‘Import of secondhand equipment will have negative impact on local players’

— Prabhat K.Tiwari, Head - Marketing, Hyundai Construction Equipment India Pvt. Ltd  Hyundai Construction Equipment India Pvt. Ltd is a part of Hyundai Heavy Industries of Korea, a global leader in construction equipment. Prabhat Kumar Tiwari discusses with Sandeep Menezes the latest trends in the Indian construction equipment industry where it enjoys a 11 per cent share of excavators. What are the recent trends in the Indian construction and mining equipment sector? In India, we are value conscious and optimise resource that is available. Excavator customers, too, are demanding and always seeking extra features in the machine to increase productivity and lower operating cost by use of mechatronics. Amidst this, fuel efficiency has been at the core of the customer's buying decision. Besides, there has been an emphasis on operator comfort by way of providing ergonomically designed layout of controls and other features such as improving quality of cabin in terms of visibility, cooling efficiency, and low sound. Safety features are also being considered while deciding on the equipment. There is a demand for a new policy for import of secondhand equipment.  Importing secondhand equipment will have a negative impact on local manufacturers though the overall economy of working with secondhand imported equipment needs to be studied. Such equipment needs to be supported aptly to run them. Today we are not yet ready to offer this support. Also, there are a lot of dissimilarities in terms of standardisation of products in India and secondhand imported machines. Credit available for these machines and ascertaining its economic lifecycle and other safety aspects as per norms also need to be laid out. India's construction equipment market is set to touch $12-13 billion by 2015. Which segments will contribute to the growth? The segments which will take the growth of construction equipment through 2015 will be infrastructure, mining, power, steel, cement etc. Infrastructure spend is projected to be $1 trillion in the 12th Five-Year Plan. Besides, there is supply-demand gap in energy which calls for new power projects with captive mining. Steel and cement growth will be driven primarily due to domestic demand, especially in infrastructure expansion. In spite of having the secondlargest global pool of engineers and technicians, India faces a shortage of trained equipment operators.  India is blessed with immense talent; however, lack of trained and skilled manpower in relation to heavy earthmoving equipment is a major concern. Excavators are mechatronics that are built to offer better output per excavation. A trained operator optimises resources and provides better output, eventually adding to the bottom line. In India, we do not have institutions that provide professional training to operators. With the rising development and more dependency on mechanised work, government should take initiatives on setting up regional training centres for this trade. To embark upon this issue Hyundai has already started a well-maintained training centre in Pune, backed by solid infrastructure where engineers, service staff, operators etc. are trained on operating skills and basic maintenance aspects of Hyundai excavators. We are also in the process of developing regional training institutes to offer training to customers' mechanics and open market mechanic. Simultaneously, government needs to support the efforts of industry players through three growth enabling initiatives: i) Increase the availability of trained manpower ii) Lower the tax burden and remove current tax anomalies that encourage imports, and iii) Introduce policy measures (i.e. encourage domestic value addition through mandatory 30 per cent level of indigenisation, and set up an industry focused R&D institute) to strengthen industry capabilities. Raw material cost could also emerge as a significant challenge. In this context global players with presence across various countries could be at an advantage if the cost dynamics were to shift in favour of some other country. Why hasn't the rental market for earthmoving and construction equipment picked up in India? The equipment rental business in currently pegged at 7-8 per cent of the total construction equipment industry. The developed markets have rental penetration between 50 and 80 per cent of the total construction equipment sold in their domain. India is still at 7-8 per cent rental penetration and we are looking at the industry growing to 15-20 per cent in the next couple of years. The more the rental penetration, the more tilt towards rental. The medium-term outlook for construction equipment rental is healthy and robust, especially from the roads, power and ports sectors. Interstate transactions for equipment and virtual are both an unwanted stress and challenge to any services company. What is the proportion of ECE bought through finance options vis-à-vis direct cash funding? Construction equipment is capital intensive attracting huge investment. Finance options are the best bet for funding them. Generally, about 95 per cent of the goods purchased are through finance and only 5 per cent are through direct cash funding. What is the impact of interest rate volatility on equipment finance?  Attractive interest rates are always acceptable and fluctuating rate of interest will adversely affect business. Higher rates affect the growth of the CE industry as excavators are capitalintensive goods and funded over a long-term period. Rate volatility and credit availability plays a vital role while investing on equipment. Government should consider including construction equipment funding in prime lending sector as it is mostly used for infrastructure projects. What is your long-term view of the Indian construction and mining equipment sector? Hyundai Construction Equipment India Pvt. Ltd has a vision to become market leader in India for the construction equipment business in terms of customer delight and market share. Hyundai has made an investment of `300 crore in India for excavators and would gradually explore options for other construction equipment. Hyundai with this investment is committed to the Indian operation on a long-term basis where customers can safely consider it as a profitable business partner for their operations in this country. Source: http://www.projectsmonitor.com/MACH/import-of-secondhand-equipment-will-have-negative-impact-on-local-players

                 

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