India's expanding crane market is an attractive yet challenging prospect
By Euan Youdale12 November 2010
Manufacturers from outside India are making forays into a market traditionally dominated by a particular type of pick and carry crane. Times are changing and opportunity is rife.
Although it will be some time before the pick and carry crane is eclipsed as the most common type in India, the market is moving slowly towards models found in foreign markets. There is an increasing requirement for a broader range of higher lifting capacity, quality products, with long life expectancy and comprehensive after sales service.
According to Off Highway Research (OHR), there were 6,499 mobile cranes sold in India during 2009, a majority of which will have been the pick and carry type, produced by domestic manufacturers including Escorts and ACE. This is forecast to increase to 8,000 units by the end of 2010 and 11,500 units during 2014, says OHR. These numbers represent significant growth when compared to OHR's 2005 sales figure of just over 4,000 units.
JCB, which manufactures the Liftall range of pick and carry in India, says the crane type is the third highest selling peice of construction equipment behind backhoes and excavators, and the figure is growing, along with the cranes' capacity.
"With increased investments in infrastructure projects and entry of global players in construction and project execution, safety norms are now of the utmost importance and becoming more and more stringent. As a result the market is moving towards larger capacity cranes within pick and carry segment - from 8 to 10 tonne class to 12 to 15 tonne - as these offer more stability in material handling. Customers are now looking for safe load indicators (SLI) for increased safety. There is alsoa trend towards articulated cranes in the Indian market," Explains JCB's Nigel Chell.
The company now offers the Liftall 1253 three part boom and Liftall 1202 two part boom to the Indian market. They are produced at JCB's plant in Ballabgarh, Haryanan, and an expansion of the range is ongoing.
"In India there are varied customer types, in terms of application, features required by them in machines and their business size. Products available in the market are tailor made for a particular customer base. The cost sensitive customers may prefer the low cost equipment, without many features that have to do with safety and long term quality. A major challenge for players like JCB is to educate the customers on the importance of quality and safety," adds Chell.
When it comes to other types of mobile cranes in India, there has been a marked increase in interest but a significant drop in rental rates over the last couple of years - partly due to intense competition and the large quantity of machines flooding the market. "There are too many people with crawler cranes and the rates have come down substantially," says Saket Agarwal, managing director of crane rental giant ABG's parent company ABG Heavy Industries, which specialises in crawler cranes. The situation is partly caused, he says, by the number of cranes imported from neighbouring China, thanks to their continually expanding ranges.
Fellow cranes services specialist Lift & Shift India shares these experiences. Romil Parikh, Lift & Shift director, says customers are now demanding free transport and delivery but he sees a positive outcome. "The market is strong and there has been tremendous growth in the population of cranes in the last few years. Although this has led to an increased supply and a drop in prices it has allowed newer clients access to cranes for their projects. Now, a client who would not use a large machine in the past due to price constraints is using such machines to improve their cycle time," Parikh says.
These recent circumstances are likely to become a long term trend. "Overall, there will be more competition due to the flooding of the market from older cranes from all over the world," adds Parikh. "There will be a marked difference between operators' execution style with premium clients sticking with suppliers who maintain the machines and also provide engineering back up."
ABG's new Indian crawler crane manufacturing wing demonstrates this new demand with its full parts and after sales service provision. Six 80 tonne capacity model 1080 crawlers have been produced and put into operation, and another five are on order. Once they have been completed the factory will also focus on a 160 tonner, the model 1160. According to Agarwal, a prototype is in production and testing will begin by April 2011. The company will then set its sights on another increasingly popular capacity range in the country with the 35 tonne capacity 1035.
The ABG facility can manufacture crawlers up to 250 tonnes capacity, although no cranes above 160 tonnes are planned for now. The plant is producing two cranes a month and this will increase to five per month in 2011. ABG, however, has no interest in increasing its market share. "There are already many manufacturers from China and Japan, we are just making a very good product at a very competitive price," Agarwal comments.
One such Chinese company is Zoomlion, which views India as its most important market. It has struck a deal with Indian crane and construction equipment manufacturer Escorts to distribute its truck cranes in the country. "With Escorts' network across India, we will promote our products all over the country. We are also looking for co-operation with some local or international consultative groups to tap the market," explains a Zoomlion spokesperson.
The most popular truck cranes, says Zoomlion, are the 30, 50 and 70 tonne capacity models. As far as crawlers concerned the company claims to have sold 100 units of the 70 tonne capacity QUY70. Other popular models are in the 100 to 260 tonne ranges, similar to other manufacturers' target market. Zoomlion's largest crane sold outside China, the 600 tonne capacity QUY600 crawler, was also sold to an Indian customer.
The manufacturer says it is in tune with demands for high quality products at relatively competitive prices, with good after sales service. "The Indian market has plenty of capacity to accommodate domestic and overseas suppliers. And the end users will be happy to have so many choices on the open market."
Japanese manufacturers are also seeing opportunities in India. Tadano believes the only way to compete with domestic companies is to manufacture inside the country. According to Takuji Murakami, in Tadano marketing and development, few crane users in India purchase imported products. "We are mainly concentrating on the sales of rough terrain cranes with over 50 tonnes capacity, which does not compete with the local manufacturers," Murakami explains.
