Indonesia Construction Equipment Market - Strategic Assessment & Forecast 2024-2029

INDUSTRY INSIGHTS

The Indonesia construction equipment market size by volume was valued at 28,568 units in 2023 and is expected to reach 36,510 units by 2029, growing at a CAGR of 4.17% during the forecast period. The Indonesian government aims to invest USD 430 billion in infrastructure development projects from 2021 to 2024. There was a 20% rise in infrastructure investments from the last investment plan in 2015–2020. Furthermore, the country’s infrastructure development projects are mostly in the transport sector. Investment projects are divided into three sectors – road, rail, and port development, accounting for 29%, 22%, and 23%, respectively. The government investment increase in the construction & mining industry is expected to drive the Indonesia construction equipment market during the forecast period.

Increased Investment in Public Infrastructure Projects

• Association of Heavy Equipment Manufacturers of Indonesia (HINABI), the amount of heavy equipment used for the mining sector is 40% of the total production. There is a surge in the demand for nickel, tin, and coal due to the rise in industrial activities post-pandemic in 2023.
• Government funding facilitates this transition, boosting demand for new solar field projects. The White House highlighted that the private sector has committed USD 133 billion in clean energy investments, partly influenced by the Inflation Reduction Act.
• The government's goal is to achieve carbon neutrality by 2060. The government is increasing its focus on using renewable energy (by reducing the use of fossil fuels, promoting electric vehicles in the transportation sector, and using solar panels on buildings for electric generation).

KEY HIGHLIGHTS

• Earthmoving equipment accounted for the largest share of the Indonesia construction equipment market in 2023. The excavator in the earthmoving segment accounted for the largest share in 2023.
• Construction equipment utilization by the construction industry as an end-user had the largest Indonesia construction equipment market share in 2023. Furthermore, Indonesia's market for 4.5-ton excavators is the second largest after 20-ton class excavators in 2023.
• Indonesia prioritizes infrastructure in its National Medium-term Development Plan 2020-2024, allocating a significant $359.2 billion investment.
• There are some major distributors of construction equipment in the Indonesia construction equipment market, like PT Hexindo Adiperkasa, Intraco Penta, and Traktor Nusantara. Furthermore, United Tractors accounts for one of the most significant shares of the Indonesian market.
• The Indonesia construction equipment market OEMs are adopting electric and hydrogen fuel technology.

• Komatsu develops hydrogen fuel cell excavators with Toyota systems for Southeast Asian markets, including Indonesia.
• Volvo launched the ECR25 Electric compact excavator, L25 Electric compact wheel loader, and EC55 Electric mini excavator.
• Komatsu also launched HB365-1 hybrid excavators in the Indonesian market in 2023.

• In June 2021, Hitachi Construction Machinery addressed cost and turnaround challenges by establishing a parts remanufacturing plant in the country. This facility eliminates transporting large and medium-sized hydraulic excavators to Japan for remanufacturing.
• China is investing heavily in the Indonesia construction equipment market in various infrastructure development projects. For instance, over 500 units of SANY equipment are used to construct high-speed railway projects between Jakarta and the City of Bandung.

MARKET TRENDS & DRIVERS

Intense Rivalry Between Chinese and Other OEMs in the Indonesian Market

• The level of competition among manufacturers in the Indonesian construction equipment market has grown due to the surge in demand for cheaper Chinese OEMs, which have easy financing facilities.
• Chinese manufacturer SANY controlled nearly 21% of the market share in the excavator segment of the Indonesia construction equipment market in 2022. Chinese manufacturers are providing cheap equipment at around 20% lower prices than their Japanese rivals.
• China is investing heavily in the Indonesian market in various infrastructure development projects. For instance, over 500 units of SANY equipment are used to construct high-speed railway projects between Jakarta and the City of Bandung, which are in progress in 2023.
• Other OEMs in the Indonesia construction equipment industry, such as Kobelco, Komatsu, Caterpillar, Hitachi, and Hyundai Construction Machinery, are increasingly focusing on continuous improvement in aftersales services supported by digital technology.

