Definition / Scope
Construction equipment generally refers to the relatively heavy machines/heavy-duty vehicles that are specially designed for executing construction (or demolition) tasks, mainly earthwork operations.
An efficient, accurate, easy, and cost-effective method for the construction of complex and high-quality infrastructure is possible only with the help of construction equipment.
Construction equipment (CE) can be classified into four groups – Earth moving, Road Construction, Concrete and Material Handling Equipment. Earth moving equipment the largest group, followed by concrete equipment and material handling equipment.
To give a snapshot, the earth moving and construction equipment is one of the most important sectors which forms around 7% - 8% of national gross domestic product (GDP). It is one of the largest contributors to economic activity, following the agriculture sector in India. Hence it acts a key driver for various infrastructure development and to create growth opportunities to various other industries in the economy.
Thus the construction equipment industry by its tremendous growth over years paves way for valuable FDI inflows and attracted various international players. It is the sector which gives either direct or indirect employment to more than 30 million people in the country and hence it’s highly labor-intensive. Among the total infrastructural investment, around 60% accounts for construction equipment.
During the last two decades, we could notice that the earth moving and construction equipment industry has made enormous progress and grown both in size and diversity.
|Base Year||2016||Researched through internet|
Top Market Opportunities
The Construction industry of India is an important indicator of the development as it creates investment opportunities across various related sectors. The construction industry has contributed an estimated ₹ 6708 billion to the national GDP in 2011-12 (a share of around 9%). The industry is fragmented, with a handful of major companies involved in the construction activities across all segments; medium-sized companies specializing in niche activities; and small and medium contractors who work on the subcontractor basis and carry out the work in the field. In 2011, there were slightly over 500 construction equipment manufacturing companies in all of India. The sector is labor-intensive and, including indirect jobs, provides employment to more than 35 million people.
- According to the report “Construction & Mining Equipment Market” by MarketsAndMarkets, the global Construction Equipment Market Worth $125.4 Billion by 2019. Among which Asia-Pacific is the Largest and Fastest Growing Construction and Mining Equipment Market, and these markets have a potential to grow with a promising CAGR.
- Based on the report by A.T.Kearney and the Indian Construction Equipment Manufacturers’ association (ICEMA), In India, over the next few years the “Earth Moving and Construction Equipment (ECE) is expected to grow at a tremendous CAGR of 20-25%.
- Currently ECE market accounts for only $3 billion, but its growth potential is more in near future, such that the market would be around $16-20 billion by 2020.
- Indian ECE market has the greatest capability to grow at 20-25% to reach 330k-450k unit sales by 2020.
- According to “Construction Market Report by DMG Events”, by 2012, the construction equipment industry's revenues were US$ 5.1 billion, but by 2020 it is estimated to reach by US$ 22.7 billion. In the same way unit sale of construction equipment is projected to reach to 82,000 by 2016 from 61,745 in 2012. Also the demand for construction equipment in India is expected to grow to US$ 9.9 billion by 2015, at a compound annual growth rate (CAGR) of 24.1 per cent (from 2011)
- Based on a report by Ipsos research, the global construction equipment market was estimated at INR5,551bn (US$90.5bn) last year and is expected to reach INR7,310bn by 2016, representing CAGR of 7.7%.
- India's construction equipment market, though smaller in size, yet it outpaced global growth trends with the market estimated at INR208.4bn at the end of last year. Revenue is expected to reach INR461.5bn by 2016, CAGR of 20.5%.
- Based on revenues, among construction equipment industry, Earth moving holds the largest share of around 68% whereas the remaining 32% contributed by Concreting/Road Construction/Material handling/Material Processing.
- In India, 71% of the sector comprises of public limited companies including PSU’s and 29% private limited, or joint ventures including closely held private limited companies.
- It is notable that there were cumulative foreign direct investment (FDI) inflows of US$ 209.4 million in earth-moving machinery in the period April 2000-March 2014.
- The Planning Commission(a department formed to develop and co-ordinate investment plans for the central government) estimates total infrastructure spending to be about 10% of GDP during the 12th Five-Year Plan (2012–17), when compared to 7.6% during the previous plan (2007–12)
Market Attractiveness and Top Opportunities
The overall growth in the construction equipment industry in India is correlated to the overall level of infrastructure development as well as growth in construction activity. Increased urge to develop infrastructure is attracting the major global players towards India.
- Great news is the Planning Commission had projected a USD 1 trillion investment in infrastructure for the 2012-17 period with 40% of funds to arrive from the private sector. Increased construction activities create favourable conditions for foreign direct investment in the equipment sector. For attracting such investments, the government has eased certain FDI norms related to infrastructure development. If everything happens in-line, and industry’s full potential is realized, then there is no doubt that by 2020, the infrastructure industry would be a $16-$21 billion industry.
- India is a country which offers greatest potential as an OEM hub due to its lower costs and the availability of skilled labour. By this year around 10 equipment manufacturers are expected to establish bases in India.
