Even though an increase in road construction over the last four months has provided relief to India's construction equipment (CE) industry, Sandeep Singh, the Managing Director of Tata Hitachi, believes that it must reach at least 12000–13000 km out of the targeted 15,000 km if the industry is to achieve 10-15 percent growth in the current fiscal year.
According to industry observers, the average speed of road construction will be more than 30 km per day by FY23. In comparison, it averaged just under 19 kilometres per day in FY22, down from 32 kilometres per day in FY21. The government has yet to provide official road construction data for the current fiscal year.
"We expect it will continue because the government will also like to show results in the coming year," he added, before continuing that it will only be feasible if actual development occurs on the ground. The CE industry as a whole is estimated to have risen by approximately 25 percent during FY23.
Though the sector remains hopeful about the industry's pace of growth, a substantial slowdown could occur later this year, when it goes to polls in mid-2024. The industry has historically slowed down three months before the elections, he adds. Second, an extended monsoon season, such as the one in FY23, may dilute growth, resulting in a 20–25 percent drop in sales. During a normal monsoon, though, the decline maintains at 10 percent, he adds. "I believe the first half of FY24 will be a good year. But the second half (third quarter of the financial year) will be good; the fourth quarter, we don't know yet," Singh added.
Tata Hitachi is a joint venture between Tata Motors (40 percent), and Hitachi Construction Machinery Company (60 percent). It makes excavators with capacities from 2T to 800T, backhoe loaders, wheel loaders, and rigid dump trucks with capacities from 35T to 290T. The company has two facilities: Kharagpur, West Bengal, and Dharwad, Karnataka. During FY23, the company's sales increased by roughly 12 percent.
In terms of headwinds, Singh observes that commodity inflationary pressures appear to be resuming, which could result in considerable price hikes for machines. Furthermore, the high cost of interest is depressing commerce because the majority of operators making CE purchases in India come from low financial backgrounds, owning only one or two pieces of equipment, and they end up feeling the squeeze. In addition, the CE industry as a whole is suffering from currency depreciation, as around 30 to 35 percent of components must be imported because they are not manufactured locally, Singh explained before signing off.