Machine tools: The India opportunity

The growth in the machine tool sector is directly proportional to the growth in the other industries. The machine Tools Industry is the backbone of the entire industrial engineering sector. And the growth trends visible in the Indian hardware manufacturing sectors are clear indicators of this fact. , today, India is in a position to export various automobile components and other industrial equipments. If we study the growth chart, one will notice that there has been a simultaneous rise in the export of general purpose and standard machine tools to other countries including the industrially advanced nations. During the last four decades, the machine tool industry in India has established a sound base and there are around 125 machine tool manufactures in the organized sector as also around 300 units in the small ancillary sector.

Engineering Review delved a little deeper into the subject to understand the opportunities that exists in the machine tool space and also the market potential that India holds for both domestic as well as multination players in this space.

THE INDUSTRY

The Machine Tool Industry is a vital constituent for the entire manufacturing and engineering Industrial Sector and is vital for the growth of the capital goods industry. The higher the quality of the machine tools the better the quality of the goods produced. Technological advancement in the machine tool space directly leads to improvement in both product design as well as quality and reliability. The Indian Machine Tool Industry, however, constitutes only a small part of the overall Engineering Industry. Yet it plays a very important role in the development and technology up-gradation of the Engineering Industry.

The quality and cost of engineering products depends on the quality of mother machine tools and their automation level. The development of the machine tool industry is therefore of paramount importance for a competitive and self-reliant industrial structure. Despite having a large and diversified industrial sector and registering rapid growth in the production of machine tools, India's position in the world machine tool industry is much lower than most other competing countries. The share of exports by the machine tool industry in India has also been negligible. Though there are several manufacturers exporting their products to other nations the more established European companies and to a large extent even Chinese manufacturers have a stranglehold over the market. The Indian machine tool industry comprises of large, medium and small scale sectors.

The small scale sector has traditionally a strong presence in the machine tool industry but losing its market share because of competition from large units and some of the other countries. The small scale units primarily meet the demands of ancillary and other units whereas machine tools from the large sector meet the demand of medium and heavy industry. Therefore the problem is two-fold in terms of the inability of small scale machine tool manufacturers to supply quality machine tools at affordable prices and difficulty of ancillary and small scale industry in buying machine tools. The units in region have traditionally been producing machine tools with low cost production methods and technology. The machine tools produced with these constraints are of low quality.

To counter this lack, the Government of India has established several Institutes in collaboration with various state governments for upgrading the technology of small scale machine tool manufacturers. These initiatives are aimed at providing technical services in terms of new designs, precision engineering facilities, laboratories and testing, expert advice and training to entrepreneurs and engineers of small scale units.  

Says Mr.Suhas Joshi- GM Batliboi, “Any country is measured by technological excellence. The technological excellence is reflected directly on the machine tools status and health in that country. The world over, India is known as a developing country, which means not that we don’t have enough exposure to worldly pleasures or worldly equipments. It’s only a question of infrastructure, which is lacking in the country. It’s a question of political will which was earlier missing. It is only a question of the will to execute. Time-bound projects within reasonably good time so that cost is not enormous.”

Adds Sanjay Suri-managing director, Legris, “The world is becoming one now. All technologies developed outside flows into India very fast. I don’t see any technological barriers in the products. What are being sold in the rest of the world is available here. It’s only a matter of manufacturing, whether you manufacture here or abroad, it doesn’t make any difference because most of the products which we at least make are made on automatic machines. They are not labour intensive and as barriers go down as they have been going down in the past, the location of the plant will be immaterial. More focus will be on the services.”

Over a period of time, thanks to factors like capitalization, liberalization and globalization as a country we have achieved major milestones. We, at a technological level on a man to man basis are not inferior when we compare ourselves with the supposedly more modern countries. The question was only about facilitating our manpower allowing them free access to information and technology and not restricting access.

