ECE industry can grow 5 times by 2015: McKinsey

-

India Infoline News Service / Mumbai Nov 15, 2007 17:30

The report states that the industry`s revenue and volume have recorded 40% growth year-on-year between 2004 and 2006, reaching US$2.3bn today

Indian Earthmoving and Construction Equipment (ECE) industry has the potential to grow five-fold from its current size of US$2.3bn to about US$12-13bn by 2015, growing at a CAGR of 24%, says the findings of a study conducted by leading management consulting firm McKinsey & Co.

The study named ' ECE Vision 2015: Scaling new heights in the Indian', was carried out for CII and IECIAL and was released yesterday at the CII Excon 2007. The Indian ECE industry is set to experience strong growth, spurred by the country's rapid economic development, according to the McKinsey study.

"The McKinsey report states that the industry's revenue and volume have recorded 40% growth year- on- year between 2004 and 2006, reaching US$ 2.3bn today and uncovers a US $40bn opportunity for the industry between now and 2015," said Vipin Sondhi, Chairman of Excon 2007 and CEO of JCB India.

The study discusses the five trends that will shape the evolution of the industry and highlights the imperatives to realize this opportunity. Of these, four are growth opportunities - investments of US $750bn in infrastructure development; the increasing dominance of price-and-value focused customers; deeper engagement of global equipment manufacturers in India; and increasing opportunities for exports.

However, the trend of increasing product imports from other low cost countries like China could potentially challenge industry growth and is something that the players in the ECE industry need to address proactively, the study reveals.

Conservative estimates suggest that as usual growth will create a market of US $8bn by 2015. But a concerted push by the industry and government alike could result in an additional US $ 4bn opportunity, equally spilt between exports and the provisioning of India specific products.

"For the industry to achieve its full potential players need to embark on three strategic initiatives - (i) introduce India specific products that includes introducing low-priced multi-purpose equipment to attract new customers and to increase mechanization in important areas, adding features to products that make suitable for use in India and launching new applications and products for missing applications; (ii) improve cost positions to better deal with the onslaught of competition from LCCs; and (iii) pioneer efforts to boost exports in areas like engineering and design services that leverage the India's technical prowess," said Adil Zainulbhai, Managing Director - India, McKinsey.

"In addition, companies need to pursue four growth-enabling initiatives to expand the market. These include enhancing the quality, delivery and price of after sales-services to increase share of service revenues from 2% of total revenues to the global average of about 8%; addressing key gaps in financing to catalyze latent demand particularly in rural areas and small towns; expanding dealer and channel network coverage to address buyer fragmentation and quality and proactively strengthening supplier capacities and capabilities," added Rajat Dhawan, Partner and Co-leader of McKinsey's Automotive & Assembly Practice in India.

The study concludes by outlining imperatives for the Government. It emphasizes that to complement the initiatives of industry players the Centre must focus on three fronts - increase availability of trained manpower as at the current pace the industry is likely to face a shortfall of 0.3mn trained operators by 2015; remove tax anamolies to encourage exports and lower tax burdens that impede demand; and institute policy measures that strengthen the industry capabilities.

Key policy measures include - provide tax benefits to players to encourage investments in research and development, establish an industry focused R&D center, incentivize exports by exempting them from excise and local levies; and contain imports of used equipments as done in other emerging market economies.

The study finally states that CII and IECIAL must work with the industry and government to create an enabling environment that results in the desired regulatory changes, and exports the Made in India brand to international shores.

The ECE industry has a critical role to play in making India one of the world's top five economies by 2025. Construction equipment players have a unique opportunity to help realize the potential of this sector and, in doing so, garner their share of the US$12-13bn revenue potential.

Popular posts from this blog

IOB capitalises on hike in stake by LIC

-
Indian Overseas Bank rose 1.53% to Rs 46.45 at 10:31 IST on BSE, after the biggest domestic instutional investors Life Insurance Corporation of India hiked its stake in the state-run bank. The bank made this announcement after trading hours on Wednesday, 25 March 2009. Meanwhile, the BSE Sensex was up 126.19 points, or 1.31%, to 9,794.09. On BSE, 31,003 shares were traded in the counter. The stock had an average daily volume of 1.93 lakh shares in the past one quarter. The stock hit a high of Rs 47 and a low of Rs 45.95 so far during the day. The stock hit a 52-week high of Rs 156.80 on 2 May 2008 and a 52-week low of Rs 37.55 on 9 March 2009. The mid-cap bank stock had underperformed the market over the past one month till 25 March 2009, falling 3.17% as compared to the Sensex's 8.60% rise. It had also underperformed the market in the past one quarter, declining 33.94% as compared to the Sensex's 1.04% rise. The bank's current equ The current price of ...
Read more

Lok Housing & Constructions builds on fund raising plans

-
Lok Housing & Constructions jumped 6.99% to Rs 107.90 at 11:20 IST on BSE ahead of a board meeting to consider fund raising options from both foreign and local market, including an institutional placement. Meanwhile, the BSE Sensex was down 50.50 points, or 0.30%, at 15203.73. On BSE, 1.86 lakh shares were traded in the counter. The scrip had an average daily volume of 4.74 lakh shares in the past one quarter. The stock hit a high of Rs 115 and a low of Rs 102 so far during the day. The stock had a 52-week high of Rs 390.50 on 1 January 2008 and a 52-week low of Rs 96.25 on 12 June 2008. The scrip had underperformed the market over the past one month till 12 June 2008, falling 26.55% compared to the Sensex's 10.18% decline. It had also underperformed the market in the past one quarter, falling 31.39% compared to Sensex's 3.24% fall. The small-cap housing projects developer has an equity capital of Rs 42.88 crore. Face value per share is Rs 10. The current...
Read more

economic times picks

-
CMP: Rs 70.50 Target Price: Rs 90 CLSA Asia-Pacific Markets maintains an 'outperform' on Jagran Prakashan, with a 12-month price target of Rs 90. "An economic slowdown notwithstanding, improving literacy and income levels in Hindi heartland imply that drivers for Jagran's growth are still in place. With a 35% ad rate hike in 2008, Jagran continues to narrow the gap with its more expensive English rivals," the foreign brokerage said in a client note, after a Q&A reply from the management. "Rising newsprint prices have made Jagran cautious on launching new editions in FY09 and its focus this year will be profitability. While management has budgeted for a minor increase in FY10 newsprint prices, it believes that prices are likely to peak in Q2FY08 and decline thereon," it added. Neyveli Lignite CMP: Rs 117.15 Target Price: Rs 160 MERRILL Lynch has maintained its 'neutral' rating on Neyveli Lignite, with a price target of Rs 160 ...
Read more