‘OEMs are under tremendous pressure from the market’

Subhasis Chatterjee at Excon 2013

Subhasis Chatterjee at Excon 2013

Eaton Fluid Power Ltd (Hydraulics Group) is a leading company in hydraulics for both mobile and industrial applications. The company produces not only some of the world’s best hydraulic products, but also some of the best and most complete hydraulic services, systems and solutions.

Subhasis Chatterjee, Managing Director, Eaton Fluid Power Ltd (Hydraulics Group) speaks to Sandeep Menezes on the Rupee depreciation in recent months, which lead to a huge opportunity to target the export market.


Excerpts from the interview:


The equipment industry is not witnessing a growth therefore is there increasing pressure from OEMs to reduce prices?

The industry is not growing currently and in such a scenario for lesser available business, more number of players is fighting. Naturally there is a price pressure which generally is linked to margin pressure also. I think that OEMs are under tremendous pressures from the market. It is a value chain that gets passed on. At the end of the day, it makes OEMs and suppliers lean and stronger. Every time there is a recession the companies that survived have come out stronger.
The Rupee has also depreciated hugely in recent months therefore it is a huge opportunity for us to target the export market. Now companies are forced to look into localization of their products. Earlier we used to procure from abroad and sell in this competitive market while still making a decent margin. Now some suppliers have localized while others have not. But OEMs are stating that they don’t care about Rupee depreciation and are not bothered if we have not localized while competitors are localizing. Therefore, all suppliers are forced to implement localization of their products.

What is the quantum of localization achieved by Eaton? Going forward, do you intend to increase localization?

A large portion of our products or components are still imported. Localization is a continuous process and we are doing our best. We are going to customers and understanding their needs then depending on the market-size of that product segment – we are localizing. Many pumps, valves, steering control units etc. that we are localizing were earlier being procured from Japan, China or Germany. Over a period of time we will localize more and increase our exports from India.

What is Eaton’s current quantum of exports?

Currently our exports are very little. For a big company like Eaton, it becomes difficult because we are everywhere. Today Eaton has presence in nearly 175 countries. Therefore everyone operates within their own given territory. We have to find out new markets within India itself. There are also many underserved markets within India, where we intend to cater to.
Also people who were into manual are now getting into hydraulics. Like a customer who used a manual steering, then went for mechanical steering and now wants to use hydraulics power steering. In future, he will use electronic steering. Therefore over a period of time everybody is upgrading. There will be a migration all the time. We have to use these areas of opportunities to look at how more people can be upgraded.

How has been the growth across the hydraulics segment?

A cannibalization is seen in the equipment manufacturing market. It will be the survival of the fittest.
Construction segment is not witnessing a growth but within construction there are several platforms. Backhoe loaders are a multi-purpose machine while excavators are a very specific machine for digging. More and more specialized machines will be coming into India. If you are in the correct segment with proper solutions, innovation of processes and customer centric, then you will still find growth.

Do Indian customers understand product life-cycle costs or still only look towards initial price?

If we supply a power unit to steel company, which buys the product directly from us and are also the end user. When we tell them that they will save power of Rs50000 per year and the machine will run for ten years, but the machine costs more than Rs one lakh. Here the steel company is saving Rs five lakh over a ten year period while paying Rs one lakh more for the machine. The steel company will accept the proposition.
But when we sell a component to an OEM who is not the end user of the product, they are adamant to pay a slight premium because the future life cycle costs benefit is received by the ultimate customer not OEM.

What is the future business strategy of Eaton in the hydraulics segment?

We want to grow and outgrow the growth of the market. Innovation remains one of our core principles or values.
We have new products like hoses, pumps, motors for excavators market, steering control units for backhoe loaders and wheel loaders etc.

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