- Moreover It is amazing that the Government of India in the Union Budget 2014-15, has announced a project to develop ‘One Hundred Smart Cities’ as satellite towns of larger cities by modernizing the existing mid-sized cities in the country. INR 70.6 Billion has been allocated in the current fiscal year for the same.
- It is really a positive outcome that the government is working on many ambitious projects undertaking the development of infrastructure and roads in India. The Union finance minister in his budget speech proposed industrial corridors and 20 new industrial clusters. These worthy projects will definitely bring in a greater demand for construction equipment and thereby shows the road ahead for construction equipment industry.
- Infrastructure investment remains as key and vital strategy for tremendous economic growth. Current Union Budget 2015 also has paved way for the same; and in the Budget the Total allocation for infrastructure has been increased by 1.5 times to INR 2.8 trillion (roads, railways and urban infrastructure are to be the biggest beneficiaries).
- As per world population statistics, India’s population grew by 17.7%, from 2000 to 2011, and by 2020 it is expected to reach 1.4 billion. The rising population and urbanization trends likely to enhance the demand for wide range of residential construction. In India Present levels of urban infrastructure are not sufficient enough to meet the demands of the existing urban population. Even the Government of India is in the process of launching a new urban development mission. This will help develop 500 cities, which include cities with a population of more than 100,000 and some cities of religious and tourist importance.
- Growth in population will increase the demand for residential and commercial real estate projects; thereby proving the opportunity for construction equipment market. Real estate industry in India is directly related to the demand for concrete and building construction equipment
- India has been top producers of coal and iron, and there is huge increase in mining operations. These mining operations thus being the root cause for the notable demand in mining equipments.
- Issues of land acquisition and also there is scarcity of land for various infrastructure developments.
- Various project bottlenecks like delays in project approval or other Regulatory issues and environmental concerns puts some barriers in construction equipment sale.
- Timely availability of raw materials.
- Delays related to forest and environment clearance have an impact on infrastructure projects
- Deviations in projected cash flow from the projects
- Financing options are limited, and payment terms for first-time users are often unfavorable.
- Only few government incentives to develop skilled workforce. Hence to rule out the issue and upgrade the skills of the workers, the major construction equipment companies, has to establish costly training centers.
- Need for pro-development policies from the government to bring about rapid execution of planned projects without any delays.
Indian Constructions and Equipment market has a robust potential for growth, having been supported by the government investments in improving infrastructure and housing demands. It is well anticipated that Indian economy good and the GDP is currently US$1.3 trillion, making it the 8th largest economy in the world, and the GDP is expected to grow about 9-10% in next 10 years.
India’s promising economic conditions paves way for lots of global entrants in ECE sector. Those global key players in the construction equipment market not only establish manufacturing facilities in India, but they also do ensure they have a strong distribution channel that enables them to reach all through the country even to the more remote parts of the nation.
Thus global entrants, joint ventures, FDI inflows, Infrastructural Investments, Government Initiatives and policies will act as the backbone for the earthmoving and construction (ECE) Industry, and would strive to make the $3billion industry reach the peaks with $16-20 billion market by 2020.
Key Market Players
- Action Construction Equipment
- Ashok Leyland John Deere Pvt Ltd
- Bharat Earth Movers Ltd.
- Caterpillar Commercial Pvt. Ltd.
- Escorts Construction Equipment Ltd.
- GMMCO Ltd. Greaves Cotton Ltd.
- Ingersoll Rand India Ltd. JCB India Ltd.
- L&T Komatsu Ltd.
- Larsen & Toubro Ltd. (Construction Equipment Division)
- Mahindra & Mahindra Ltd.
- Stetter India Pvt. Ltd.
- Trucks India Ltd.
- Telco Construction Equipment Co. Ltd.
- TIL Ltd Voltas Ltd.
- Volvo India Pvt. Ltd.
- Wirtgen India Pvt. Ltd.
The other prominent players in the segment are:
- Appollo Earthmovers
- Apollo Industrial Products
- Braithwaite & Co. Ltd.
- Elecon Engineering Co. Ltd.
- Godrej & Boyce Mfg. Co. Ltd.
- Gujarat Appollo Equipment Ltd.
- Heavy Engineering Corporation Ltd.
- Hyderabad Industries Ltd.
- International Combustion (India) Ltd.
- Jessop & Co. Ltd.
- Macneil Engineering Mukand Ltd.
- Shethia Erection & Material Handlers
- TRF Ltd.
- WMI Cranes
The worldwide technology leaders in the construction equipment sector are: Komatsu, Caterpillar, Hitachi, Terex, Volvo, Scania, Case, Ingersoll-Rand, HAMM, Bomag, John Deere, JCB, Poclain, Bitelli, Hyundai, Kobelco and Daewoo. And good news is that almost all the technology leaders have presence in India either as joint ventures, or have set up their own manufacturing facilities, or marketing companies.