Energy & Environment Practice, Frost & Sullivan
What technological changes are witnessed over the years?
For most switchgear and controlgear products, innovation is in terms of aesthetics and customised features offered by the suppliers. Trending innovations in the low voltage switchgear industry are:
Maximising switchgear efficiency (product life cycle improvement).
Safety and reliability (tamper-proofing, safety, and handling).
Improving user-interface (digital display, wireless enabled and intelligent systems).
Multi-functional and niche functionality (report generation and monitoring capability etc.).
MNC players and established domestic firms tend to spend more on product improvement. The frequency of updating the features is usually two-three years. On the other hand, lesser-known brands who have established themselves for low/entry level products and prices, neglect investing in technology and bringing innovation into their product offerings.
What are the emerging trends?
Customer requirements are changing with times, with a need for more intelligent features in LV and MV switchgear products. Increased digitisation and connectivity is the need of the day. There has been increased penetration of premium products in the infrastructure, industrial and commercial segment as they are ready to shell out premium for these features. At the other end of the spectrum, the residential and utility customers are still price sensitive and prefer economical products with basic features. All said and done, the end-customers are keen on the type tested products, especially for the high rating circuit breakers, panels, RMU´s etc.
In which segment do you see the maximum demand?
Government spending has been on the rise and policy reforms and initiatives have led to increased foreign investments as well, resulting in increases demand from the power and infrastructure segments over the last one-two years. However, investments from the domestic private sector are yet to see signs of improvements, and this has had an impact on the demand from the industrial and real estate segments. Although residential and commercial real estate segments have witnessed flat growth, increased awareness of protection devices among end users has resulted in relatively better growth for final distribution products like MCCB, MCB, RCD, and DB. This trend is expected to continue for the next couple of years, where power and infrastructure will drive growth.
What are the main challenges faced by the industry?
The Switchgear and control gear market in India is highly competitive, especially for volume-driven products such as MCB, MCCB, and HRC fuses, making it difficult for the large MNC suppliers to sustain their market share with dipping profit realisation.
A large number of local market players, coupled with fluctuating raw material prices and imports from other Asian countries, and the pressure on market players to reduce prices to sustain business, deter the market from growing to its actual potential.
The other challenge the industry has long been facing is inadequate budget allocation. Due to constrained budgets, end-users tend to choose low-technology, low-priced switchgear components, thus deterring organised players from offering technologically superior products and solutions.
What according to you needs to be addressed to improve the segment?
Timely implementation of various government projects: Uncertainty and delays in implementation of various power reform programs/initiatives have led to artificial demand and market players are confronted with irregular and bunched orders resulting in overbooked manufacturing lines at time and leading to delays. Production planning in this case becomes challenging.
Investment kickstart in the industrial (manufacturing) segment to drive the growth: This has been the major end-user segment for switchgear products. However, demand has dipped considerably over the last two-three years, due to low capacity utilisation rates, resulting in restricted investment for expansion and new projects. Improving market sentiments and policy initiatives like GST and Make in India enhancing ease of doing business, are expected to propel growth of the manufacturing sector
What is the current growth rate and projection for 2020?
The market has been growing at slow pace over the last two years due to weak macroeconomic environment, and unfavorable market sentiments. A stable Centre, which looks determined to re-invigorate growth, attracts large dosage of investments across industries, and revives market sentiments is essential. Various reforms have been initiated to boost the economy, but growth slowdown has been so pronounced that it may take some time for these measures to fructify. Fresh investment in the green energy corridor, intra-state transmission projects, smart city, and other sub-station projects for grid stability will also drive the market. Over the course of the next four years (FY 2020) the market is expected to grow at a CAGR of 4-5 per cent. The market is expected to have moderate growth rate for next two years; after 2018, the growth is expected to kick-off with fresh investments and improved macroeconomic performance.