The Indian forklift market

Local Feature Article
- 24 Dec 2009 ( #442 )
8 min read
India, home to nearly 1.2 billion people and burgeoning services and software industries, is expected to post a 6% growth for its economy this year. It's a departure from previous 8-9% highs that it enjoyed before the global financial crisis (GFC), but the country's low export dependence, large domestic savings and a huge consumption base have ensured its economy's relatively good shape.

With the global materials handling market almost halved this year, impacting stakeholders worldwide, Christine Cranney discovers that the Indian forklift industry was affected but is still doing well.

Pradip Churiwal, CEO of Macneill Engineering
Pradip Churiwal, CEO of Macneill Engineering
Pradip Churiwal, CEO of Macneill Engineering Ltd, estimates that the size of the Indian materials handling market for 2009 is 4,000 units. He tells News demand has fallen by a third this year.

"[India's top forklift manufacturers'] sales were down by about 30%, but we managed to maintain normal production and supply," Churiwal says.

Shishir Kumar Sharan, general manager for operations for forklift manufacturer Voltas, says due to decreased margins, forklift manufacturers have had to "fight for orders".

Also, to boost demand for capital goods, the Reserve Bank of India lowered interest rates.
"But banks are scrutinising the creditworthiness of customers before they grant loans for equipment, especially to small sectors and hirers," Sharan explains.

Domestic focus

Indian forklift users are increasingly aware of the need for technology and safety in materials handling compared to the days of prevalent use of labour. Most choose Indian forklifts over expensive foreign brands. This preference is one of the reasons the Indian forklift industry was not adversely affected by the GFC.

Chetan Gole, assistant vice president for Action Construction Equipment Ltd (ACE)'s forklift division, says that India was "saved from the crisis" as the industry is not overly dependent on exports.

Sharan agrees, emphasising that the impact of the GFC has been minimal because Indian forklift manufacturers produce mainly for domestic consumption.

A Voltas forklift
A Voltas forklift
Locally made Godrej, Voltas and Macneill forklifts are popular with domestic users. Godrej & Boyce Manufacturing Co Ltd and Voltas Ltd are early market entrants, having had tie-ups with US manufacturers Clark Material Handling and Yale, respectively, in the 1960s. Meanwhile, Macneill Engineering Ltd, newer to the market but nevertheless a pioneer, has a grip on the oil industry with its fire-proof forklifts.

However, Sharan points out that domestic equipment sales are still impacted by the global downturn as equipment hire in container depots and warehouses is linked to manufacturing activities and the export market.

He also explains the challenges faced by imported forklifts: "The US dollar has appreciated nearly 17% against the rupee, making imported forklifts costly. Besides, equipment support is a major issue in the customer psyche.

"Unless there is a solid Indian name supporting the after-sales (service), customers remain hesitant to buy the equipment."

Indians also prefer locally made forklifts because most standard forklifts will not fit their requirements.

Nimesh Karelia, director of Jay Equipment & Systems Pvt Ltd explains that Indian manufacturers can easily adapt equipment to suit customers' needs. "Dealers of imported equipment, on the other hand, [do not have this advantage]. India is not much developed so the use of standard products is limited."

Karelia adds that many forklift manufacturers have realigned their sales strategies by intensifying their focus on the domestic market rather than push exports.

Redirecting sales and marketing efforts towards the domestic market is prudent as India's market potential is huge. Besides, Churiwal says, Indian manufacturers hardly export - and if they do, it is to the Middle East, Africa and Asia region.

Diversified Business

The major forklift players in India have also been protected from the impact of falling demand by their vast product lines and diversified business interests. Take Godrej for example. Besides producing one of India's leading forklift brands, the Godrej Group is also one of India's largest consumer products conglomerates, manufacturing goods ranging from cosmetics, detergents, furniture and refrigerators, to machine tools and aerospace equipment.

Founded in 1897 by brothers Ardeshir and Pirojsha Godrej, the group's turnover for financial year 2008 exceeded USD2.2 billion. Its companies have won awards including Highest Ranked Indian FMCG in Asia's Hot Growth Companies' List by Business Week and Corporate Citizen of the Year Award given by Economic Times. Its forklift manufacturing business falls under one of its two major holding companies, Godrej & Boyce Mfg Co Ltd.

Shishir Kumar Sharan, general manager for operations for  Voltas
Shishir Kumar Sharan, general manager for operations for Voltas
Voltas Ltd, producer of Voltas forklifts, warehousing equipment and rough-terrain cranes - and a strong competitor of Godrej - is an established engineering, airconditioning and refrigeration company in Mumbai. It is a part of the Tata Group and its shares are traded on the Bombay Stock Exchange. It reported sales of INR40.7 billion (USD869 million) for the 2008-09 financial year. Voltas provided airconditioning for the world's biggest ocean liner, the RMS Queen Mary 2, and also the world's biggest building, Burj Dubai. It also represents TCM forklifts and Atlet warehousing equipment.

"We don't believe in sacrificing quality, customer satisfaction and equipment reliability to get to the top. Nonetheless nearly one out of every three forklifts sold in India [carries the Voltas brand]," Sharan says.

