In a major push to the government’s make-in-India initiative in attracting investment in the manufacturing sector, XCMG, China’s largest construction equipment company with an annual turnover of $13 billion, is investing $150 million (Rs 950 crore) in India to set up a greenfield manufacturing facility.
The new plant is expected to come up in the next 12 months and will manufacture a range of construction equipment, primarily for the domestic market. The location of the proposed unit is yet to be finalised and some cities including Chennai are being considered. XCMG’s technical team will arrive soon in India to work out the details, after which the company is expected to arrive at a final decision.
Announcing the investment plans for India in Chennai yesterday, Wang Min, Group chairman, XCMG, said, “The new proposed company in India will operate independently. The manufacturing facility will be set up by the end of 2017 and products will start rolling out by 2018.”
XCMG is a major investment partner in Schwing Stetter globally and is working closely with its Indian subsidiary in targeting India business.
Elaborating on the synergy between Schwing Stetter and XCMG, Wang Min said both the companies will work together in their respective product portfolios, given that Schwing Stetter is a strong band in India with an extensive sales and service network “which we will use for serving our customers.”
Speaking about XCMG’s global portfolio and the planned entry into the Indian market, Anand Sundareshan, chairman, Schwing Stetter India, said, “XCMG is the world’s biggest manufacturer of cranes and construction equipment and foresees huge potential in the Indian market. This has attracted the company to invest here to tap growing opportunities. We will work with them closely to further penetrate the market in India.”
The company initially plans to make loaders, excavators and motor graders which have synergies with existing products and customers in India. Subsequently, other products will be introduced. The road construction and infrastructure segment, which is being aggressively driven by the government of India, is set to be a big growth market and XCMG is looking to capitalize on this opportunity.
XCMG, which has over 100 different machines and more than 300 models in its portfolio, has a sizeable presence in the Indian market through its independent dealers. Under the new game-plan, XCMG’s India operations will be consolidated and brought under one roof; production will be carried out in a separate manufacturing facility and product sales and service implemented by the combined XCMG-Schwing Stetter sales team.
Recovery in the construction segment
The Indian construction equipment Industry, after few years of a slump, saw the green shoots of recovery in 2015-16. While the US$ 2.8 billion industry is expected to grow to US$ 5 billion by 2019-20, the aftersales spares market is worth about US$ 800 million and a major source of income and employment opportunity for small-scale manufacturers and service providers. The sector employees about a million people directly and impacts allied livelihoods and families of over 10 million.
Anand Sundareshan, who is also the president of the Indian Construction Equipment Manufacturers’ Association (ICEMA), the representative body for the construction equipment industry in India, said, “As compared to 2015, year 2016 has been good for the industry. Comparing H1 of 2015-16 to H1 2016-17, the industry has grown by nearly 30-35% and primarily driven by road construction activities in India. There was mining business as well but it has slowed down.”
“In 2016-17, the industry will grow between 25-30%. This growth is on the higher due to a lower base but on a five-year horizon, the industry is expected to grow at a CAGR of 12%,” he added.