Rental rates for CE not yet at par with the increased prices of the machines due to BSIV compliance

This development, while considered transitional, has raised concerns for both original equipment manufacturers (OEMs) and operators as the construction equipment industry gears up to adopt Bharat Stage V emission norms by April next year. 

By Shahkar Abidi calendar 04 Oct 2023 Views icon5287 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

Despite the construction equipment industry's shift to BSIV emission norms in 2021, rental rates for these machines have yet to catch up. This development, while considered transitional, has raised concerns for both original equipment manufacturers (OEMs) and operators as the industry gears up to adopt Bharat Stage V emission norms by April next year.

Shalabh Chaturvedi, the Managing Director for India and the SAARC region at CASE Construction Equipment, highlighted the disparity between the growth of the construction equipment industry and the rental costs of the equipment. While the industry experienced impressive growth of 15-20 percent across different product lines in the first eight months of CY2023, the rental rates have failed to keep up with the rising prices of the machines. 

Offering a perspective on the problem at hand, Chaturvedi said, "For instance, the rental of a backhoe varies between Rs 800-900 per hour depending upon the length of the job, irrespective of BSIII or BSIV engines". The ticket price of new CV equipment, on the other hand, has gone up in the range of 20–25 percent for BSIV machines vis-à-vis their BSIII ones.

Chaturvedi acknowledged the situation as a source of stress but remains optimistic, considering it a transitional phase due to the continued presence of older machines equipped with BSIII emission engines still in operation. In the context of machine lifespan, typically lasting 7–10 years, he emphasised that the industry is witnessing a gradual shift, with a higher proportion of BSIV machines replacing the older ones. As this transition takes place, it becomes imperative for rental rates to align with customer affordability, Chaturvedi added.

The top executive further added that with any emission norm change, there is a cost implication because OEMs need to put some additional components on the engine after treatment in order to reduce emissions. And when you increase the cost, the customer needs to pay for it.

Wildcards in election-bound states, uptick in demand in other states
He added that while national elections are still six months away, one must contend with a multitude of state elections slated for the fourth quarter of this year. These states are not insignificant; they are large and hold considerable sway.  As a result, on the one hand, there will be pressure from the central government to expedite the awarding of more projects and ensure their successful execution. On the other hand, the state machinery will be heavily focused on conducting efficient and peaceful elections, diverting attention and resources away from project execution. 

"So other than these states, in general, I would expect the industry to pick up. In these (election bound) states, it's a wild card," Chaturvedi said. He added that how the construction equipment industry navigates the Q4FY24 has to be closely watched.

CASE Construction Equipment, a part of CNH Industrial NV, has been present in India since 1989. It has consistently remained a market leader in the vibratory compactor segment and a leading player in the backhoe loader segment. The company boasts a manufacturing facility in Pithampur, Madhya Pradesh, for the domestic and export markets in over 105 countries, offering a full line of construction equipment globally, including motor graders, wheel loaders, vibratory compaction rollers, crawler dozers, skid steers, compact track loaders, and rough-terrain forklifts. It recently displayed its Made-In-India product proficiency at the brand’s state-of-the-art manufacturing facility in Pithampur, where it showcased the 770 NXe Loader Backhoe along with the 770EX Tractor Backhoe Loader; 1107FX and 952 Vibratory Compactors, 1650 Dozer, and 865 Grader, along with the CX220LC Crawler Excavator.

The company is planning to elevate its manufacturing capabilities to more than double over the next three to four years, in response to the Indian market's transition to tighter emission norms, as apparently this has opened new exporting opportunities for the company. 

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