ACE of New Delhi manufactures forklifts, cranes, loaders, aerial work platforms, mast climbing lifts, lorry loaders and truck-mounted cranes. Indian Business Insight reported in November that it plans to foray into the real estate and hospitality sectors. Cranes accounted for 87% of sales for 2007-08 followed by construction equipment at 9%. Its shares are also listed on the Bombay Stock Exchange.

"Besides our ACE brand forklifts, we represent Faresin (from Italy) for their telehandler range and Omega (from Canada) for their rough-terrain forklifts and side loaders," Gole says.

Macneill Engineering Ltd, which claims to be the Indian pioneer for producing fire-proof forklifts, was appointed Linde Material Handling's exclusive importer in 2005. Headquartered in Bishnupur, West Bengal, the company manufactures Macneill-branded electric and diesel forklifts and other industrial materials handling equipment in the light-to-medium range. Customers have included Indian Airlines, Proctor & Gamble and Whirlpool. It recently entered the forklift rental business and claims it is "the first in India to enter the sector in an organised way".

Another Indian forklift manufacturer, Jay Equipment & Systems Pvt Ltd of Mumbai, manufactures materials handling equipment and storage systems. The manufacturer's battery-operated equipment is marketed under the "Ezi" brand while manual, semi-battery operated products are promoted under the "Jay" brand.

"We take up the complete project consultancy for the upgrade of equipments and storage systems right from the input of raw materials to processing, then storage and dispatch of finished goods," says Karelia.

Changing Trends

Major forklift technology developments have been slow to penetrate India as it is currently a very small market. This explains why, while manufacturers in other countries may gripe about the influx of Chinese forklifts, some in India are actually rolling out the red carpet.

Macneill's Churiwal explains that although only Indian forklift manufacturers are eligible to tender for government contracts, Indian forklift manufacturers face competition in the private sector from cheaper Chinese imports.

"Only now, after competition from the Chinese, are Indian manufacturers starting to look at technology and environmental issues," he says.

A three-tonne diesel ACE forklift
A three-tonne diesel ACE forklift
ACE's Gole is upbeat about his competitive position: "Competition is always healthy. Competition has certainly brought changes in terms of improvement in product quality, price and services; and ultimately benefitting the customer. Finally, the fittest will survive."

However, Jay Equipment's Karelia is quick to defend Indian-made forklifts.

"In our experience, Indian materials handling equipment is safer and has a longer life-cycle than any other Asian-manufactured equipment used in the Indian business environment."

Voltas's Sharan says Indian manufacturers keep track of developing forklift technology by visiting trade expos, reading media reports and browsing websites.
"The questions remains - how will improved technology be commercially available at reasonable rates?" he asks.

It may only be a matter of time before costlier but more advanced forklifts become available to meet the demands of a maturing market.

In Gole's opinion, Indian forklift users today are more exposed to global practices and trends.

"[Indians] understand and appreciate process efficiency and safety. Some have started using application-specific machines and industry-specific attachments, unlike the past where people either used labour or the most basic materials handling equipment."

A positive development for the Indian forklift industry is the Training Institute for Forklift Operators that Macneill established in 2007 next to its factory in Diamond Harbour Road, Kolkata. Churiwal says it's another first for the company as organised forklift operator training did not exist in India before.

The Future

Industry members all agree that the growth potential in Indian materials handling is enormous. As Jay Equipment's Karelia points out, India is still developing. Warehousing projects and various industries are mushrooming all over the country. These projects and industries require materials handling equipment which, like cogs in a wheel, may seem insignificant but are vital to operations running smoothly and effectively.

Toyota, the world's leading car manufacturer, has invested USD350 million in a second Indian plant in Bangalore, with an annual capacity of 100,000 units. Expected to be ready by December 2010, the plant will produce small passenger vehicles - including the Corolla - which will have a high content of locally -sourced parts. There are also plans to expand the capacity of its first Indian plant in Bidadi, near Bangalore.

Other projects include the state-run Bharat Earth Movers Ltd's INR2.6 billion (USD55.5 million) railway parts and defence products plant being constructed in Palakkad in Kerala, Vizag Steel's over INR80 billion (USD1.7 billion) expansion project to double its plant's capacity and Hindustan Zinc Limited's two brownfield smelter projects to increase its zinc and lead production, at Rajpur Dariba in Rajasthan.

Gole's optimism about the future reflects that of many of his peers: "Unless the industry faces unpredicted roadblocks, the future is very bright."

However, Sharan from Voltas Ltd, has a word of caution: "Since signs of good growth appear in many sectors and customers are thinking of capital expenditure next year, we expect that to have a positive impact on demand [but] true global recovery is yet to happen. The UK and US markets are likely to remain subdued next year, affecting our import and export trade. Coupled with high US unemployment, all this will have a negative impact on growth in demand."

According to Deustche Messe, co-organiser of CeMAT India that was held in Mumbai this month, the Indian transport and logistics sector is one of the country's fastest-growing service industries, with annual growth rates of 15-20%.
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