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Corporate Report

Published on: Jan. 28, 2023, 11:35 a.m.
Tata Hitachi on a growth path
  • Excavator assembly line: banking on quality

By S M Boothem with Akshaya M

India’s leading construction machinery equipment manufacturer and the largest hydraulic excavator company, Tata Hitachi is a 40:60 joint venture between Tata Motors and Hitachi Construction Machinery (HCM). It started its collaboration with HCM in 1984 and it is one of the longest-standing JVs in the industry, having completed 60 successful years of operations in India. The company has a manufacturing presence in Dharwad in Karnataka and Kharagpur in West Bengal. It offers a diverse portfolio of mini excavators, construction excavators, mining excavators, backhoe loaders, wheel loaders, and dump trucks, apart from a wide range of attachments, parts, and expert service solutions.

Industry outlook                                        

India’s construction equipment (CE) industry reported a sales growth of 23 per cent for the third quarter of 2021-22 on a year-on-year basis. According to a report released by the Indian Construction Equipment Manufacturers Association (ICEMA), during this quarter, the construction equipment industry sold 22,630 units compared to 29,448 units in Q3FY21. India will be a key player, the second-largest in the CE sector, by 2030. 

“With strong capex growth expected in the next 12-18 months and increased focus of the government on developing infrastructure, railways, roads, etc, there is steady and strong demand for equipment across the infrastructure and construction value chain. We therefore expect the Indian construction equipment industry to touch $5 billion by FY25. The fact that infrastructure spending is also expected to rise to 9 per cent of GDP during the same timeline, upwards of 7.2 per cent, indicates significant incremental addressable market demand for the near future. Hence domestic players like Tata Hitachi, L&T and ACE are expected to benefit significantly in the medium term ahead,” says Avinash Gorakshakar, Head Research, Profitmart Securities.

Tata Hitachi is headed by Sandeep Singh, the managing director, who has over 3 decades of industry experience under his belt. Since joining the company in 2015, he has brought the business to its current success in a fledgling industry. “In FYQ3, the industry has already seen growth and boasts around 20 per cent growth in machine sales and a revenue increase of 25 per cent. The company is producing similar numbers with excavator sales at about 10 per cent and revenues at 15 per cent.

This growth will continue for another year provided other challenges like increasing interest rates and fuel prices, and the rupee value depreciating and affecting import costs, are overcome. Despite these issues, we were able to pull through the last quarter seeing there is increasing demand and we are expecting good growth in the coming quarter as well,” explains Singh. 

“The partnership between Tata Motors and Hitachi Construction Machinery (HCM) brings to the table a unique amalgam of cutting-edge Japanese technology and Tata’s strength of localisation as well as leadership with trust,” says Toshiki Onishi, Director, sales, marketing & customer support. “This forms the foundation of the company’s success and its market standing in the excavator segment for several decades now. HCM believes in fostering the transfer of knowledge and ideas among employees to ensure the same level of performance across its subsidiaries. These efforts have contributed to making Tata Hitachi one of the global hubs for manufacturing equipment for Hitachi’s global markets,” he adds.

  • Singh: expecting good growth

    Singh: expecting good growth

New business strategy

The company is working on several marketing strategies to gain chunks of market share. Concept selling was a challenge for this kind of product because the difficulty lay with creating awareness. One of the strategies implemented by Tata Hitachi was ‘Try and Buy’, where the customer had the opportunity to take the machine and make use of it. This approach, though, had huge associated initial costs; however, the company was able to recoup the investment due to the long-term customer satisfaction and expansion of its customer base which followed. 

However, with digitisation, direct engagement has become easier. Since there is a limited type of target customer for such products, the company is able to engage with the existing customer base, while also gaining new followers through social media and other digital avenues. The company’s wide range of products targets the requirements of the Indian market in the infrastructure and mining sectors. 

“State governments with elections are loosening the purse strings and releasing investment funds for infrastructure development. Many central government-driven projects like road construction for the ‘Green express highway’ which will increase connectivity for the automotive sector in Karnataka, are being promised funds. With this kind of demand, we are expecting the coming quarter to be good,” says Singh optimistically.

While Tata Hitachi is currently heavily involved in manufacturing excavators, it is moving into the wheel and backhoe loader segment. Its imports are at 30-35 per cent overall, but a range of equipment is completely imported, especially for large-volume products. This is something the company is trying to change by concentrating on localisation. 

Since the existing plants already have the capacity for an increase in production without any need for further capital expenditure, the company is in great shape as far as its expansion plans are concerned. While its current focus is on exporting to SAARC and neighbouring countries, the next plan of action is towards the Middle East and South Africa. It is already sending its machines on a trial basis for exports as the global market share for backhoe loaders is massive. The machines produced by Tata Hitachi follow global emission norms and tout the latest technologies like the telematics predictive analysis system.

  • Onishi: cutting edge technology

    Onishi: cutting edge technology

Tata Hitachi’s stance on sustainability is unmistakable and is prioritised at all levels. The plants are solar-powered and they facilitate rainwater harvesting. The company promotes a circular economy where all scrap material is recycled. It supports refurbishing aggregates and increasing the lifespan of existing machines, creating huge value for customers. It also offers variable pricing business models, buy-back with competitive resale prices, full maintenance contracts and equipment rental solutions. 

The company is looking at threefold growth by 2030. However, the industry as a whole has faced multiple challenges and has not seen continuous growth over the years. Hence, with expansion into new products, new segments, new markets and exports, Tata Hitachi wants to achieve at least 10 per cent CAGR in the next 5 years.

The infrastructure sector is a key driver in India’s economic growth. The aggressive push and support from the government to speed up projects across the country will help all players in the segment. Tata Hitachi is well-placed to grab this growth opportunity in the coming years. 

  • Prasad: crossed many hurdles

    Prasad: crossed many hurdles

Lending a helping hand 

The company firmly believes that long-term value creation for the business is linked to the organisation embracing sustainable development.  Every business needs to be intertwined with environmental, social, and governance (ESG) concerns. There is a paradigm shift away from the sole purpose of generating profits towards sustainable development and long-term value creation for organisations. 

Environment: Tata Hitachi is aware of the need to adopt environmentally sustainable practices in design, processes and products. The company’s product life cycle assessments lead to eco-friendly designs and reduce the overall carbon footprint of its products and services. This helped reduce the carbon footprint in manufacturing by 45 per cent in the last 5 years.

t also made significant investments in the plants at Dharwad and Kharagpur towards renewable energy, rainwater harvesting, and reusing ETP water for irrigation. The Kharagpur plant has an installed solar capacity of 10.5 MW which meets 74 per cent of its power requirements, while the Dharwad plant has a target to meet 90 per cent of its power requirements. 

Social responsibility: To encourage women’s participation in all areas of operations in the plant, various women-friendly policies and initiatives by the company helped see more women marking their presence felt on the shop floors. Their CSR initiatives are categorised under four broad heads – skill development, education and literacy, rural development, and healthcare.

Tata Hitachi’s Operator Training Centres at Kharagpur and Dharwad are on a mission to skill unemployed youth for the enhancement of employability and entrepreneurship under the Skill India program. Several key partners and NGOs have helped the company to mobilise young people. 

Healthcare: During the pandemic period, Tata Hitachi played a critical role, partnering with IIT Dharwad, by donating face shields, masks and sanitisers from its Dharwad plant to various hospitals. For this Covid-19 relief initiative, the company received a Certificate of Appreciation from CII. The company also ran regular medical check-ups and blood donation camps.

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