Construction Equipment Industry: Broadening Horizons
The Construction Equipment market has been experiencing a slowdown since several years due to economic stagnation on the global front. Despite this scenario, the Indian Construction Equipment industry has slowly and gradually sustained its growth in the overseas market. Relin
The Construction Equipment market has been experiencing a slowdown since several years due to economic stagnation on the global front. Despite this scenario, the Indian Construction Equipment industry has slowly and gradually sustained its growth in the overseas market. Relin Hedly, Equipment Times, highlights the export potential of OEMs, challenges faced and possible solutions that could help them propel growth amidst intense competition in the global market.
Export Prospects
The Indian Construction Equipment industry is looking beyond the existing markets and ruling overseas markets with its manufacturing ecosystem. The country has a very well-crafted process for exporting construction equipment to other countries via seaports. Although several OEMs export to Middle East, African countries, some export only to SAARC countries.
Despite facing a tough time last year, from December onward, the Indian CE market has been showing signs of recovery and this trend is expected to continue in 2020. Exports will show similar trend as most of the economies which had been through touch finance issues are also recovering.
To create a strong foothold in the international market, products with global standards coupled with good quality integrated with advanced technology, swift after-sales service, and easy spare parts availability is a must.
On the global platform, competition is intense since the market is open to everyone, right from the global leaders to local players. Diverse range of high-quality products at competitive price remains the differentiation factor. To adapt the products for the global markets, constant upgrade is essential. R & D centre equipped with modern facilities are being devoted towards the development and speedy commercialization of globally competitive products. Machines equipped with advanced technologies like telematics and IoT are in demand in the global markets and OEMs are collaborating with experts to develop high quality, technically advanced products for export customers.
Moreover, diverse range of quality products helps create a strong impact on the global market. Competitive prices, availability of spares and high-quality products give OEMs a direction to create a strong foothold in the international market. Furthermore, climate change and environmental targets are pushing both Construction & Agriculture equipment manufacturers to adapt new solutions for the export market.
While this could be a disruption in 2020, it will not impede the long-term growth as food production and construction should continue to happen as long as people are there.
Challenges: Finance, Profits and more…
In India, the major challenge continues to be – To Remain Profitable in a highly competitive industry even though it is growing, and there is continuous effort required to optimize costs while maintaining product innovations, productivity and service levels. Finance for construction equipment, especially for getting into the leasing sector is another major challenge being faced by this industry. If these issues are resolved, then growth can increase many folds as more and more companies are now keen to go for leasing, rather than owning of equipment. Stringent prequalification norms for awarding of contracts has become a necessity to ensure that the companies awarded the jobs deliver in terms of quality and product, within the targeted time. Creating and sustaining a strong brand image is again a hindrance faced by some manufacturers in the overseas market, which are being overcome by diverse range of products and after-sales service. The cost of logistics is higher as compared to other countries. Also, a lot of improvement is required especially in the infrastructure including road, railways and ports to handle high volume efficiently. Although the Indian government has already made many changes in processes, some manufacturers feel there exists a lot of scope as far as simplifying the processes is concerned.
Lately, the Construction Equipment (CE) industry has been witnessing a talent crunch. Hence, there is a need for construction equipment manufacturers to engage with academic institutions and leverage opportunities to attract potential employees. This can be ensured by showcasing the evolution brought in the industry by IoT and Big Data to the young talent.
India Scenario
Research suggests the Indian construction equipment market stood at around $ 3.2 billion in FY17 and is projected to grow at a CAGR of 6.8% during FY18-FY24 to cross $ 5.3 billion by FY24, on account of the country’s expanding construction industry. Rapid urbanization, increasing foreign investments and surging demand for customized equipment are few of the other major factors expected to boost demand for construction equipment in India in the coming years. Increasing number of public private partnerships and government initiatives such as smart city development projects would also aid the construction equipment market in India. Growth in real estate projects and increase in infrastructure spending by private and public entities are pivotal factors driving growth of this segment.
Significant growth in the mining industry is another aspect that could provide major boost to demand. In the last 5 years, the road infrastructure in India has witnessed an exponential growth due to proactive policies and initiatives of the MOST (Ministry of Surface Transport) at the center and also by the road development authorities in various states throughout the country. At the MOST level, from around 12 km /day – the road projects had peaked to 30 km/day and similar growth has been achieved at some of the states. This had resulted in a CAGR growth of 30% for the road construction equipment industry during the last five years. Allocation of Rs. 100 lakh crore for infrastructure over the next five years, including increased allocation of funds for roads and highways along with the proposal to develop five new smart cities with states in PPP mode is another positive.
Government reforms and initiatives
Amidst the subdued demand for Construction Equipment, manufacturers are showing signs of optimism with the government’s focus on affordable housing projects and road sector projects. With increase in investment opportunities, several projects including roads and highways will witness major boost.
On the export front, the best reforms for Indian government to boost the export sector over time is to continue to align the national requirement with international policy frameworks. Adapting a framework which is widely accepted enables manufacturers in India to have a sufficient volume base in India which enables export. Cover Story Inputs follow
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