Western Europe Construction Equipment Market - Strategic Assessment & Forecast 2024-2029

MARKET OVERVIEW

The Western Europe construction equipment market size by volume was valued at 388,607 units in 2023 and is expected to reach 458,638 units by 2029, growing at a CAGR of 2.80% during the forecast period. Western European governments are heavily investing in renovating aging infrastructure and developing new projects, such as expanding ports, railways, roads, and highways. Key initiatives, including the UK's 'National Infrastructure and Construction Pipeline,' Germany's 'National Hydrogen Strategy,' and various housing schemes, for instance, the 'Affordable Housing,' are expected to boost the Western Europe construction equipment market during the forecast period.

Increased Investment in Public Infrastructure Projects Across Western Europe

1. I recently released the National Infrastructure and Construction Pipeline in 2023. The United Kingdom outlines planned and projected investments in significant economic and social infrastructure for the next decade. The pipeline indicates a planned investment of approximately USD 81 billion between 2023/24 and 2024/25 for major infrastructure and construction projects. Such projects are projected to support the growth of the Western Europe construction equipment market.
2. In Spain, The European Investment Bank (EIB) has funded 136 projects under the infrastructure and innovation program with support from EFSI. According to the General State Budget Project 2023, Spain increased infrastructure investment by 7% in 2023. Road investment will reach USD 2.4 billion to improve road safety and reduce traffic accidents.
3. Belgium's rail infrastructure manager, Infrabel, plans to secure a USD 1 billion loan to finance its 10-year plan from 2023 to 2032. This funding will enhance capacity on key rail routes, including the Flemish corridor between Bruges and Ghent and a southeastern route from Ottignies-Louvain near Brussels to Luxembourg.
4. The UK Infrastructure Bank is providing USD 37.9 million in funding to support GeoPura's deployment of Hydrogen Power Units (HPUs) and the construction of one of the UK's largest green hydrogen production facilities. This initiative was awarded Government funding in the Hydrogen Business Model Allocation Round 1 in December 2023.
5. The Green Finance Fund (GFF), launched in June 2023, aids the Greater London Authority (GLA) in accelerating the decarbonization of buildings, energy, and transportation systems to achieve London's Net Zero 2030 objective. The UK Infrastructure Bank's investment in the Green Finance Fund (GFF) will bolster London's expanding green economy, currently valued at USD 60.6 billion.
6. The Climate Protection Ministry has committed USD 22.5 billion for infrastructure investments under the 2024-2029 framework plan in collaboration with the Austrian Federal Railways (ÖBB).
7. The Ministry of Transport in Spain allocated USD 10.6 million to digitize the state highway network. Construction of the A-11 road between El Burgo and San Esteban de Gormaz in Soria will begin in 2024.
8. In France, the mega project, Grand Paris Express, comprises four new automatic metro lines built in the Greater Paris region. It will consist of 200 km of new lines and 68 stations. This network aims to double the capacity of the Paris metro and link its suburbs. The project will be fully operational by 2035. The estimated budget of the project is USD 28 billion.
9. RWE (Nuclear electric power generation company) announced in November 2022 that it would build a storage facility to provide grid-balancing services for its power plants in Germany. Therefore, the batteries will be connected at 2 RWE power plants in North Rhine-Westphalia. The project is estimated to be completed by 2025.
10. Spain and France signed a new agreement in October 2023 to construct an underwater gas pipeline connecting Barcelona and Marseille. The pipeline will allow Spain and Portugal, two of the top importers of LNG, to ship their extra supplies to France and other European nations.
11. In April 2024, Google unveiled plans to invest USD 1 billion in constructing a new data center in Farciennes, near Charleroi, Belgium. The investment will include an initial building on the site, with two more planned.
12. The Guyanese Ministry of Home Affairs oversees the reconstruction of the New Amsterdam Prison Complex, aiming to modernize it into a state-of-the-art facility. The project involves inspecting various construction lots.
13. Rolls-Royce, in April 2023, announced its plans to produce green hydrogen. The Baden-Württemberg Ministry for the Environment, Climate, and Energy Management supports the project with an investment of USD 4.6 million. The “H2Infrastructure” will involve the production of green hydrogen, including the development of infrastructure and the construction of test benches.

