06 June 2020

Construction Equipment

On a rock and roll !



Around 60 per cent roads in developed nations are multi-lane expressways, national and state highways. The corresponding number for India is a meagre 6 per cent or 2,56,749 Km roads across the length and width of the country. These figures reflect the growing need for construction equipment and the innumerable opportunities that the sector presents to the players in the industry reports ROHAN AMBIKE.




On an average, 27. 5 km of highways were constructed every day in FY18, while contracts were awarded for an average 46 km per day, a top road transport and highways ministry official said recently. The construction of 10,000 km of National Highways last year compares with 8,231 km in FY17 and 4,260 km (11 km per day) in FY14, the last year of the UPA government. Contracts were awarded for 17,000 km in FY18 compared with 15,848 km a year earlier and 3,169 km (8 km per day) in FY14.




India’s Earthmoving and Construction Equipment (ECE) market is expected to grow by 20-25 per cent over the next few years to reach 330,000 to 450,000 units sold in 2020 from the current levels of about 76,000 units. The sector will continue to be dominated by backhoe loaders (more than 40 per cent of total demand), but broad-based growth is expected across products, with each segment expected to see double digit growth. A rise in the use of concrete will also create demand for concrete equipment in infrastructure and housing projects. The demand for ECE is also expected to grow in new segments such as agriculture, which have not historically been ECE users because of a lack of access but are slowly adopting the equipment.




Construction equipment expanse


The global construction machinery market is anticipated to record at a CAGR of 7. 21 per cent during the forecast period 2018-23. The increasing focus on infrastructure and development of automation in the construction and manufacturing processes had a significant impact on the market growth. The road construction machinery market has witnessed significant growth in the recent past, owing to the increased road development programs undertaken by the central and state governments, especially in the Asia-Pacific countries.




Growing demand from irrigation industry, increasing number of upcoming highway construction projects and advanced vehicles equipped with emission control systems are some of the factors expected to drive the construction machinery market. The demand for machines that are cost effective, along with regulatory pressures for lower emissions, is pushing construction-equipment manufacturers to opt for electric and hybrid vehicles over the traditional hydraulic and mechanical ones.




The Asia-Pacific construction machinery market is projected to register a CAGR of 8. 60 per cent during the forecast period. Asia-Pacific ranks first in the construction equipment market with major market share held by China, India and Japan. The infrastructural ventures across Asia-Pacific countries have a significant impact onthe development of the CM market, states Mordor Intelligence report.




The Central Government in the past 2 years has made significant changes in its policy and spending across sectors. The focus has shifted to developing infrastructure for residential and commercial purposes. Projects that were previously pending in government offices have been restarted to kick start development of infrastructure in the country. Keeping the recent policy and budget announcements in mind, the ICEMA (Indian Construction Equipment Management Association) has predicted that the construction equipment industry in India will grow almost double in size to $5 billion from the current $2.8 billion. The government has finally passed, approved and restarted projects worth Rs.4 lakh crore adding fuel to the fire of growth.




By FY20, construction equipment industry’s revenue is estimated to reach to $5 billion. Revenues increased at a CAGR of 8.38 per cent during FY07- 14 and is further estimated to rise at a CAGR of 2.34 per cent between FY07-20, owed to the rapid infrastructure development, undertaken by the Government of India. In FY16, Indian construction equipment industry grew at a YoY of around 3.45 per cent over the previous year.




Technavio’s market research analyst estimates the global construction equipment market to grow at an impressive CAGR of around 12 per cent by 2020. Urbanisation has led to the increased demand for infrastructure development projects like the construction of roads, sewage facilities, transit systems, and mega cities. This augmented need for better infrastructure facilities will spur growth in the construction equipment market during the predicted period. The APAC region currently accounts for around 60 per cent of the total market share and is expected to grow steadily at a CAGR of around 17 per cent during the forecast period. Augmented investments in infrastructure development across all regions in APAC are expected to propel growth in the construction equipment market during the predicted period.




Furthermore, factors like the growing urban population and rapid urbanisation are resulting in the increased demand for new transport and utility infrastructures. This increase in the demand for new transport and utility infrastructures will result in the strong growth of this market in APAC until 2020. The Heavy Construction Equipment Market is projected to reach $166.05 Billion at a CAGR of 6.80 per cent from 2015 to 2020. The construction equipment market is projected to grow at a CAGR of 4.11 per cent during the forecast period, to reach a market size of $116.20 billion by 2021, while the mining equipment market is projected to grow at a CAGR of 6.42 per cent , to reach $136.03 billion by 2021. A wide array of upcoming infrastructural projects and the rising demand for commodities has led to an increase in construction and mining activities. Additionally technological advancements, such as the introduction of telematics in mining equipment, have led to a rising demand for construction and mining equipment. These advancements have increased the fuel-efficiency, lowered the emission levels, enhanced the safety, and improved the handling of the equipment. Construction Equipment Market is expected to garner $288.8 billion by 2022, registering a CAGR of 9.2 per cent during the forecast period 2016-2022.




In terms of numbers it expects overall equipment sales to rise from the current 46,755 machines to 89,030 in 2019. With the government emphasis on fast tracking road sector projects through removal of various traditional irritants like shortage of funds, land acquisition challenges,  environmental concerns and delay in government clearances and lack of structured regulatory and policy framework for PPP models - the road construction equipment market is expect to grow from its  current volume of 2500 machines per year.




Another area that will require to be addressed in the equipment industry will be the upgradation of existing technologies and introduction of new technologies. In keeping with the high volumes and the scope of the infrastructure to be built machines will have to be designed keeping in mind efficiency in terms of fuel consumption and productivity. On the equipment finance side there is a need for policy reform – systemic changes leading to credit enhancement, banking and regulatory interventions – to spur growth in demand for products.  Further since construction equipment capacity in the country exceeds current and near term domestic demand, there is a need to boost exports. That will involve aggressive push by the OEMs. Right now with a major projects push in sight the outlook for the CE sector seems bright.