This has given us good results thanks to the innovative and creative minds, which is available in abundance in India. What was not available was the opportunity. With globalization the opportunities are now, however, immense. When you have more opportunities, people are willing to invest because the ROI is assured. This is a major factor in inducing new investments. Any decision on investment is based on ROI. ROI comes from volumes. Earlier; we did not have the volumes to justify the investment.

Now with globalization, both the domestic as well the international markets have opened up. That has become a key for success for the machine tools industry as a whole in India. Ten years back, the few players that existed in this space considered a monthly production of 4 or 5 CNC machines a great job. Today, various machine manufacturers in different parts of the country are manufacturing more than hundred CNC type machines per month and yet there is demand for more.

What this means is that technological achievements in the country are related—starting from the mother machine. The mother of all equipment is machine tools. In every day life, right from the geyser or to the air-conditioner, you come across a lot of electronic, electrical and mechanical products, which are all produced using mother machines, or machine tools. So the health and wealth of the country is directly related to the growth of the machine tool industry anywhere in the world.

Says Joshi, “Today, India is on the threshold of opening up to the world in the machine tool industry. And for a change we see machine tool people producing in volumes, which was a foregone conclusion once upon a time. So as it looks, today on one side we are producing and on the other side we are achieving the milestones of technological advancement. These milestones are trying to catch up with the technology available in the rest of the world. I think, the IT sector has given the impetus and the respectability and has opened up of the field for Indian engineers to look globally. Yes, we can do it. It’s a question of gathering together right talent and the right infrastructure and making it happen. Once it happens, we will have excellent quality of workmanship which was missing in the days of old.”

The ‘Made in India’ tag was not very respectable ten years back but with IT professionals going all over and earning a good reputation people have started looking towards India. And the first development started in the automobile industry. Most of the global automobile manufacturers have started taking interested in sourcing from India. Today, we have manufacturers based out of upcountry regions like Faridabad and Rajkot exporting automobile components world over even to the likes of General Motors, Ford, etc, which are US manufacturers known the world over.

The growth in the automobile industry has been phenomenal and simultaneously the requirement for machine tools has gone up. But we are still way behind. If you analyze the previous year’s figures, imports outnumber the manufactured products in India. The reason is technological obsolescence of the products made in India. So we have to catch up on technology. Secondly, if you analyze the imports in India, generally people say Indians are price sensitive and they buy cheap machines. But the highest imports have come from Germany in numbers, which is definitely not a very cheap product. This means that we are hungry for more and more technologically advanced products. Indians may be price conscious but they are willing to pay the price if we see value. The exposure to the global market has made Indian manufacturers focus on better product quality, better workmanship, better reliability and better consistency, and better service and support. They have realized that this cannot be provided at the cost of productivity. This is what is driving the machine tool as a whole in the industry.

However tackling the price conscious mind set has been a challenge for many MNC manufacturers. Most have been following the policy of avoiding any discussion about the price factor till the customer is convinced about the requirement for their products. Says Mr. Volker, Carl Zeiss, “We try to convince the customers about our technique and the way we do our business and the way we try to support our customer and the solution that they will get in the end. The demand of the market is to have machines that will speed up their production process and improve the overall finish and quality.”

OPPORTUNITIES FOR MACHINE TOOLS

Says Ashiesh Chandavarkar-vice president-Nugen Machineries, The opportunities for Indian manufacturers are tremendous. In the last few years, there has been significant movement in this space. And I foresee the industry growing three fold in the next couple of years.” Adds Mr. Nair, GM of SICK India, “ India is going to be one of the major players in the whole industry especially with industries like automobile and metal handling equipment taking off in a big way. I think the growth in these sectors, to a large extent, has also given a boost to the machine tool industry. As these industries are huge consumers of machine tools it was automatically bound to happen. And yes, I am sure there is lot of growth here. And with foreign companies setting up operations here in India we have also much more advanced technologies coming in.”

