Volvo confident of better sales as construction activity gathers steam

Volvo, a leading construction equipment supplier in India, is confident of clocking better sales in the remaining two quarters of the financial year 2021 compared to the previous year.

Construction of highways and expressways has picked up and mining has resumed, resulting in a “hockey stick” recovery in sales of machines like excavators, compacters and haulers.

“September onwards anything related to construction, road building and mining has done exceedingly well. We will do better in September to March than we did in the same period last year. From September onwards, there has been a huge ‘hockey stick’ recovery,” Volvo India Managing Director Kamal Bali told Moneycontrol.

The recovery is good for Volvo since its construction equipment costs an average of Rs 60-70 lakh, more than double that of the higher volume machines manufactured and marketed by segment leader JCB. A 90-tonne Volvo excavator, better known as earth mover, costs around Rs 4 crore.

The pick-up in demand is across the sector. As per data shared by the Indian Construction Equipment Manufacturers Association, sales during July-September quarter jumped 20 percent to over 19,000 units from around 15,850 units in the same period last year.

While Bali did not share sales figures for Volvo’s construction equipment, industry sources say the company is on track to finish FY21 with sales of around 2,000 units. It sold about 2,500 machines in the previous year, sources said.

The demand was coming on the back of the national infrastructure plan of the government. The road ministry was doing exceedingly well, Bali said. The micro, small & medium enterprises (MSME) sector was seeing lots of liquidity.

“The stimulus provided by the government and jobs created in the rural sector have helped push overall demand. There have been several reforms like for the mining sector which have been opened up for the private sector,” he added.

JCB saw green shoots emerge in June itself when there was a ‘V’ shaped recovery and sales were better than in June 2019.

Tracked excavators, used for heavier loads, saw the usage shoot up to 80-85 percent in June and July, according to Subir Chowdhury, Managing Director and Chief Executive Officer, JCB India. JCB is yet to share its sales data for September and October.

Between April and October, the Centre awarded twice the highway building contracts it did during the same period last year. Contracts for nearly 5,700 km of roads had been awarded till the end of October.

Of the target of building 11,000 kms of highways in FY21, more than 40 percent (4,628 km) were constructed in the last seven months.