This section of industry usually mimics trends of the commercial vehicle segment and takes around two months to catch up.
02 Dec 2022 | 6294 Views | By Shahkar Abidi
India's commercial vehicle (CV) segment has been experiencing an upward sales trajectory, growing by almost 39 percent year over year (YoY) in the second quarter of the 2023 fiscal year. This was aided by replacement demand, increased government spending on growth industries like infrastructure, the return to work and school ...
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India's commercial vehicle (CV) segment has been experiencing an upward sales trajectory, growing by almost 39 percent year over year (YoY) in the second quarter of the 2023 fiscal year. This was aided by replacement demand, increased government spending on growth industries like infrastructure, the return to work and school schedules, and increased e-commerce demand. Additionally, stable freight rates helped improve CV fleet operators’ fleet viability.
The mood seems to be similar for the construction equipment sector that follows trends experienced by the commercial vehicle (CV) segment. Usually, it takes around two months to catch up and the next five months can be the game changer, says Sandeep Singh, Managing Director of Tata Hitachi.
Singh told Autocar Professional that the impact is being felt within the CE industry that has reported a growth of about 10–15 percent across its product range. “We are in a positive mood as things are getting better,” said Singh. Singh added that continued growth can be expected in the next five months. However, the spike in construction equipment has varied across different categories. For example, the excavators and backhoe loader segment grew by around 10 percent, and wheel loaders jumped around 25 percent year-on-year.
Like his contemporaries, Singh also wants the past to repeat itself. The CE industry, like most industries, was severely affected by the Covid pandemic. Nonetheless, it was able to regain some of its composure in the second halves of the previous two fiscal years, when it generated nearly 60 percent of its volume growth. If the trend continues, then some segments of the CE industry may touch the all-time high levels like in FY19.
Singh observed that the CE industry growth could have been better like the performance of agriculture or automotive. One of the key reasons for it is that since May of this fiscal year, the Reserve Bank of India (RBI) has increased interest rates four times in a row starting in May, and it has increased the policy repo rate three times in a row, each time by 50 basis points. Repo rates are at 5.9 percent, which the apex bank says has been done to check on inflationary pressures.
The development, if uncontrolled, may end up dampening the growth momentum, as most of the projects in the industry happen on long term loans. Further, what aggravates the situation is the fact that most of the operators making CE purchases in India come from modest financial backgrounds, owning just one or a couple of pieces of equipment. “Therefore, long term finance availability to these operators is very important,” Singh says. He added that though the government has taken several measures to help the businesses in the past, more needs to be done in this regard.
A joint venture between Tata Motors (40 percent) and Hitachi Construction Machinery Company (60 percent), Tata Hitachi offers a product line that includes 2T to 800T excavators, backhoe loaders, wheel loaders, and 35T to 290T rigid dump trucks. The company operates two facilities, Kharagpur in West Bengal and Dharwad in Karnataka.