India is emerging as a manufacturing hub. According to S.K. Mahadevan- Director of Haas Automation, the growth will be at least 15-20 percent compounded annually. The conventional machine owners are shifting to CNC machines. Basically, the main reasons are productivity. Another key reason is that it has become increasingly difficult to fins operators willing to work on conventional machines. Says Mahadevan, “The new breed of workers and engineers are not interested in operating conventional machines; everybody wants to operate computer-aided numerical control machines.”

Most companies in this space have been doubling their turnover every year. One reason is that India is slowly emerging as one of the main outsourcing destinations for many countries worldwide. However, according to Mr. Ajmera of SPM Machines, the machine tool manufacturers in India will have to face competition from the Germans and other European companies and even from China. China is a major force that Indian manufacturers will have to face in the near future because they are coming in a very large very big scale to sell their machines. And their focus is India. Says Ajmera, “The Indian machine tool industry may go down if the Chinese compete with India. The Indian machine tool industry is not so mature. The Chinese are making every kind of machines—light as well as heavy industrial tools. And they are already developed in terms of technology as well as production facilities. They just have to modify their technology according to the needs of the moment. And this they can do, as their technology is developed.”

TECHNOLOGICAL TRENDS

People are more cautious now as far as the technology is concerned. Previously customers were satisfied with opting for the mechanical version. Now that mindset has changed. More and more customers are opting for NCs and CNCs. They want to upgrade their present technology. Those who had deployed conventional press brakes earlier now want to opt for NC and those using NC want to upgrade to CNC technology.

Says Chandavarkar, “We have manufactured three machines in the Auto Turret Punch Press space. We saw the demand and we decided to cater to this. This will hit the markets in the coming year. People are becoming more technically savvy.”

In the case of machine tools, more and more people are keen to automate their machines because the volumes are bigger. So you naturally need faster throughput for your machines, which you can only achieve through automation. Says Nair, “I can see more and more people being conscious about the safety of the usage of machines, which means that safety has become a priority and safety aids are being used more and more.”

One of the key technological trends driving growth is the increased subcontracting in the automobile space. In the US and Europe, manufacturing is expensive so they want to sub-contract to India and China. India is more quality-conscious than China. Hence the growth has increased. Many of the manufacturers want to shift their base to India. They will only retain R&D, marketing and strategy.

India is growing as far as export is concerned. Nugen, for instance, already exports its products to 17 countries as of now. Says Chandavarkar, “We are still getting many inquiries from overseas companies. People abroad are aware of our products and they are keen to get details about our machines. I think demand is going up as far as the export market is concerned.”

India is as it is a very big market for sensors. To a large extent, it is also immeasurable because there are both foreign companies who sell their sensors here and also Indian companies who manufacture their own sensors and who give a really good and tough fight in terms of quality as well as price to the foreign manufacturers. Now as the machine tool industry grows other industries too grow in parallel. These sensors get more and more used and especially for machines manufactured for exports these sensors are going to be used in a very big way.

Our qualified people plus English speaking qualified people are assets to India as well as to the world. The IT industry has proven that given the right environment we can excel in performance. It is coming back to India in the products space as well. Our components, if not products, have started getting accepted. If this continues, then the overall life pattern of an individual will become wealthier than what it was. And naturally he will be spending more than what he was expected to earlier.

The GDP growth has been good. There is an increased demand for more lifestyle products including modern gadgets. The demand for white goods is going up. Indirectly, the rate of internal consumption in the country is what is going to decide how we are going to sustain this productivity. We have not offered cheap labour, land, electricity and incentives for multinationals to come here and produce and take away products outside the country. We are telling them use our resources, use our land, use our power, manufacture and we consume it here.

In times to come, if we are able to continue and maintain and sustain these globalization policies and the right environment, we will be able to produce world-class goods. We have enough natural resources to sustain the momentum—we have water, we are trying to catch up on the electric power generation front, we have mines, minerals, coal, petrol, etc. We are not dependent on any outside country for our basic requirements.”