Automation in India

“The market will gradually move towards automation”

India is a massive market, with huge potential and very fast growth. The International Monetary Fund is expecting India’s economic output to grow by more than 7 percent over the next few years – outstripping even China. The market for material handling products, in contrast, is comparatively small, with around 10,000 units sold in 2016 in a country with a population of 1.3 billion. But there is a lot happening, as KION India’s CEO, Sunil Gupta, tells us. Especially in the world of automation.

2017-09-11

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Sunil Gupta
KION India’s CEO


Mr. Gupta, how has the Indian market for material handling developed over the course of 2016 and in the first half of 2017?

The Indian MHE market has huge potential for growth over the coming years. The year-on-year increase in 2016 was 8 percent, and this growth has continued into the first half of 2017. But the Indian market is also becoming highly competitive, with many local and international vendors offering a wide range of products. We are currently seeing an increase in demand for imported products, as customers are expecting cost-effective products with enhanced features.


Is KION India ready to benefit from this growth?

Yes, we are highly pro-active in this area. Our customer-centric, multi-brand strategy creates synergies between our brands (Linde, OM Voltas, Baoli), enabling us to offer our customers an extensive product portfolio with a range of solutions. Our vast sales and service network with more than 100 touch points across India ensures that our products and services are within our customers’ reach.


What are the most important drivers of this development?

The market is expected to grow by 9 to 10 percent on average over the coming years. The main growth driver is the rise in industrial production, followed by the modernization of the logistics infrastructure, and the increase in government investment into the infrastructure. India’s GST tax reforms are also an important factor for the manufacturing industry, as they will reduce manufacturing costs by removing a number of taxes (See Background: Modi’s mammoth tasks). And on top of that, there is the growing scarcity of storage space and the boom in e-commerce.


The industry has high hopes for the Indian tax and land reforms. Are there any noticeable changes yet?

The industry certainly has high hopes for these reforms. The tax reforms were rolled out in July and have been received very positively by businesses. It was very encouraging to see a political consensus between all parties. We are seeing the first signs of positive change, and I am very hopeful that the Indian economy will enjoy even greater benefits in the future. Land ownership reform is also on the table, and I feel very positive about this too. It should remove the hurdles in setting up facilities in India, which would be a win-win situation for everybody.


KION India embarked on its multi-brand strategy last year. Are there any initial successes to report?

Through our multi-brand strategy we offer Linde products in the premium segment, OM Voltas products in the volume segment, and Baoli products in the economy segment. OM Voltas provides the basis for our strategy, and Linde and Baoli have benefited considerably from the KION India platform. By collaborating more we are able to leverage cross-selling opportunities and reduce our fixed costs. By focusing our energies on brand collaboration efforts, we have generated more than double the number of enquiries for Linde products, resulting in higher sales.


An example is an order for 44 Linde and OM Voltas units from a Chinese multinational based near Pune. Further projects involving Linde, OM Voltas, and Baoli are in the pipeline, underlining the positive impact of our multi-brand strategy. We are confident that our multi-brand approach will take our success on the market to the next level.


What future developments do you anticipate on the Indian automation solutions market?

Over the coming years, the market will gradually shift toward automated products and solutions. There are a number of reasons for this: the increase in industrial growth, the rise in consumer demand for goods and services thanks to greater disposable income, and an increasing focus on efficiency and safety. The growth in e-commerce, in the production of capital assets, and in the logistics sector over recent years has paved the way for automation products and solutions to enter the market, which will gradually move toward smart warehouses and other automation solutions.


Has KION’s acquisition of Dematic brought any tangible results in India yet?

The acquisition of Dematic significantly boosts KION’s brand positioning in the global markets, including in India. By combining the brands we have created a full-service provider with a comprehensive offering of material handling solutions. There are great opportunities in India for Dematic, especially with the use of the KION India platform. We are currently in the process of integration and will see tangible results in the coming years.


Background

Modi’s mammoth tasks

Three major reforms provide the benchmark for assessing Indian Prime Minister Narendra Modi’s time in office: the introduction of nationwide Goods and Service Tax (GST) across India, land reforms that offer security to investors, and reform of the labor market. Modi implemented the first of these this summer, his administration is currently working on the second, and the third is likely to be postponed until his next term.
One of the country’s leading critics is already eating his words. The legendary US investor Jim Rogers had long been calling for India’s rapid transformation, similar to that undergone by China. But the billionaire declared that there was no one who could bring about such a change. However, after seeing the zeal for reform demonstrated over the past few months, he has come around. “If Modi is able to push through several reforms as he has done with the GST, then we are all going to have to pay a lot more attention to India,” says Rogers.