Global and Indian Trends of CE Industry

 

According to Off-Highway Research projections, the global Construction Equipment (CE) market saw a peak in sales in 2021 with nearly 1.3 million units sold worldwide. The CE industry has seen several cycles of ups and downs but is noteworthy that the trend is moving towards higher numbers in years to come. However, projections suggest that sales are likely to decline over the next few years due to lack of growth in the Chinese market. Sales in 2023 are forecast to drop to just over 1.11 million units, falling to 1.05 million in 2024, 1.03 million in 2025, then 1.07 million in 2026 and 1.12 million in 2027. 

The primary reason for this downward trend is due to lack of growth in the Chinese market. The slowdown in global sales over the next couple of years comes amid a decline in China between 2020 and 2023 when sales are forecasted to fall from a high of 412,485 units to less than half that at 193,766. Off-Highway Research forecasts a gradual recovery in sales between 2023 and 2027 by which time it expects sales to have climbed back to 270,415.

While China is witnessing downward trend in 2023, India is likely to witness an approximate 8% to 10% growth vis-a-vis 2022 (from about 69 K units in 2022 to about 76 K units in 2023). 

The reasons for optimism in the Indian CE market are primarily for the following reasons.

A. The BS-4 emission norms especially in the wheeled segment is stabilizing and market is accepting the changes both in the cost points as well as in terms of the technology adaptability.

B. 2024 is an election year, so the govt is pushing hard on a lot of infrastructure investment just before the election year.

The growth could have been better, but India will see some of the major states getting into election mode during this year, which can really suck out a lot of liquidity from the market (especially the major contractors). As I write this article, the state of Karnataka is actually in the election mode (elections will be held on 10th May 2023 and results expected by 13th May 2023). Elections always bring that feeling of uncertainty until the new government is formed and is formed by solid majority and not as a coalition. The 2024 is going to a major disruptor for Indian CE market for the following reasons.

Two major disruptions - 

A. the national general elections and 

B. the emission norms will again be subjected to upward revision to BS-V

Another interesting trend across the world is the growth of the Mini and Mid-sized excavator sales. In 2021, approximately 325,000 units were sold across the world. The primary reason for such growth are; Smaller footprint for operations along with 360-degree slew and lower entry price compared to the Backhoe loaders. The primary markets for the mini excavators are the North American and European markets, but China has significantly adapted to the mini excavator usage as well with over 100,000 machines sold in 2020.

Comparatively, India is a very small market for the mini excavator, in 2022, India saw mini sales breaching the 2500 mark and expected to cross 3000+ units in 2023. Mini along with Skid Steer loaders were the highest growth segment in 2022 in percentage terms.

The Backhoe Loaders still command the highest numbers in the Indian CE industry for many decades. However, this is slowly losing out to the excavators, minis other dedicated machines for the target application. In the current scenario, only organizations, which can keep their input costs lower will be able sustain a long run (as the growth will become smaller). One of the key components in any CE machine is the engine, because of the constant upgradation in the emission norms which are driven by the environmental issues. Hence. organizations who are constantly innovating for lower input costs and also adapting to alternative fuel strategy can survive. We might see some kind of consolidation and restructuring in the market in the next 2 to 5 years through merger and acquisitions in the market.