India Construction Equipment Market - Strategic Assessment & Forecast 2022-2028

MARKET INSIGHTS

India construction equipment market is expected to grow at a CAGR of over 8% from 2022 to 2028 and is expected to reach over $7.5 billion by 2028 from $5.2 billion in 2022. India's construction market sales are expected to reach 1,65,097 units by 2028. The growth in construction equipment is driven by government investment in infrastructure, mining, and renewable energy projects. 

India is one of the leading construction equipment markets in the world.

The Indian economy was adversely impacted by the COVID-19 pandemic, which led to a 7.7% contraction of GDP in 2020. However, 2021 witnessed a sharp growth of 8.9% due to high government investment in the Renewable energy sector (24%), Roads & highways (19%), Urban Infrastructure (16%), Railways (13%), and Others (28%) which includes mining, manufacturing & agriculture sectors.

According to the IMF report, the Indian economy will grow by 9.5% in 2022 and 7.1% in 2023. India's favorable business environment ranked 62^nd in the ease of doing business index in 2020. The country has an excellent administrative setup, attractive foreign policies, young & skilled workforce. The government initiatives to ease foreign investment norms in construction, transport, and renewable energy sectors attract FDI investment. The government also offers a range of tax incentives, support services, and import duty exemptions and provides free trade zone that supports the growth of FDI inflows in the country. Services, construction, and manufacturing were some leading industries that attracted nearly ~40% of FDI inflows in 2020.

Under National Infrastructure Plan Indian Government planned to invest USD 1.4 trillion in 2021, which includes some major projects such as Delhi- Mumbai Trade Corridors (USD 90 billion), Gujarat International Finance Tec City (USD 20 billion), Chennai Metro Rail (USD 14.9 billion), Diamond Quadrilateral (USD 13 billion), Nagapattinam Oil Refinery Plant ( USD 4.2 billion), Jewar International Airport (USD 4.19 billion), Navi Mumbai International Airport (USD 2.1 billion), and Paradip Paraxylene Purified Terephthalic Acid Plant (USD 1.8 billion).

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A surge in Investment in Transport Infrastructure, Real estate & Renewable energy Projects

In 2020, the Indian government planned to develop road infrastructure and allocated USD 212.8 billion of the fund by 2030. The union budget 2020-2021 boosted the plan, and USD 24.2 billion was dispersed to transport infrastructure.

The real estate sector in India is expected to reach USD 1 trillion by 2030. As per the projected growth trends during the pre-COVID-19 era, the sector's contribution was likely to rise to 13% of India's GDP by 2025. ICRA estimates that Indian firms are estimated to raise USD 48 billion through infrastructure and real estate investment trusts in 2022. The government of India's Housing for All initiative will likely bring USD 1.3 trillion in investments in the housing sector by 2025. The Pradhan Mantri Awas Yojana (Urban) [PMAY (U)] scheme is expected to push affordable housing and construction in the country and give a boost to the real estate sector. Substantial investment in the real estate sector will drive higher demand for the construction equipment market in India for renovation and new building construction activities.

The need for renewable energy supplies increased due to the measures taken by the Indian government measures to reduce fossil fuel dependency. The government aims to increase installed renewable energy capacity to 500 GW by 2030. Therefore, 45 solar parks with an aggregated capacity of 37 GW were approved in India, which included Solar Parks in Pavagada (2 GW), Kurnool (1 GW), and Bhadla-II (648 MW) in the top 5 operational solar parks of 7 GW capacity in the country. The country is focusing on becoming self-sufficient in manufacturing solar panels, which prompts the investment of USD 3.2 billion under the Atmanirbar Bharat scheme in 2022.

The rise in investments in transport infrastructure & real estate sectors is expected to drive the demand for excavators, backhoe loaders, and fixed and tower cranes.

The renewable energy projects support the demand for mini excavators and cranes in the Indian market.

The significant challenges are the sharp rise in Steel Prices & Shortage of skilled labor.

In 2022, steel demand is expected to increase by 17% to 110 million tonnes, driven by rising construction activities.

According to ICEMA, apart from COVID-19, and related supply chain disruptions, the construction equipment industry has faced challenges due to abnormal increases in steel prices since July 2020. A sharp rise in steel prices pushes the manufacturing cost of construction equipment which can negatively impact the demand for high price equipment such as large excavators, motor graders, and cranes in the Indian market.

The skilled labor shortage poses the greatest threat to the future of construction and will continue as demand increases. The boom in demand has put pressure on the construction industry, which is currently struggling to meet the increasing demand for its services. According to job market experts and company officials, various sectors, including the Indian construction sector, struggle to meet the rising demand for its services due to an increasing industry-wide skill shortage. Based on the Indian growth expected in the infrastructure and real estate sectors, about 83 million persons will likely be employed in this sector by 2022. Due to the high impact of the COVID-19 pandemic, there is an increasing labor shortage in this sector. Labor shortages in the construction sector will result in the delay of projects and will, impact construction equipment sales and will result in decreasing demand for construction equipment in the Indian market.

Rising demand for Mini Excavators & Electric Mobility Equipment

There is a surge in redevelopment and smart city projects across the country, which triggers the demand for mini excavators due to their compact size and quality to operate in small, congested cities. Low price and high fuel efficiency are other significant factors for the popularity of Mini excavators in the Indian market.

According to the Indian Construction Equipment Manufacturers Association (ICEMA), the industry is looking at electric mobility options increasing in the India construction equipment industry. Demand for electric equipment for commercial use is estimated to increase 15 times in the next six months. Rising manufacturing costs due to the rise in fuel prices, raw material prices, recycling, and energy prices are also key factors contributing to the increased use of renewable energy sources. For instance, SANY launched its first electric 300ton excavator in February 2022 and focuses on upgrading its capacity to 800 tons. In 2021, Volvo launched Smart Construction electric mobility, a solution comprising pollution.

KEY HIGHLIGHTS IN THE REPORT

• The earthmoving segment is the largest in the India construction equipment market, followed by material handling and road construction equipment. Excavators and Backhoe loaders were the fast-growing major construction equipment in the market in 2021. The demand for excavators and backhoe loaders will rise due to various government investments in infrastructure development, growth in renewable energy, and the country's mining industries.
• India is the largest market for Backhoe loaders in the world. The equipment is highly flexible, cheaper, and can operate on muddy and uneven surfaces, making it extremely popular in the Indian construction market.
• Various civil engineering works and smart city projects prompt demand for mini excavators in the market. The real estate and affordable housing projects support the demand for large towers and fixed cranes in the Indian market.
• The infrastructure investment in 2021 and the national infrastructure development plan drive the construction industry growth. The government's focus on renewable energy resources for power generation will attract significant FDI inflows in 2021.
• The surge in commodities prices and rise in demand for coal and iron ore in the market supports the country's mining industry growth. And government initiatives of make in India & Amtanirbar Bharat encourage the development of manufacturing sectors.
• According to the ICEMA report, India's construction equipment Industry is expected to grow by three times and become the second-largest market by 2025.

VENDOR LANDSCAPE

• The key players in the Indian construction equipment market are JCB, L&T, Caterpillar, Volvo CE, and ACE.
• JCB, L&T, ACE, and Caterpillar accounted for ~69% of the market. JCB holds 80% of backhoe loaders markets in India.
• Other prominent vendors are XCMG, SANY, Komatsu, Kobelco, Tata Hitachi, and Hyundai.