Backhoe loaders are passing through a challenging time for the past few years. Market is
registering a flat growth with some indications that it is shrinking.However, now there is optimism among the leading players in the backhoe industry on the back of the government initiatives on infrastructure projects. But how far this will help this segment to regain its glory is difficult to predict.
Backhoe loader has led the sales in construction equipment industry in India, for the past several decades. As an extremely versatile product, it has proved its importance and utility over the years. It is usually the first machine to enter a site at the start of the project and remains engaged with a variety of activities throughout its life cycle. Over the years the contribution of the backhoe to Indian infrastructure development is immense. But the recent industry slowdown has severely affected this segment. Manufacturers are contemplating new strategies to recover.
Market scenario & demand
Major players in the backhoe loader market predict a flat market this year with annual sales in the range of 18,000-21,000 units. The market in this segment is highly competitive with all the big players fighting with the leader. This sentiment is reflected in the recently announced downsizing of staff and officers by some of the manufacturers to enable them sustain their operations by cutting costs.
According to Jasmeet Singh, Head – Corporate Communications, JCB India, the industry has been going through a challenging time over the past 3-4 years. ¨As per ICEMA estimates, the market for backhoes in 2015 was approximately 21,500 units. This year has been equally challenging and we expect a more or less similar outlook,¨ he explains.
Neeraj Bhatia, Business Head, ACE, expects a sale of 18,000-20,000 backhoe loaders in FY 2015-16 in which, 50 per cent will be captive users, 20 per cent hirers, another 20 per cent mine owners, 10 per cent institutions like municipal corporations. Rajinder Raina, General Manager – Marketing, Escorts, feels, ¨During the current calendar year, the annual addition will be 18,000-19,000 units which in next five years time would be around 25,000 units per annum.¨ He sees challenge in the financing of the equipment as most of the customers are first-time buyers/users. Vijay Sharma, Executive Director, Terex Equipment, says, ¨We expect the backhoe loader market to be around 22,000 units in 2015-16. Over this base, we expect the market to grow by 3-4 per cent in FY 16-17, after which the growth rate is expected to surge to up to 7-8 per cent once the Indian infrastructure growth story engulfs most part of the country.¨ At the same time, he cautions, saying, ¨For the above to happen, we need peace, law and order (no mindless agitations), quick passage of important business legislation like land acquisition, GST, and improvement in ease of doing business, not amongst businesses but simplification in doing business with the government which essentially including permits, clearances, taxation reforms through IT enablement of government services, tenders, payments of dues/bills etc.¨
The market demand is model-specific. Sharma says, ¨Customers go for models which provide cost-effective solution and are high in terms of quality and performance which are technologically reliable.¨ Bhatia says, ¨More than 90 per cent of backhoe loaders are sold with 76 hp engine, 1 cu m loader and 0.24 cu m backhoe bucket. This is an established combination with huge population.¨
Ajay Aneja, National Head – Sales, CASE India, says, ¨From its peak in 2011 at about 33,500 units, the loader backhoe market has shrunk in line with the overall industry size since then to reach around 22,500 units. While the decline in volume has been witnessed in 2015 as well, the rate of decline is flattening and a revival is expected in the industry from 2016 onwards.¨
Growth prospects & challenges
According to Sharma, on an average about 24,000 new backhoes are being added every year. This makes it the largest selling CE product category. ¨Globally, backhoe is a utility machine, however, in India, it is positioned as a productive machine, which has to turn out profits and payback the cash used to fund it. This product category will continue to thrive for a long time as it accurately represents the great Indian entrepreneur, who is very actively engaged in the process of nation building.¨ Says Singh, ¨We feel that there will always be a strong demand for backhoes, in the Indian market, mainly due to the variety of tasks and applications that the product can accomplish. As new projects get announced, the demand is also expected to rise and in the coming years a minimum of 10 per cent growth may be expected.¨ Bhatia expects low growth for backhoes as he says, ¨Backhoe loader market is maturing and a 7-8 per cent annual growth is expected in the next five years. It is a support machine, not a mass production machine, so growth is feeble.¨
The key challenges in its growth path are the availability of funding options and innovative financing products for buyers wanting to own and operate their first backhoe loader, according to Sharma. ¨The rationalising of on road prices across different states in India will also give a fillip to demand as taxes and taxes over taxes make this product unviable in certain states. A GST regime will help this product category grow at 200-400 bps.
Source: Equipment India