Volvo Construction Equipment, a wholly owned subsidiary of AB Volvo of Sweden, is one of the world’s largest manufacturers of construction machines. In India, Volvo is one of the top five construction equipment companies and plays a key role in major infrastructure projects through its range of construction equipment. A.M. Muralidharan, in an interaction with Renu Rajaram, talks about the difficult market conditions, his hopes for a revival, and his company’s future plans.
What is the current scenario in the Indian mining and earthmoving equipment sector?
The conditions of the sectors are a mixed situation. In the excavator sector, we have seen 20 per cent reduction in the market whereas, in road compactor, the market is up by about 8 to 9 per cent. Excavator sales are not moving ahead due to the slump in mining and construction sectors, whereas there is growth in the road construction sector.
The overall construction equipment market in India includes road construction equipment, construction vehicles, earthmoving equipment, material handling and preparation equipment, concrete equipment, and tunnelling and drilling equipment.
Which equipment segment will see highest growth potential?
It is a tough question to answer. I think, if I have to put it on priority, mining would be the first. Second would be construction. Earthmoving segment is a part of construction sector.
What are the reasons for the slowdown in the mining equipment sector?
I think it is due to various policies and environmental issues. The country has a tremendous need for investment infrastructure development and the government has to look at policies that would speed up the projects.
How is the slowdown affecting Volvo India?
The present market conditions along with devaluation of rupee are definitely affecting our bottom line. If the market is growing, we will be able to increase our sales volume and bring up the bottom line. Hence, we are focusing on localisation, thus reducing the impact of the same.
What I feel is that the market would come back by end of this year or early next year. A lot of changes are expected in the first quarter of the next year.
What are some of the major hurdles faced by your company?
The major hurdles, at present, are the market growth at the national level. Earlier it was predicted that the market would grow tenfold in the next six to seven years. But right now it is in the other direction. So the biggest hurdle is the slog in the market.
All infrastructure segments are struggling to survive. Mining sector is not stable. But looking at the positive side, there are some segments like road which are still stable. We need to look at the investment on more infrastructure projects. We need to see more on city building too. The focus should be on connectivity issues like building more roads, metro rail projects etc. in the mega cities coming up. We need to introduce more high-speed trains and airports. There is a need for investment in the infrastructure segment to meet the demand gap.
In the mining sector, if the same level of growth seen in 2011 continues, there are hopes. We feel that, with the slight improvement in the last few weeks, the demand for products will pick up in the near future.
What changes in government policies would you suggest?
The relaxation in mining policies and environmental policies would improve the business in the sector. The government needs to take quick decisions on the lead projects in infrastructure sector. Bills like the land acquisition bill would speed up the projects and thus the market. Bills of this type would change the present conditions, better the situation and speed up projects in road and construction sector.
What are your growth plans in India?
We are one of the top five construction equipment companies in India. We have our factory in Bengaluru. We are manufacturing 21T and 29T excavators in our Bengaluru plant in addition to soil compactor, asphalt compactor and asphalt paver. We have invested around Rs.90 crore in 2010-11 and have capacity to cater until 2015. We are planning to increase the volume of production two-and-a-half fold by 2015 to meet the requirement and also plan for product line and distribution expansion.
If the market comes back in India, we would not be worried about the turnover. We are fairly a large organisation in this country. There are about 100 officials recruited by the company in India. Efforts being made to expand and strengthen our distribution network, which has grown from three dealerships in 1997 to 15 dealers at present, in the Indian market. Our sales volume has increased since we started our business here, but it would not be possible to divulge the numbers.
What can we expect from Volvo India at Excon 2013?
If we see an upward trend in the market, we will introduce our new brand here. We had introduced the brand ‘SDLG’ in 2009. We are planning to introduce a few new products at the Excon exhibition this year. We have introduced 48T excavators named EC480D. It is better in productivity and is less fuel consuming. We provide very effective service too.