‘Our growth strategy basically depends on market performance’

Founded in 1972, Shandong Lingong Construction Machinery Co., Ltd, located in Linyi, China, is a national large-sized backbone enterprise in construction machinery industry and is ranked among the top five wheel loader manufacturers worldwide. SDLG branded products include wheel loaders, earth-moving scraper and excavator series, road machinery series, mining truck series, and small-sized construction machinery series serve the value market.

B. Sridhar, Head, SDLG Business, Volvo India Pvt. Ltd told Sandeep Menezes that the company is expecting some growth in future and also looking at segments other than wheel loaders.



Excerpts from the interview:

-India’s need for better infrastructure will be the main driver for construction equipment growth irrespective of the political set-up post elections. Comment.

We are also expecting growth to happen after the elections. Once the new government comes in and gets formed – they will need to arrange funds and find out the infrastructure needs – it will take some time. At least one quarter will go for them to kick off any of the projects. But there will be huge growth from India’s infrastructure perspective.

-Which infrastructure segments will drive the growth for construction equipment demand?
The core demand drivers will be from rural connectivity since India needs rural connections, it will also be a long term inititiative. Infrastructure especially roads will be the main segments driving demand for equipments.
-What are the main challenges facing the construction equipment sector?
Right now due to the current situation, we need to deliver the machine at very low costs. These machines have several components – the prices of these components have been rising because of steel price, manufacturing cost and labour cost increases.

Therefore although the machines costs are rising, we are forced the keep the machines prices very low. It is a big challenge for us – the competition is heavy while buyers are less. Therefore pricing is a heating issue for us.

-Wheel loaders have been SDLG’s specialty, how has this product segment (Wheel loaders) evolved in the Indian market? Tell us about SDLG’s contribution to the wheel loader segment in India?
At SDLG, we started with the pump segment now we have spread into each and every segment like ports, quarries, mining etc. Once the new infrastructure announcements happen there will be huge growth for wheel loader segment.
Our machines are superior and more reliable.

-How has been the market scenario for 3-tonne and 5-tonne wheel loaders in India?
Currently there is no growth happening in the equipment segment. Compared to last year, this Q1 witnessed a 15 per cent lower growth. But going forward and looking at the need for heavy infrastructure in India definitely there will be high growth in the 3 and 5 tonne wheel loader segment.

Is there a market for the above 5 tonne wheel loader segment in India?
Yes, there is a market for above 5 tonne wheel loaders but it is very small when compared to the overall market for wheel loaders. Up to five tone segment consists of 90 per cent marketshare while the above 5 tonne segment is only 10 per cent.
The above 5 tonne wheel loaders are mainly needed for very large mining operations.

-Volvo CE is a premium brand whereas SDLG is a value brand. But isn’t there a conflict of interests since both operate in the same industry segment targeting similar customers?
No, because we are very clear what we need to do. Volvo CE does not focus on the smaller capacity wheel loader segment. The 3 tonne and 5 tonne wheel loader segment is being catered exclusively by SDLG therefore I don’t think that there is any conflict of interest.

-SDLG is amongst the biggest Chinese brands in the Indian market – but after-sales support and quality are two issues that make Indian buyers hesitant to buy from Chinese OEMs. How is SDLG different?
I do agree that after sales support from other Chinese companies is a challenge. We as a company have strong after market backup support for the customers over the years. In India, we understood that this issue will arise therefore from day one. We looked at how fast we could put provide back-up support. We ensure back-up support closer to the customer’s site so that they do not feel that they have purchased one amongst the Chinese machines.

-SDLG has a warehouse in Bangalore, 13 dealers and 36 branches nationwide. Going forward, tell us about SDLG’s growth strategy in India?
Our growth strategy basically depends on how the market is performing. We have a short term and long term strategy for the product as well as the channel. It is not about increasing the numbers only. It is also about putting the machines quicker back on the road and getting dealership closer to customers. But all this revolves around how the market is performing.

-SDLG does not manufacture in India – it imports. How has been the impact of Rupee depreciation?
It is a big challenge. You have a price for customers and there is competition from local manufacturers therefore it is a big challenge for anybody who imports the machine. But how long will this continue? One needs to be focused and align the price. Once the new government comes in this situation will change and Rupee will become stronger. Also if mining begins and its exports commence – the Rupee will get strengthened.

-Last year, you told me SDLG cannot manufacture in India until volumes don’t rise to a level wherein it becomes viable. When will that happen?

We are expecting some growth in future and also looking at segments other than wheel loaders. There is a study happening to look if it’s feasible and viable to manufacture in India. If you ask me when it will happen – it’s difficult to say. But as the business grows in India, we are also ready – it is only a question of how fast this growth will happen.

-Post elections, how much growth do you foresee across the equipment segment?
The equipment segment will definitely witness around 15 to 20 per cent growth year-on-year for the next 4 to 5 years.

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