KEY HIGHLIGHTS

1. Earthmoving equipment accounted for the largest market share of the Western Europe construction equipment market in 2023. Excavators in the earthmoving segment accounted for the largest share in 2023. Rising investment in housing, port expansion, and public infrastructure projects is expected to drive the demand for excavators in the Western Europe construction equipment market.
2. In 2023, construction activity in Western Europe stayed strong despite challenges like increased financing expenses, rising input costs, and labor shortages. This strength is anticipated to persist in 2024, though the future differs across countries and sectors.
3. Hydraulic excavators are Western Europe's most widely produced construction equipment, specifically in the UK. The production of hydraulic excavators in the UK primarily focuses on JCB in Staffordshire, which serves the domestic market.
4. In France, construction equipment sales experienced a marginal decline of 0.3%, indicating a relative stabilization. However, sales of earthmoving equipment saw a slight increase of 2%. Heavy equipment sales decreased by 5.9%, whereas compact equipment sales rose by 4.3%. At the start of 2023, there was a notably high level of orders. Throughout the year, order intake gradually decreased, returning to more typical delivery times.
5. In Spain, construction equipment sales rose compared to 2022. Although earthmoving equipment sales slightly declined by 4%, rigid dumpers showed strong performance. In 2023, renovation projects and civil works were the primary factors propelling the construction industry. A minor decline was observed in both the residential and non-residential sectors.
6. In Belgium, invoiced sales for delivered earthmoving and construction equipment remained relatively stable overall, although there were significant variations between different types of equipment. Order intake saw a decline ranging from 15% to 25%.
7. Another growth product, not just in the UK but also in other countries of Western Europe, is telehandlers, which are widely used across construction, agriculture, and materials handling applications, making them very versatile. Production in the UK is again dominated by JCB, with significant imports from Europe and other global markets by import brands.
8. German crane and other material handling equipment rental companies Wittrock and Ulferts recently, in December 2023, made a significant purchase of 50 new Liebherr All Terrain cranes. The order, placed at the end of last year, encompasses a range of models, including three models ranging from 50 tonnes to five-axle units of 250 tonnes.
9. As of Sept 2023, HD Hyundai Infracore Co. is establishing its directly managed European subsidiary in Germany to counterbalance sluggish demand from financially strained Chinese developers. This subsidiary will manage sales, after-sales service, and component supply for its construction equipment under the DEVELON brand, aiming to reduce dependence on dealers.

MARKET TRENDS & DRIVERS

Digitalization and Technological Integration in Western Europe Construction Equipment Market

1. Digitalization has evolved from a trend to a fundamental driver of innovation in the Western Europe construction equipment market, enhancing efficiency, safety, and adaptability.
2. According to a 2023 survey, 60% of European construction companies have integrated digital tools, a significant increase from 40% five years ago. Automation and AI-powered analytics have revolutionized equipment operations, with over 3,000 AI-powered machines introduced in 2022, leading to increased efficiency and decreased errors.
3. This automation has reduced manual involvement by 15% over the past two years. IoT integration has surged, with over 200,000 construction machinery units in Europe being IoT-enabled, enabling real-time data monitoring and predictive maintenance.

Increasing Focus on Electric and Autonomous Construction Equipment Across the Western Europe Construction Equipment Market

1. The electric equipment market is anticipated to be driven by government initiatives, growing demand for eco-friendly construction projects, and the trend toward industrialization in the Western Europe construction equipment market. However, an important challenge is the substantial cost linked to electric construction machinery, which might impede market growth.
2. Develon showcased its latest driverless machines IN ConExpo, including the DD100-CX dozer and the DX225-CX crawler excavator, as part of its Concept-X2 equipment range. These autonomous machines feature a cabinless design and a consistent visual style, representing a significant update from the Concept-X machines showcased in 2019.

Rising Trend for Waste-To-Energy Projects in the Region to Boost the Sales of Wheeled Loaders in the Western Europe Construction Equipment Market

1. Stringent waste management laws and diversion targets incentivize the implementation of waste-to-energy technologies. These regulations compel waste management firms to prioritize sustainable waste treatment and energy reclamation methods.
2. West Bromwich Waste To Energy Project is a 49.9 MW biopower project. Verus Energy and Wheelabrator Technologies collaborate on its development, sharing ownership with Low Carbon Group Limited.

Surge in Investment for Public Infrastructure Supports The Western Europe Construction Equipment Market

1. In Sept 2023, Germany's Federal Ministry for Transport announced a USD 43.3 billion investment plan until 2027 to improve Germany's railway infrastructure at the 2023 Rail Summit in Frankfurt.
2. The ministry stated that the majority of funds in 2024 will be directed toward Germany's construction industry, with approximately USD 20.4 billion designated for building renovations and new constructions.
3. The UK's 2023 National Infrastructure and Construction Pipeline comprises 660 projects, programs, and other investments across various infrastructure types. Over the next two years to 2025, the total value of planned public and private investment is USD 205.7 billion, an average of USD 102.8 billion per annum.
4. The Dutch government plans a multi-billion-dollar investment in Eindhoven to retain ASML and boost the region. The USD 2.6 billion 'Project Beethoven' will enhance housing, education, and transportation while addressing electric grid capacity shortages.

High Expenditure in Green Hydrogen and Green Energy Projects

1. In 2023, the German government unveiled its National Hydrogen Strategy update, aiming to accelerate establishing a hydrogen market to achieve climate neutrality by 2045. The update includes doubling the 2030 target for domestic electrolyzer capacity to produce green hydrogen from renewable sources to 10 gigawatts.
2. Germany's Ministry for Economic Affairs and Climate Action (BMWK) has approved subsidies totaling USD 17.3 billion for constructing 10 gigawatts (GW) of hydrogen-ready gas-fired power plants.
3. This subsidy scheme represents a reduction from the initially proposed maximum capacity of 23.8 GW, announced in August 2023. Although the timeline for launching tenders for the gas-fired stations has not been disclosed, they are expected to commence shortly.