The company is looking at ways to increase sales. "We should do something in order to reinforce the presence of our brand and we are considering every possible option - as long as we only rely on imported machines, it is difficult to compete," says Murakami. "We believe the Indian market will keep on growing in the medium to long term - taking further action is needed."
On the move
Fellow Japanese crane manufacturer Kobelco Cranes has already made the move. Its parent company Kobe Steel will invest Yen 1.2 billion / Rupee 600 million (US$13 million) to construct a crawler crane plant, scheduled to begin production in October 2011. Kobelco Cranes India Pvt. Ltd. (KCI), will have about 70 employees. Kobelco says the Indian market for crawler cranes, which reached about 200 units in 2009, will grow to 700 units in the next five years on the back of strong infrastructure investment. The Indian plant is Kobelco's first overseas production facility and it will be the world's first major foreign mobile crane manufacturer to build crawlers in India. Again, the capacity range will be 60 to 250 tonnes.
The most popular Kobelco crane in the Indian market is its 250 tonne capacity CKE 2500 crawler, followed by the 135 tonne capacity CKE1350. "For smaller sizes below 100 tonnes, the market is very competitive in price so we are not focusing in this range," says Mike Maruo at Kobelco.
The new plant will be sited next to sister company Kobelco Construction Machinery's excavator factory to take advantage of shared resources. From the beginning of October Kobelco also changed its representative office in Delhi to a separate sales and service company.
The allure of promised growth is not enticing all manufactures to set up factories in India, however. Liebherr counts itself one of them. "We do not intend to set up manufacturing facilities for mobile and crawler cranes in India. We have a target to manufacture at the highest quality level, with the latest steel or other materials, using state-of-the-art production facilities, under the responsibility of highly skilled people," explains Wolfgang Beringer, at Liebher-Werk Ehingen in Germany. To this end, the company says it will continue to develop its brand at the recently extended German factory and offer its products to the world market from there.
For Terex Cranes, a presence in India, with its sales and service centre, plus a spare parts facility in Pune, is vital, but there are no immediate signs of a move into manufacturing. "India still tends to be a niche market for a wide variety of cranes products. However, in view of the increasing number of government-supported infrastructure projects currently underway, the future trend looks very positive," says TR Badarinarayan, Terex Cranes India executive director.
The biggest demand is for mobile cranes, particularly crawlers in the 600 to 1,000 tonne capacity range, as well as 20 to 64 tonne capacity tower cranes, adds Badarinarayan. "Building a strong team to support our product offering on the Indian market is a priority - offering the distinct advantages of a global corporation capable of delivering fast, efficient results on a local level."
High end provision
Raman Joshi, managing director of Manitowoc Cranes India, reiterates the increasing requirement for high end service provision. "We are seeing a lot of customers, especially those who purchase new cranes, put a lot of effort into their equipment purchases. It is no longer just about price. Many customers want to know about the lifecycle cost, fuel economy, ease of maintenance, customer support and a host of other factors."
The company was the first western manufacturer to set up fabrication facilities in India with its tower crane factory in Pune. It also has a dealership arrangement through TIL in Kolkata, Delhi, Chennai and Hyderabad, for its Grove and Manitowoc products.
"In terms of customers in India, they generally like cranes that are easy to operate. In more rural areas, the demand is for cranes that are easy to maintain. Rough terrain mobile cranes from Grove are very popular in India, [they are] very straightforward to own and operate."
The Potain MCi 85 tower crane was designed for markets like India. It includes a single-tie jib which can be assembled on the ground and lifted in a single piece. The mast sections are pin-connected for safe and quick erection while other components are designed for lightweight handling or removal, explains Joshi.
"In terms of size, India is still relatively small but the key is that it is growing and the outlook for the next 10 to 15 years in this country is very strong," adds Joshi. "Being first here has allowed us to create a market-leading crane sales network." Apart from full Crane Care support the company also provides training centres in India and supplies training staff direct to companies if they prefer.
Zoomlion's spokesperson sums up the mood concerning India. "It is a very important market, not only for us, but for all world manufacturers. The increasing and rapid development of the economy in India in recent years is amazing and we believe the growth will continue for years."
Off Highway Research reportd on India
India and China are the only two major economies still growing rapidly, at a time when the majority of developed markets are struggling to come out of recession, according to Off Highway Research. Nevertheless, the Indian economy passed through difficult times in the fiscal year ending 31 March 2009.
The global economic crisis brought real GDP growth down to 6.7%, compared to an average of more than 9% in the preceding three years. Estimates for the last fiscal year show a rebound with GDP growth put at 7.2%. The first challenge for the Indian government is to get back to 9% GDP growth, and then push on to sustain growth above 10%.
India, which Off-Highway Research says, increased its share of global construction equipment sales from 3% to 5% between 2005 and 2009. Despite the decline in 2008 and 2009 India will account for at least 7% of world demand in the next five years.
The market will be dominated by the following six products, continues Off Highway Research: backhoe loaders, crawler excavators, mobile cranes, compaction equipment, wheeled loaders and mobile compressors. Together these are forecast to account for 93% of the Indian construction equipment market by 2014.