India Offers a Significant Opportunity for Growth For Caterpillar
How does Caterpillar look at the emerging construction and mining equipment market scenario in Asia in general and in India in particular?
No other region of the world can match the growth opportunities that Asia presents for Caterpillar and its dealers. In particular, the enormous plans for infrastructure development in China and India represent a tremendous opportunity to serve existing customers and potential new customers. For mining, Asia also represents opportunities to support long-term mining industry customers who are investing in their operations to support the growing demand for natural resources. This includes mature mining operations in South-East Asia and Australia as well growing new mining operations in China and India where significant coal reserves and other deposits remain untapped.
For the general construction market in India, the Backhoe Loader dominates the machinery industry and is valued for its versatility and mobility. However, increasingly India is employing the concept of the “right tool for the right job.” It is in this context, that Caterpillar dealers are in an excellent position to provide sound advice; value analysis, work tools and a world-class range of CAT construction equipment that can provide customers the opportunity to gain efficiencies, increase productivity and improve safety of workers by introduction of right sized versatile equipment. In other parts of Asia, we are seeing increasing machine diversity as the market evolves and customers become more aware of the economic advantage of matching equipment to application.
Caterpillar has been playing a pioneering role in the development of Indian construction equipment sector. Tell us something about the Company’s growth in India, developments in its product range, domestic, and export market size, manufacturing facilities in India and the level of indigenization achieved by the Company?
In 2002, Caterpillar established EDC, a design and engineering center in Chennai to support enterprise product design and development. In Thiruvallur, close to Chennai we have Caterpillar India Private Limited, which manufactures a range of earth- moving equipment. In Hosur, close to Bangalore we have Caterpillar Power India Private Limited, a manufacturing facility for engines, engine components and generator sets. Caterpillar also has logistics, marketing and human resources operations in India. These operations focus primarily on serving our customers and dealers in India and in the Asia Pacific region. Overall, Caterpillar in India has about 3,000 employees providing products and services to the local and global market. Due to the rapid growth and infrastructure development as well as mining and power generation needs, the market in India offers a significant opportunity for growth for Caterpillar.
In terms of development of our product range, Caterpillar has learnt a great deal from customers in India’s construction industry. The recently released 424B Backhoe Loader was redesigned to meet the current market requirement in India. Significant changes were made to satisfy the customers need for a more robust regional design that would allow for higher ambient temperatures, higher annual usage, wider range of applications and a more spacious and comfortable cab. The new cab design was stringently tested with customers before being finalized.
Excavators are playing an increasingly significant role within the Indian construction market and Caterpillar is pleased to announce the release of new CAT D-series medium size hydraulic excavators. A range from 20 to 37 tonnes offers customers increased reliability, versatility, performance, and comfort, combined with lower owning and operating costs. For utility work, general construction and rental customers, the operator can easily use the machine monitor to switch to Economy Mode, which will reduce the fuel consumption by more than 15%. Caterpillar’s new D-series excavators offer the Indian construction market world-class quality products combined with industry leading to fuel efficiency and productivity, which is reinforced by our message “Easy on Fuel, Hard on Dirt.”
Caterpillar looks to India as a significant market. What are the Company’s plans and its vision to widen its business platform and product portfolio?
As mentioned in the answer above, we have worked to bring our proven global business model to serve our customers in India. As we do in the rest of the world, we look to bring the greatest possible value to our customers in India. This includes providing the most durable, reliable, and proven products available, and working with our dealers, supporting those products at a level that is unmatched.
R&D for product development and training of personnel manning the machines and equipment are important factors in continuous development of product and upgradation of skill and expertise for efficient handling of machines and equipment. What are Caterpillar’s plans to ensure that these attributes always remain in its focus?
Caterpillar is a technology leader and has a long history of product innovation and development. In 2005, Caterpillar invested more than $1 billion in research and development. Caterpillar has more than 3,800 inventors who have contributed to more than 6,800 granted U.S. patents for Caterpillar, with nearly 1,200 U.S. patents alone granted within the last five years. This continued investment in the development of new technology and products is a hallmark of Caterpillar products.
Training is a very significant part of Caterpillar’s corporate culture, whether applied to improve the skills and knowledge of our own employees, our dealers or our customers. A recent example of Caterpillar’s commitment to customer training can be highlighted when Caterpillar brought to India a senior professional application expert and trainer from the Caterpillar Institute in Australia. The trainer spent time in India visiting many customer sites, studying the application requirements and techniques used. He was then able to develop a training course to suit customer needs, teaching techniques to improve efficiency, increase safety and reduce machine wear and tear. This type of training adds to skill levels and improves return on investment for the customer in India. Caterpillar dealers are investing significant resources to deliver this training program to Backhoe Loader customers throughout India.
Outsourcing as a business model is an emerging aspect of equipment business and product development. Will Caterpillar opt for such a model in India and make India an important export hub?
As a result of this growing customer base and the potential for new customers, Caterpillar is making investments to serve customers in this region. This is really the way we have operated around the world for many decades. In some ways the investment in India and China today is similar to the investments Caterpillar made more than 40 years ago in Japan when that market was much less developed compared to today. The same could be said for our investments in South America and Europe more than 50 years ago. This is a part of our global business model. That manufacturing business model is set up to place major manufacturing in every major currency region of the world. This global footprint offers Caterpillar a natural hedge against currency fluctuations while also allowing Caterpillar to manufacture many higher volume products in parts of the world that are close to our customers, thus improving our ability to deliver those products to our customers in a timing manner.
What is Caterpillar’s overview of the technological developments taking place worldwide in construction equipment in terms of energy conservation, mechanization, ease of operation and maintenance, eco-friendliness and how these are being incorporated in its product range to give Indian Industry the benefit of these developments being witnessed in the advanced countries?
Caterpillar leads the industry in adopting technology and meeting global standards particularly in emissions. At the same time, Caterpillar is cognizant that market viability of some product means
applying appropriate technology and standards for products that meets local Indian standards and market requirements. Where technology adds benefits such as fuel efficiency, emissions reductions, lower owning and operating costs or improved safety, it adds value that customers appreciate. For India, and for the rest of the world, the market adopts new technology in line with regulatory requirements and as it recognizes return on investment. Caterpillar has the opportunity to use a dual product strategy in emerging markets by offering the latest technology products together with regional designs such as the CAT 424B Backhoe Loader.
Apart from China and India, are you focusing on other South East Asian markets in terms of financing, rental and used equipment business as in India?
Yes, we believe in providing our customers with many choices, including rental and used equipment and financing. We are continuing to expand our Cat Rental Store Network across South East Asia.
In India Caterpillar has established a good reputation in the selection of dealership arrangement, efficient after-sale services and assured supply of spare parts. How these are being further strengthened in view of a boom in the demand of construction equipment and machines?
Our products in India are distributed and supported by two independent dealers — TIL Ltd. and Gmmco Limited. TIL, a dealer for more than 60 years, covers the Northern and Eastern regions of India through about 50 branches and more than 1,000 employees. The remainder of the country is covered by Gmmco, a Cat dealer since 1986 with over 800 employees at more than 30 branches.
In India, as in other parts of the world, Caterpillar works with these dealers to establish the best in class product support for our customers. Our dealers in India have a long track record of investing in people and technology to support our customer base. As this market represents a large growth opportunity for Caterpillar and its dealers, we will continue to work with them to make the right products available to our customers and to provide support for those products.
NBM&CW March 2008