Adoption of Electric & Hydrogen Fuel Technologies
Concerns over environmental issues led the Indonesian government to aim for carbon neutrality by 2060. This triggered the need for electric construction machinery in the Indonesian construction equipment market. The increasing government focus on carbon emissions reductions in 2021 further supported the demand for electric construction equipment. Major construction manufacturers such as Volvo Construction Equipment, SDLG, and XCMG launched electric and compact mini excavators in Indonesia to tackle the growing industry demand. Furthermore, in 2021, Volvo Construction Equipment launched the EC55D compact excavators in Indonesia for smart city projects.

Government Investments in Public Infrastructure Projects Through the PPP Model

• In 2023, the government invested in 83 PPP projects for infrastructure development, which included 50 projects in the transportation sector, including 13 ports and 15 railways projects. Asian Development Bank provided a loan of USD 100 million to the Indonesian government to support these projects. In 2023, the Indonesian government planned 49 projects, 33 Public Private Partnership Projects (PPP), and 16 non-PPP projects.
• These 33 PPP projects include 18 in the road sector, 4 in the telecommunication sector, 1 in the electricity sector, 6 in the water supply sector, 3 in the transportation sector, and 1 in the energy conservation sector.

Investment in Transport Sector Projects Under the National Strategic Plan

• In 2022, the country’s government introduced National Strategic Projects in Indonesia. The projects are focused on increasing the region’s economic growth, improving community welfare, and increasing regional development.
• There are over 200 national strategic projects, ranging from toll road development and new airport construction to broadband enhancement coverage, worth nearly USD 500 billion.
• The 200 projects consist of 56 roads, 57 dams, 11 railways, 16 railways, 15 energy, 16 ports, 12 water and sanitation, two housing estates, eight airports, nine irrigations, one project in the education sector, one project in the coastal embankment, and one project for digital technology.

MARKET RESTRAINTS

Surge in Building Material Prices Hampers Construction Projects

• In 2023, the country’s government increased fuel and oil prices. The increase in fuel prices is expected to affect other commodities, including housing and property sectors. The rise in fuel prices will affect building materials such as iron, cement, sand, steel, and bricks.
• According to the Central Statistics Agency (BPS), in 2023 diesel prices increased by 37.8%, cement rose by 8.5%, asphalt increased by 15.3%, and steel roof prices fell by 3.85%.
• The cost of construction projects of buildings for roads, bridges, and ports increased by 9.6%; the cost of installations of electricity, gas, water, and communication centers rose by 5.6%.

Skilled Labor Shortage Hampering the Industry’s Growth

• Indonesia faced a shortage of skilled labor in 2023. The country needs ~113 million skilled workers by 2030 to achieve economic growth in the manufacturing, infrastructure, and agribusiness sectors.
• The country depends on foreign labor from Bangladesh, Nepal, and India. The shortage of skilled labor triggered during COVID-19 in 2020 due to lockdowns further impacted the labor market and hampered the Indonesia construction equipment market growth.
• In 2022, Indonesia had the lowest rate of foreign participation in the labor market among Southeast Asian countries. Indonesia has a 0.7% participation of foreign labor, whereas the participation of foreign labor was higher in Malaysia (13%) and Singapore (35%).

VENDOR LANDSCAPE

• Caterpillar, Kobelco, SANY, Hitachi Construction Machinery, and Komatsu are leaders in the Indonesia construction equipment market. These companies have strong market share and offer diverse sets of equipment.
• Toyota Material Handling, Kubota, Liu Gong, Yanmar, and JCB are niche players in the Indonesia construction equipment market. These companies offer low product diversification and have a strong presence in the local Indonesian market.
• Volvo Construction Equipment, Zoomlion, Takeuchi, and XCMG are emerging in the Indonesia construction equipment market. These companies are introducing new technologically advanced products to challenge the market share of market leaders in the country’s market.
• SAKAI, Sumitomo, Hyundai Construction Equipment, and Liebherr had an established presence for a significant period in the Indonesia construction equipment industry, coupled with diverse product offerings. These companies generally lag behind competitors in providing innovative and advanced product technology.