After strong growth in the March 2021 quarter, the construction equipment sector faced challenges in June due to the impact of the second wave. Now that the industry is coming out of lockdown, it hopes to gain momentum in the coming months. Market leader JCB India is preparing for the emerging growth curve with a new range of products and strategies. Deepak Shetty, Managing Director and CEO of JCB India spoke to: BusinessLine on the impact of the second wave, recovery and growth prospects. extracts.
How did JCB deal with the impact of the second wave?
The second wave was definitely disruptive. However, the company was not badly hit during this wave. We have over 160,000 machines communicating with us through our telematics solution. So compared to the drop in usage we saw in the May-June 2020 period, it was much better this time around. We were one of the first companies to take a proactive call to suspend production activities at our facilities. We did this for the safety of our colleagues. We were also one of the first companies to start vaccination campaigns. We had our first vaccination campaign on April 2. I am pleased to tell you that 100 percent of JCB employees across India have received at least one shot of the vaccine. And more than 35 percent of workers across India have completed the second dose.
What was the recovery like after the impact of the second wave?
As we came out of the impact of the second wave, we slowly started to see the impact of the monsoon and the lockdown extended in some states. So there will be some battle in the month of July and August. We hope that the pace of revival will pick up from September onwards.
How was the first half of 2021 in general for the construction equipment industry?
The March quarter was really good. We had seen green shoots at the end of the first wave and that translated into a great period in the December 2020 quarter and the momentum continued into the March quarter as well. But there was a bit of disruption in April as we also had the transition from CEV Stage 4 (emissions standards). Overall, H1 was 65 percent better for the industry compared to H1 of 2020. Our performance was also in line with the industry.
Do supply chain challenges persist?
Yes, there are 2 or 3 challenges that have impacted the supply chain. While Covid-19 and the ensuing lockdown had an impact on production and supply, the massive rise in commodity prices, especially steel, rubber, etc., poses a major challenge. Recent heavy rainfall in Maharashtra also caused some disturbances. As Pune is an important supplier base for us, there is some impact on the supply chain.
Have commodity price spikes ruined the demand recovery?
It is a huge problem not only for JCB, but also for the industry. Steel prices in particular have risen sharply and that has caused a lot of pain. Steel prices have increased by almost 100 percent compared to the period of June 2020. How much can the increase be passed on to the consumer? On the other hand, how much can you push back to your suppliers? My heart goes out to MSME suppliers as they are the hardest hit. The larger OEMs can make long-term contracts with steel mills, but people buying in the spot markets face a huge challenge. As an industry, we have made our voices heard against this steep rise. Because the walk has gone so fast, and especially during this Covid crisis, the costs of the projects are also rising everywhere.
The second wave also affected the rural construction sector. How do you see the recovery in the rural segment?
There are two factors that will boost demand in the rural segment. Focus on infrastructure development through Pradhan Mantri Gram Sadak Yojana ensures continuous investment. One of the biggest lessons learned from the second wave was the gaps in health infrastructure, especially its absence in rural areas. I was encouraged to see the Center’s recent announcement of ,23,123 crore for improving healthcare infrastructure. I am sure that a large part of the money will be spent on developing rural health infrastructure. Thus, the development of health care and physical infrastructure will provide many opportunities for the construction machinery industry, whether it is to set up a hospital or establish a road network to connect to hospitals. It’s also the need of the hour – much more than a business opportunity for us.
Are you planning new product launches this calendar year?
We are one of the first people to invest in CEV IV machines. We have just launched the new set of CEV IV compliant machines that will deliver a lower total cost of ownership for customers compared to previous machines. The benefits of the new 3DX plus series include 7 percent lower fuel consumption, 25 percent higher productivity and 15 percent lower maintenance costs. While new machines may cost more, the main benefits they offer will outweigh more. We will continue to introduce new machines from now until the end of 2021, and we have a series of new launches lined up.
What are your growth prospects for 2021 amid the threat of the third wave?
I think there will be challenges in the short term. However, it may depend on how quickly we ramp up our vaccination campaign. However, I expect that in the fourth quarter (December 2021 quarter), things should be at last year’s level, if not better. The December 2020 quarter was one of the best Q4s. We hope it will definitely improve in the coming months. Obviously a third wave could be a damper, but it’s something we can speculate. We cannot make a judgment based on that.