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Despite slowdown in the economy and the infrastructure sector, the $55.656 billion (globally in 2013) construction and mining equipment US-based Caterpillar Inc is bullish about India.
In an interview with T E Narasimhan, Caterpillar Inc's Group President Ed Rapp, who did not reveal proposed investments, market share and sales numbers, says that the company's vision is to be a leader in the segments it operates in. Excerpts
Given the current economic slowdown, ban on mining and other issues, how bullish are you about India?
India presents a tremendous opportunity for Caterpillar, with increasing focus on infrastructure investment and a need for efficiency and higher productivity.
Caterpillar’s belief is that “the road to progress… must begin with a road.” Our Global vision is to be a leader wherever we do business and the same holds true for India.
We are keeping ramping up our services and distribution network across India which will improve our capability to supply high quality service parts and highly skilled service engineers to our customers. We have 8 territorial dealerships across the country owned by GMMCO and TIPL. We, with more than 150 dealer outlets, are still growing.
Recently the Prime Minister Narendra Modi launched 'Make in India' campaign. Will Caterpillar look at India as a sourcing hub for other countries?
We are optimistic and welcome the 'Make in India' campaign introduced by PM Modi. We view it as an important step to showcase the exceptional talent and capabilities of a country as rich and diverse as India.
With continuous inputs from our customers, Caterpillar produces machines which are made in the country, for the country and also for exports. The machines are equipped with advanced technology and remote sensing capabilities, all of which are supported by highly skilled engineers in India. India has proved to be a lucrative, a global outsourcing hub and manufacturing base for Caterpillar.
While we have been expanding our footprint in India by catering to local demand, a significant percentage of machines produced are exported to other markets in Asia Pacific and around the world. Demand for our products as well as favourable trade relationships between India and other countries are among the various factors that are considered favourable to export products made here.
In 2011, Caterpillar announced $210 million investment in India including setting up an engine manufacturing facility, for electric power gensets and expanding off-highway truck manufacturing facility at Thiruvallur. In 2012 again the company announced around $150 million for Perkins power 4,000 series engines. What is the status of these investments?
To better serve the India Backhoe Loader market, we recently launched two variants of Backhoe Loaders – New 424B and 424 HD. Both variants are being manufactured at Thiruvallur, Tamil Nadu.
We recently added a second engine production line at Hosur, Tamil Nadu to make the Cat 3406 series of engines. As part of our strategic plan, we recently launched the Cat 320D2 Hydraulic Excavator which is an upgraded version of its predecessor 320D. The Perkins facility in Aurangabad will begin manufacturing its powerful 4,000 Series engines in 2015.
Initially the facility will have the capacity to produce around 3,000 engines per year with the capability to increase to 5,000 units. It is envisaged that the workforce will grow from 60 employees at the plant’s inception to approximately 450 when it opens in 2015, producing engines for Perkins electric power customers in the Asia Pacific region.
The company has also invested in component manufacturing for backhoe loaders and small wheel loaders. Recently, we started manufacturing skid steer loaders for export and will shortly launch these new products to the India market as well. Following the Bucyrus acquisition, we now offer the largest range of mining equipment both for surface and underground mining.
How does the India research facility help the company? What does it mean to Caterpillar Inc globally?
With a highly competent team of about 900 engineers, the Engineering Design Center in India partners with businesses across the globe and provides comprehensive product development and associated engineering services (design, virtual validation & virtual manufacturing). About 90 patents have been filed by EDC-I so far.
What are the key growth drivers in India for the company?
The primary drivers of long-term growth in India directly play to Caterpillar’s strengths, given the major industries directly served by Caterpillar - mining, marine, construction industries, quarry & aggregates, electric power, industrial, financial services.
We have an optimistic view for Caterpillar in the Indian market. In fact, Caterpillar’s presence in India is stronger than ever. We are investing in our operations to support the ever increasing consumer base here. We value our supplier relationship and consider them an integral part of our business model.
We are focused on executing a growth plan to achieve a leading share of the market opportunity. After all we are the global leader, and we intend to achieve the same in India as well.
Caterpillar Inc has various brands globally, how many are in India now. Going forward do you have any plans of bringing brands like CAT Financial, CAT Rental Store or others? If yes, which are the brands and when they would would come?
As a global company we seek to replicate our business model in our focus markets. For example, we have brought our entire repertoire of business into India; and that includes rentals, technology solutions, retail stores etc. Most recently, Caterpillar’s Financial Products Division and Tata Capital Financial Services Limited (TCFSL), have come together to offer customers finance options for purchasing Cat® equipment.
We value our India operations and its quality to the extent that significant investments are being made to ensure that it serves the India market and is also an important export base. We are hopeful that regulatory reforms being put in place by the government will enable us to further bolster our business support model.
