Will Not Get Into A Warzone To Push Volumes: CASE Construction India
CASE Construction Equipment, a brand of construction equipment from CNH Industrial, makes a wide range of products such as excavators, motor graders, wheel loaders, vibratory compaction rollers, crawler dozers, skid steers, and compact track loaders. Shalabh Chaturvedi, Marketing Head, CASE Construction India, while interacting with BW Businessworld, maintained that even though the domestic market remains buoyant the company will not get into a ‘warzone’ by getting into a segment which is already hyper-competitive. Below are the edited excerpts:
How important is the Indian market for Case Construction globally and how big are you betting on it?
CASE is a part of CNH Industrial Group, which is one of the largest capital goods companies in the world. From a business point of view, India is still not significant today in terms of contribution because the Group is itself very large i.e. nearly $30 billion dollars. But India is growing and therefore from a strategic significance point of view, it is extremely important for the whole Group. We (CNH Industrial Group) are really betting big on the Indian market. In terms of our manufacturing footprint, we have a plant in Pithampur (Madhya Pradesh), which has been there for two decades. We have a facility in Greater Noida for tractors which has also been there for two decades. We have recently invested in a manufacturing plant in Pune which is for crop solutions, which is a major investment from a state’s perspective. We have recently launched an NBFC-CNH Capital-a captive finance arm a couple of months back. It provides financing solutions for end customers for all CNH brands (such as) for New Holland Agriculture, Case Construction, Case IH, etc. So from a strategic importance point of view, which we are getting, we are investing a lot in the India market.
You have been in India for the last three decades and have been running a wholly-owned subsidiary since 2012. Which segment is the volume puller for you?
From a volume perspective, backhoe loaders are the largest segment in the construction equipment space (in India). This year, the total market of backhoe loaders would be more than 45,000 units per annum. This accounts for atleast 50% of the total construction equipment industry. So in the same ratio, backhoe loaders become extremely significant for us from the volume perspective. Since we are a leader in vibratory compactors with more than the one-third marketshare with us, this segment also contributes significantly to our volumes. But since the size of this segment is merely at 5,000 units per annum (in India), we are not expecting the numbers to be bigger than backhoes.
How have some of the structural reforms impacted your company and the construction equipment industry per se?
When I talk about the construction equipment segment, we are a part of the larger infrastructure ecosystem. Infrastructure has been a priority sector of this government. Therefore, we are also one of the beneficiaries of it and we are contributing to the infrastructure development through our machines. These kinds of disruptions had some temporary effect but the megatrend if you look at it, for infrastructure development it is really huge and is quite sustainable. (Although) these things had some impact but not so much to impact sales (of construction equipment).
Are you also exporting your products from India? If yes, can you share the details?
Yes, we have started exports a couple of years back and are ramping up more for that. From a construction equipment point of view, we are exporting products across segments primarily to countries which are having similar emission norms as us or lower (than us) such as South East Asia, Africa, Middle East, Russia, CIS countries, etc. One of the requirements for many of these markets is how service oriented we can be in terms of giving after-sales support in these markets. Being a part of CNH and Fiat Powertrain Technologies’ (FPT) service network from an engine point of view, we have been able to really penetrate deep into these export markets with India as the hub of manufacturing. We are now exploring at ways in which we can be a components supplier, if not the whole equipment, to Western European and North American markets. For example, we are supplying some aggregates from our Pithampur plant to our (parent company’s) manufacturing plant in Italy.
As the government is talking about building highways and creating infrastructure, do you think getting into the excavator segment would be the next big bet for you?
Excavator (segment) is becoming more and more significant in the Indian market in terms of volumes. In terms of value, they are already higher than loader backhoes. So they are important for us and the industry. The only challenge in the excavator segment is extremely crowded. Every conceivable OEM has a localised presence in the Indian market. Therefore, it is not a profitable segment for every manufacturer to be in. For us, it remains a strategic call whether you want to be one of the many with some product differentiation and try to be present and increase your volumes or remain away and not lose money by entering a warzone. Nonetheless, the discussions are on them and we are doing some internal evaluations. We are doing some product testing also in the Indian conditions. But it remains to be seen how we are close to the market.
As you are aware, new emission and safety norms for construction equipment are round the corner. So are you geared up to comply with them?
For a large multinational like us, which is operating in more than 190 countries in the world and (which is complying with) different emission norms of the world, we are well-prepared in terms of our product portfolio of managing Tier-IV and even Tier-V norms. So, from emissions or product readiness perspective, we are ready even if Tier-V norms come in. The challenges are in terms of clarity from the government in terms of the timeline of implementation. They have been clear about Tier-IV but not so much in terms of safety homologation which was due this year (2018) and got shifted to next year (2019). Maybe, it will get clubbed along with Tier –IV norms. Sometimes the lack of clarity on timelines of implementation becomes an impediment. The other thing is the readiness in terms of the secondary infrastructure and in terms of fuel availability. If you look at Tier-IV interim which is already implemented for commercial vehicles, passenger cars in India, you get that quality of diesel in metropolitan cities but the moment you go outside metropolitan cities, you don’t get that quality of diesel even today inspite of it being implemented (countrywide). So we have our concerns that once the Tier-IV final emission norms come in 2020 October and in 2021 April from a sales perspective, how prepared the country will be from a secondary infrastructure point of view in terms of fuel availability and things like that.
