The growing demand for Backhoe Loaders in developing markets is ringingin good news for many, writes ManishArora, as he throws light on how MahindraConstruction Equipment is positioned to cater to this growth.

“Sales of BHLs in India is expected to increase from the 21,192 unitssold in 2015 to 28,000 machines by 2020, a +32 per cent increase, according toOff-Highway Research.”

• Manish Arora, Business Head, MahindraConstruction Equipment.

   

   

  Presently, theConstruction Equipment market isdominated by Heavy Earthmoving Equipment. Here too, it is the Backhoe Loaders (BHLs)which constitute more than 65 per cent of heavy earthmoving equipment sales. Itsdemand is expected to grow further as it is a highly versatile machine and canbe employed for numerous applications, including digging, demolitions,excavating, breaking asphalt, laying roads, transporting materials, levelling,loading and much more at the job site.

  They have the capacity to easily duplicate the work of bulldozers,front-end loaders and excavators and are useful in farming, construction,mining and infrastructure services. In fact, BHLs can be easily used in urbanengineering as well as construction projects, which hugely drives the growth ofthis equipment. BHLs generally come with various easily attachable attachmentswhich further increases its utility at the jobsite.

  Given their usability, backhoe loaders are high-sellingequipment all over the world. Earlier, their demand was majorly seen in thedeveloped nations. But, with the increase in the number of infrastructureprojects and construction activities in developing countries, BHLs demand isseeing a rapid increase there too.

   

  Reasons for thegrowth of BHLs in the developing countries

  There are many reasons driving the growth of BHLs in emerging economies.These include:

  - Investment in infrastructure by respective governments.

  - New infrastructure funding, reforms and procedures.

  - The undertaking of highway and rural road development programs.

  - Agriculture and irrigation projects.

  - Land development, building construction and industrial developmentprojects.

  - Unlike other CEs, demand for BHLs is supported by the fact that theyare highly multi-purpose equipment and can perform variety of tasks with ease.

  - The re-emergence of the rental sector is further expected to drive thegrowth of the market.

  - Shortage of manual labour in developing nations is another significantfactor which is likely to contribute to the growth of BHLs in the long term.

  - Last but not the least, as against manual labour and traditionalmethods, BHLs lead to improved quality, timeliness, better project financials,and safety. Gradually, developing nations have begun to realise this fact and,hence, are showing more interest in employing BHLs.

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  Key trends relatedto increasing BHL demand in developing markets

• The Asia-Pacific market, including developingcountries like India, account for much of the growth in the global heavyconstruction equipment sector as construction activities continue to increasein these regions. The Asia-Pacific construction equipment market, including thebackhoe segment, is supposed to grow at a CAGR of 10.2 per cent during 2015 to2020.

• The Asia-Pacific region, with China at theforefront, is expected to be the key region for aggregate demand of BHLs due toits huge government-led investment in new transport and other vitalinfrastructure development.

• The other developing countries constituting theBRIC nations are also showing a growth in demand for BHLs. If one were to rankthem in order of highest to lowest demand, then China is the leader of the pack,followed by India in second place, Brazil and Russia in third and fourth,respectively.

• The demand for backhoe is set to rise in Malaysiaand other Asian countries as well.

   

  Demand for backhoesin India

  When it comes to the Indian market, it is by far considered to be thelargest growing BHL market in the world with BHLs accounting for almost 50 percent of all CE sales in unit terms. As per Off-Highway Research, there is anactive population of 195,000 BHLs in India.

  Growing at a rate of close to 37 per cent CAGR over the last few years,the pace of backhoe market is likely to continue in the coming years too. Thissegment is perhaps the only one in the CE sector in India that has reached thestage of maturity and scale where exports could be considered.

  Interestingly, all BHLs sold in India are manufactured locally, with JCBIndia, followed by CASE and Mahindra Construction Equipment all togetherleading the market with a cumulative share of over 80 per cent. This isfollowed by other players like Caterpillar India, ACE, Escorts, and TerexEquipment, amongst others.

  By 2019, BHLs are expected to account for over 68.23 per cent of totalsales of CEs. Moreover, sales of BHLs in India is expected to increase from the21,192 units sold in 2015 to 28,000 machines by 2020, a +32 per cent increase,according to Off-Highway Research.

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• Growth opportunities

  Overall, the huge demand for heavy construction equipment from emergingeconomies due to infrastructural development and increased spending on constructionactivities is expected to accelerate the overall growth of the BHL market.Keeping this trend of growth of BHLs in the developing markets, the next fewyears can be the right time for construction equipment manufacturers to launchnew products, not only in the domestic market but even international markets.

  They can adopt various strategies to take advantage of the projectedgrowth in infrastructure construction in the various countries and aim toexport their building construction equipment to these markets. They can look atexpansions, agreements, contracts, joint ventures, and partnerships in thesector to garner a larger share in the market.

  Moreover, collaborating with other equipment companies could act as akey to success. Alliance across industry due to the entry of more diverse andtechnology-driven products into the marketplace can also help the buildingconstruction equipment manufacturers in the developing markets to gain a largershare not only in the domestic but global markets as well.