“I think what’s important is the intent of government which is very clear that infrastructure must be created. In infrastructure, the roads & highway sector has really moved forward, so, I firmly believe that if one sector can do it, so can the others. In irrigation, Telangana has set a successful example which other states can follow. There is still a massive amount of infrastructure yet to be built in the country, and this calls for large volumes of equipment.”
Mr. Vipin Sondhi
MD & CEO, JCB India
Mr. Vipin Sondhi
MD & CEO, JCB India
How has 2017 been for the CE Industry?
As an industry, we have grown by about 14% this year; which, in my view, is not enough. It must grow upwards by 25-30% every year, if more progress needs to be done.
No doubt, the year has faced various challenges and the biggest one was the misinterpretation of the Supreme Court order on automobiles. Sales was impacted negatively for 45 days. The order, which was pertaining to four-wheeler, was misinterpreted for a wheeled equipment, in the Construction Equipment Vehicles category. We got the clarification, for which we had to go to the Supreme Court.
For GST, we’ll say that it is a great reform and we are very thankful to the government and to the GST council for having reviewed our request of bringing down the GST rate of Construction Equipment from 28% to 18% slab.
Roads and Highways projects have been driving demand in the CE industry for the last two years, but other sectors are not performing as they should. What is the reason for this and what steps should be taken to revive them?
I think what’s important is the intent of the government and it’s very clear that infrastructure must be created. The Roads and Highways sector has really moved forward. So, if they can do it, so can the Railways, Irrigation and other infra sectors. I firmly believe that if one state and sector can do it, so can other states and sectors. In fact, when all the sectors start moving ahead, their collective demand for construction equipment will really push the industry towards growth.
Telangana has set an example by successfully desilting village ponds, canals etc, and it has revived irrigation. Andhra Pradesh and Maharashtra, likewise, are doing a few such projects, but we need to take a countrywide approach. For our Railways, we need to build the infrastructure with a special focus on safety both on rail and near the stations. In fact, Railways is moving very systematically and in a very focused way, so it’s a matter of time before the sector starts moving forward. It’s taking time because work in this sector has not been done for so many years.
What about the infrastructure financing/funding?
At the moment, we know that most of the funding is coming from the Budget. Public spending is also there. But only the Budget has so much capability to fund infrastructure and the Finance Minister has created the fiscal space in the last three Budgets and allocated more and more for infra spending, with most of it going to roads.
Then comes the whole issue of NPAs and Corporates, which are over leveraged. The government is finally moving towards recapitalization of banks. The whole process is going to take time, though a big move has been made, but we are yet to see the details on enabling banks to start lending again for infra projects.
The PPP model, I will say, has struggled, but for a few successful projects. It fell apart because of government clearances, so it should be resurrected to bring back confidence in private investment in infrastructure development. Without this, the funding requirement would be limited.
We’re not seeing investment from private sector because the balance sheets of the developer and the public infrastructure companies are over leveraged. The Tier-2 and smaller contractors (whose balance sheet can be considered) are coming forward but banks are reluctant to lend even to them due to bad experiences in the past. Banks will give smaller amounts for lending not large amounts which were given earlier, which may not be a bad thing after all, because we cannot afford to make the same mistakes from the past.
We need to see improvement every year to bring in ease of doing business. As per the recent report on Ease of Doing Business by the World Bank, India has jumped to the 100th spot. Many people would say that 100 is quite far behind, but we were at 133 earlier. This applies for specific points and specific parts of the country since the study was done for Delhi and Mumbai. But this also means that other states can also look at going up by 33 points and take their own reform measures. So hopefully, we will see positive movement in that direction, but a lot relates to faster clearances.
The Construction Equipment industry, currently, has a capacity utilization of 60-65%. Our best year was 2011 and now it’ll be 2017 as utilization has started. After a slowdown during 2013-2015, the industry began picking up in 2016, so the capacity developed in 2011 is getting utilized now.
Every year should be better than the previous. We must move from a difficult situation to a better situation to a good situation in two years. And I think that in five years, the business environment will be perfect. So, there is optimism.
What is JCB’s capability as an integrated service provider and not just an equipment manufacturer for both its institutional and retail buyers?
Institutional buyers, more and more, want to be focused on their projects and not on the equipment. They want maximum uptime from the equipment; and if there is a breakdown, the machine should begin to operate as soon as possible. They also want to know how much the equipment is getting utilized and what is its productivity.