Rising Investment in Residential Construction and Price Stabilization Across Western European Countries

1. In March 2024, in September 2020, the UK government shared details about the affordable homes program for 2021-2026, revealing USD 14.3 billion in funding. The initiative aims to deliver approximately 180,000 new homes throughout England by March 2029.
2. According to February 2024 government data in the UK, single-family home (SFH) investment reached a record high of USD 11.3 billion last year, with investors acquiring or financing the development of over 6,200 rental houses.
3. As of April 2024, the Spanish government will finance the construction and renovation of an additional 43,000 affordable rental homes. This initiative supplements the existing plan to repurpose 50,000 foreclosed homes managed by Spain's bad bank, Sareb.
4. Moreover, in 2024, France is experiencing a notable decrease in real estate prices, with the average price per square meter dropping by 1.8% compared to the previous year.
5. This decline is driven by significant changes in the housing market, including a sharp decrease in home sales, falling below 900,000 for the first time in seven years—a nearly 25% decrease compared to 2022.

INDUSTRY RESTRAINTS

Skilled Labor Shortage and Aging Population in the Region Will Slow down the Pace of Construction Activities

1. In Feb 2024, the German government highlighted the significant challenge facing Europe's largest economy, emphasizing growth constraints due to a workforce shortage. For 2024, the government anticipates a growth rate of 0.2%, down from the previous forecast of 1.3%.
2. With approximately 700,000 vacancies currently unfilled, Germany's economic growth potential has declined to 0.7% from around 2% in the 1980s and is projected to decrease further to 0.5% if the issue remains unresolved.
3. Although the construction industry is among the largest sectors in the U.K., it faces challenges recruiting new talent and acquiring the necessary skills. The most recent Construction Skills Network (CSN) report indicates that approximately 225,000 new construction workers will be required by 2027 to meet the industry's demands.

Government Regulations and Their Associated Costs

1. Several complex regulations across EU member states make compliance challenging for manufacturers and operators. For example, by 2022, the EU had implemented over 500 regulations concerning construction equipment, covering areas like emissions and safety standards. This number has increased by 20% in the last five years, highlighting the rapid tightening of regulations.
2. Manufacturers bear the impact of these challenges. In 2023, the costs of complying with the EU's strict emission standards for construction equipment reached USD 12.7 billion, a 30% increase from the previous year.
3. About half of manufacturers had to modify their machinery to meet these standards, driving up production costs and delaying new equipment releases by an average of 8 months. 
4. End-users also face significant hurdles. European construction companies spent an average of USD 1 million annually in 2023 on training and certification to ensure compliance with evolving safety and operational standards.

Increasing Construction Costs Will Have a Negative Impact on the Western Europe Construction Equipment Market

1. Total new work output from 2024 to 2029 is forecasted to grow by 21%. Building costs are predicted to increase by 15% over the next five years, while tender prices are expected to rise by 17% during the same period.
2. In the U.K., the price of insulating materials increased by 28.8%, ready-mixed concrete by 18.7%, and fabricated structured steel by 24.2%. Other input materials such as timber, cement, plywood, and roof tiles witnessed high prices due to their limited supply.
3. In 2023, the construction cost index of Spain has escalated sharply, predominantly driven by the strong global demand recovery and the war crises in Ukraine. The prices of energy-intensive building materials, such as concrete, cement, and bricks, have continued to increase, irrespective of declining energy prices.

VENDOR LANDSCAPE

1. Caterpillar, Komatsu, JCB, Volvo CE, SANY, Liebherr, and Hitachi Construction Machinery are the front runners in the Western Europe construction equipment market. These companies have a strong market share and offer diverse equipment. 
2. Takeuchi, Hydrema, John Deere, Yanmar, LiuGong, Bobcat, Terex, Tadano, Bomag, Merlo Spa, Wacker Neuson, and Toyota Material Handling are niche players in the Western Europe construction equipment market. These companies offer low product diversification and have a strong presence in the region’s market.
3. XCMG, DEVELON, Kobelco, Kubota, HD Hyundai Construction Equipment, Zoomlion, Manitou, and CNH Industrial are emerging in the Western European construction equipment market. These companies are introducing new technologically advanced products to challenge the market share of the region’s market leaders. 
4. Hidromek, AUSA, Jungheinrich AG, Kato Works, Manitowoc, Bell Equipment, Kalmar, Haulotte, DIECI, JLG, Euromach, Ammann, Mecalc, Sunward, and VF Venieri Spa have low product diversification in the Western Europe construction equipment market. These companies are lagging in adopting new technologies.