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  Future of industries - Heavy Industry  
     
     
 
Heavy indudtry
 
Shining Perspective
Mining & Construction Equipment (MCE) manufacturing companies are targeting emerging market
due to high growth potential and maturing developed markets
Stringent environmental law is making products costlier due to high technology involvement
The critical factor would be to bring affordable, environment friendly product to achieve scale
Manufacturers need to get into micro details of product planning with diverse customer segments
to evaluate the mass potential for designing a low-cost, high application, low maintenance product
Besides, focusing on strong dealership network support, sales service, availability of low cost
spare parts would play vital role
 
 
As recession has curtailed construction activity in much of developed world, fresh wave of consolidation will be witnessed in such markets. Around the same time, emerging markets like China and India, riding on their
domestic economic buoyancy will see best growth opportunities. North America will be second fastest growing markets through 2013.
 
The industry will see technological innovation under pressure by stringent environmental norms.
 
There will be spurt in demand for spares and allied services as also the used and rental equipment market will witness high growth.
 
Mixers, pavers and related equipments will be fastest growing product segment in the construction business.
 
 
  Industry Growth Drivers
  Strong economic development
  Rising Global demand
    The global Mining & Construction equipment (MCE) industry has been on an upswing since 2003-04
and has grown by over 15% annually until Q3, 2008-09
  Growth in emerging market
    Low levels of mechanization
    Low penetration of equipment in the construction industry
    Proposed heavy investment in infrastructure by govt
    Increasing population and urbanization
  Growing levels of mechanization
  Growth in Infrastructure, mining, real estate industry
  Govt.’s policies, including more fiscal investments and increased construction activities
  Industrialization
  Timely availability of credit at favorable terms and interest rates
  High growth potential for used and rental equipment markets in developing nation In India,
it is in nascent stage
 
  The Market
  Worldwide construction machinery/ equipment market was ~110bn in 2008
    It is expected to grow at a CAGR of 5.3%; to reac $140bn (2008-13)
  The Asia/Pacific region, Western Europe and North America are the top producers
of construction equipment
  These countries account for more than nine-tenths of global output in 2008
 
  Market Drivers
  The industry is dependent on macro-economic factors like
    Strong economic development
    Government and private investments in infrastructure
    Large government projects like road building
    Commodity prices
    Booming real estate industry
  Growing levels of mechanization
   
  Industry Competitive Scenario
  Increasing competition among global and national players
  Global companies are improving value through greater customization to meet local needs
    Besides, strong service and spares support to beat competition
    Dealership tie-ups
    Setting up of a viable and efficient aftermarket network
    Training of manpower to operate the equipment
  Players from emerging countries seeking to expand into mature markets
    Through improving their technology and product quality and begin to build sales and service networks
  The threat from low-cost players entering mature markets will likely come in two waves
    In the first, low-cost South Korean players will further expand their mature-market presence
    In the second, beginning around 2012, Chinese players will begin entering mature markets in the
low-cost-product segment
  Mature market players are focusing on improving cost efficiency and further exploiting the existing
advantages in technology, distribution networks, and brand positioning
   
  Industry Complexity
  Cyclical nature of industry
    The industry is cyclical, with the long term demand strongly correlated to the health of the underlying
economy and infrastructure investments
  Stringent environmental norms
    Emission/ noise control norms
  Capital intensive industry
  Equipment Financing
    Timely availability of credit at favorable terms and interest rates
  Managing economies of scale
  Managing concerns related to quality and availability of long-term after-sales service
  Managing raw material costs through effective sourcing
    Especially for imported content
  Govt. regulation & taxation policies
    Lack of synchronization of interstate tax policies (on movement of equipment between states)
and logistics of the equipment
     
  Industry Pain Areas
  Economic recession
    It led to weak sentiments across user industries and tight liquidity conditions in 2008-09
  Volatility in the commodity prices like steel
  Foreign exchange volatility
  Low resale value of equipment
  High cost of R&D
  High level of inventory/ Inventory optimization
  Over capacity/underutilization
  High lead time in importing component
     
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