To ensure this, we have the largest network of dealerships and the largest teams within the dealerships, essentially for service and parts. Out of 6,000 people, about 4,500 are only for service and parts. We post one or two persons on site, who ensure and relay all issues relating to the equipment to the dealer. We also ensure availability of critical parts on job sites. Our Livelink renders real-time information on the utilization, servicing, fuel consumption and status of the machine to the local dealer and to the company’s headquarters in Delhi. So, in case of a breakdown, help comes in very quickly.
While ensuring maximum uptime and reliability of the machine to our large institutional buyers, we also take care of the small buyer, who may have bought a machine on a bank loan. While also paying EMIs, he has to find work and ensure that to complete his work on schedule, the machine keeps running all the time.
Hence, the importance given by JCB on ready parts supply, servicing and use of Livelink for getting real time data and information on the machine’s operations and performance. We also have an alert called GEO Fencing, which ensures that if a machine goes outside of its work area, the company / owner is alerted instantly. We have created an app for our dealers called Smart Serve which enables a dealer to locate the nearest service engineer and send him to the site for troubleshooting.
Customers are getting exposed to technology more and more. What technological trends do you see emerging in the CE sector?
One of the trends I see is more and more information being provided on the health of the machine to ensure maximum uptime. To ensure the machine’s reliability on site, timely information can pre-empt any kind of possible problem with the machine. There is a lot of focus on productivity, per ton of fuel consumed, and per ton of material moved. This is especially so in larger projects with users getting penalties or bonus points on time taken for the projects. We are definitely seeing that larger machines are being bought more and more as we move forward and as project requirements become more stringent.
How challenging is it to create a market for new products such as your Telehandlers in India?
The Telehandler is a new product for India, for which we are creating the market, like we did for our backhoe loaders. We create awareness by giving live demonstrations of its features and advantages over existing processes, which despite being hazardous and unsafe, are continuing simply because they have been there for the last 20-30 years.
Our Loadalls and Skid Steers are used for specific applications and need attachments as per the application. Hence, attachments plays a big role in creating the sales of our Loadalls and Skid Steers. So, based on customer requirement and feedback, we create the right attachment and demonstrate it to the customers. This is part of our market creation efforts, and the biggest positive response is when we get repeat orders for our products.
We have launched 20, 22, and 30-ton excavators for which we are getting a great response, especially from institutional buyers. In fact, we are creating the category for 30-ton mass excavation for sites that need a lot of mud to be removed, as in irrigation projects.
Please elaborate on JCB’s R&D for designing and developing attachments?
At JCB, a big factor is its R&D and the application engineer, whose job is to conceptualize a product / attachment after seeing its possible use, and creating it after discussions. Its design may be unique and specific to an industry or to an application, and is not available in any part of the world. For instance, attachments needed by the sugar and the ceramic industries, are very peculiar to India. So, the application engineer has to conceptualize the end use and then work with the R&D team to develop it. And of course, we get a patent for it.
How focused is JCB on Exports?
It’s healthy to have 20-25% of total revenue coming from exports, because the Indian market is also growing, and our focus is more on India and the neighboring countries. JCB’s ‘Made in India products are present in over 85 countries. Our products are doing well in the Middle-East, Africa, and South-East Asia markets, and we are also exporting to Latin America and Russia.
JCB is always the cynosure of all eyes during Excon as there are high expectations from the company. What new intelligent construction solutions will JCB introduce this time?
Excon is one of the biggest exhibitions for the Construction Equipment industry in South Asia and it is an ideal platform to exhibit products and services that have the potential to drive growth in the future.
As always, JCB will present an exciting line up of machines at this year’s Excon with some innovative new additions in the large equipment category. All these products exhibit innovation in design, performance, efficiency and safety including Telematics.
Additionally, we will showcase the entire range of our world-class JCB products starting from the compact range such as Mini Excavator, Skid Steer Loader to mid-range machines such as Backhoe Loaders, Telehandlers, Super Loaders to larger Excavators, Compactors and Wheel Loaders. All these products have been designed and engineered to cater to the changing needs and increasing demand across different segments.
JCB will also display its range of Consumer Products, Parts and Product Support options. Apart from this, our famous Dancing Diggers show will enthral the crowd throughout the five day event.
Visitors will get to experience world-class technology in action at our stand in terms of Telematics and Internet of Things.
At Excon 2017, JCB will reiterate its position as a Full Range Infrastructure Equipment Partner.