that has just gone by, had degrown by about 8%. The tractor sales were also highest during the year corona hit us, and the same fell in FY22.'
However, the company is not sure whether the ongoing fiscal will be as good as FY21. Data from Statista points out that as against 91,800 units of construction equipment sold in FY21, only 84,300 units were sold in FY20. The peak sales of the construction equipment industry during the last ten fiscal years had come in FY19, where the industry had sold 97,010 units.
Huge Infrastructure Projects Vs BS-V Transition
Gupta believes the upcoming five years to be one of the best growth periods seen by the construction equipment industry as there are over INR 102 lakh crore infrastructure development projects announced by the Government of India. Therefore, the sales in the construction equipment vehicle industry are directly proportional to the work in hand as per him, and these equipment are not brought for social statements.
'We are of the view that the upcoming three to four years will be a good time for the construction vehicle equipment industry. Be it road, railways, ports or housing, the outlook for the next three to four years looks very promising. The performance this year will be better than the years that have passed by,' he stated.
The BS-IV to BS-V transition, scheduled for two years from now, might prove to be a party spoiler for the industry. These transitions have not worked in favour of any of the automobile sectors so far, as there was a decline in sales of construction equipment when the industry had transitioned from BS-III to BS-IV last year. There was a price increase in the construction equipment industry last year, and come April 2024, there will be another one.
'The industry is migrating from BS-IV to BS-V in two years from now. There is also a geopolitical war going on. All these factors clubbed together have made the prices of the commodities skyrocket. Add the increasing fuel prices to the list, and you will see that the rental/return end-consumers are getting from these construction equipment is not commensurating with the EMIs that they are paying,' explained Gupta.
As per Gupta, these factors put together are exerting much pressure on the operator/end consumer. Gupta further opined that keeping present conditions in mind, if the requirement of construction equipment is X at the moment, the end consumers will only buy a certain percentage of X.
Intent, Time, Results
On being asked if the big infrastructure development plans announced by the country's government would push the construction equipment industry towards growth, Gupta said, 'The sum of INR 102 lakh crore, from an intent point of view, is a huge commitment. This is the reason that gives us a feeling of a new momentum being created in the industry during the next three to five years.''
Gupta expressed confidence that the projects announced will actually be implemented six to 18 months from now. 'Implementation of the new projects and calculating how many new machines would be required for the same, and then buying and deploying these machines on ground will take time. There is always a timeline. The impact of what gets announced today will only show impact six to 12 months from now. The impact will certainly happen but it will take time to be felt on the ground,' argued Gupta.
The contractors working in the construction equipment renting, buying and deploying vertically only opt for new machines when they see the money flowing in the channels. Purchasing new machines for projects announced on paper remains a risky business until the money starts getting credited into their accounts as new machines require heavy investments.
'The project announcements look good. There has also been much work done on the road development side in India but we will wait for the tenders to be floated by the government and private industry before investing in new machines,' argued a South India based contractor/renter of construction equipment Mobility Outlook met at the EXCON 2022.
Focus On Portfolio
Mahindra & Mahindra, being present in backhoe loaders and motor grader verticals, plans to focus more on these two ranges of the construction equipment vehicle industry. The company currently exports 25% of what it manufactures in India. It is now planning to increase these export figures aggressively by expanding to more geographies.
“We are going to increase our footprint in the export markets. BS-IV to BS-V migration will be one more focus for us, keeping in mind the time left for the same,” shared Gupta. Mahindra was the first to start retailing BS-IV construction equipment machines in India last year.
He added, “The challenge for the manufacturer will be the technological shift, but the challenge for the end consumer will be a bigger one. He has already made changes for migrating to BS-IV last year, and two years from now (April 2024), he will have to shift to BS-V.”
Migration to BS-V will bring in the addition of AdBlue to the industry. This will add to the operating expenses of a construction equipment vehicle.
The company, in terms of technology, is providing a platform where the owner of a construction equipment machine can do a real-time analysis of how his machine is performing, if the operator is working consistently, how much fuel the machine is consuming, how the performance of the machine can be improved, and more.
Mahindra & Mahindra has no immediate plans for the electrification of construction equipment vehicles it offers in India. Gupta shared that the company focuses on BS-IV to BS-V migration and will evaluate electrification plans post that. The company is showcasing its latest products and solutions at the ongoing EXCON 2022.
New Launch
Mahindra & Mahindra has unveiled a new ‘G75 Smart’ motor grader at EXCON 2022. The company claims that the RoadMaster G75 Smart offers road contractors liberation from compromised makeshift solutions, such as manual labour and farm tractor-based graders. As per the company, it can enable small road contractors to participate in projects with grading needs for government flagship programmes such as Smart City and PMGSY roads.
About the launch, Gupta said, 'Our aim is to help small contractors break free from sub-optimal grading practices and to upgrade them to mechanisation and enable them to participate in nation-building. The brand-new G75 Smart motor grader is a highly reliable machine with low owning and operating costs and will truly be their 'Profit Ka Partner. Our existing RoadMaster range of motor graders has already captured over 20% market share, and we are confident that G75 Smart will further strengthen our position while transforming the construction of small roads in India, which constitute about 60% of the country’s roads.”