Kobelco Construction Equipment India is raising localisation in three new excavator models to nearly 70% from 48%-50%, a move the company says could reduce lifetime ownership costs by around 30% and widen access to its machines among Indian contractors and equipment-hiring companies.
The 19.1-tonne to 24-tonne excavators were launched on Friday for infrastructure and construction applications. The Japanese machinery maker is sourcing engines and other components locally while retaining its core engine, hydraulic and electronic systems and the underlying Japanese technology, according to company director Moses Eddy.
“The biggest change is that we have moved from a Japanese-made engine to an Indian-made engine supplied by an American company, offering equivalent technology. This is the most significant step in increasing localisation,” Eddy said at Kobelco’s factory in Sri City near Chennai.
He said the company expected the new products to lower lifetime ownership costs by around 30% at similar selling prices. The claimed reduction is intended to address one of the barriers to Kobelco’s expansion in India: the perception that its excavators are expensive to operate because of their imported components.
Kobelco has about 25% of the premium end of India’s 20-tonne excavator segment, which accounts for 20%-25% of the overall market. Its share of the total excavator market, however, is estimated at only 5%-6%. The company expects local sourcing and lower operating costs to make its machines more competitive in price-sensitive segments, including smaller contractors and equipment-rental businesses.
The localisation strategy is also linked to Kobelco’s production and export plans. Nearly one-third of the company’s output from India is now exported. It shipped about 600-700 machines last year and expects exports to rise to around 800 units this year, provided logistics constraints ease following the conflict in West Asia.
The Sri City plant has an annual production capacity of 3,000 excavators, which can be increased to 3,500 units. Kobelco has invested around Rs 900 crore in India so far and expects its turnover, including exports, to reach Rs 2,500 crore this year, compared with around Rs 2,000 crore currently.
The company expects annual growth of 8%-10% in favourable market conditions. Its next expansion will therefore depend on both domestic demand for construction equipment and the ability of its India operations to manage component sourcing, production and export logistics.
