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Comparative Outlook of the Earthmoving Equipment Market

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Construction equipment accounts for around 524 percent of the total cost incurred in any construction project. The construction industry is a primary demand driver for earthmoving and road construction equipment. Increasing mechanization of industry and construction facilitates greater penetration of construction equipment. Recent Government policies around tax benefits for infrastructure ventures have boosted equipment usage. Construction investment is composed of three components infrastructure investment, real estate construction investment and industrial construction investment. Broadly, there are four arms of the earth and construction equipment industry: earth-moving equipment, material handling cranes, concrete equipment, and road building equipment. The earth-movers form the largest segment of the construction equipment sector in India.

 

Earthmoving Equipment

Market Trend:

Technological focus has led to a significant number of development initiatives and superior equipment. Major technological developments such as real-time monitoring facilities for detecting as well as monitoring system failure are forecast to propel demand. Growing adoption in the commercial sector will also favorably impact revenue. Multifunctional machinery has witnessed considerable adoption over the recent past, and provides several advantages over traditional or single function counterparts. These include reduce time and labor, as well as high degree of efficiency and productivity. Growing large scale construction projects along with enhancement in after-sales services are among other key drivers. High capital and operating expenditure may restrain growth. Unpredictable raw material cost, uncertainty in economic conditions, and the presence of emission control regulations are factors responsible for impacting the global earthmoving equipment market price trend.

Construction is forecast to remain the leading application, with over 60% of the earthmoving machinery market share in 2015. Underground mining equipment include hydraulic shovels, long wall mining equipment, cable shovels, etc. Other mining equipment includes mineral processing machinery, surface machinery, pulverizing & screening equipment, and crushing, drills & breakers. Demand across these sectors is predicted to boost earthmoving equipment market size. Global surface mining equipment market is predicted to exceed USD 29 billion by 2023. Increasing mechanization of construction processes coupled with strong economic growth is anticipated to boost the Asia Pacific industry demand. Increasing spending in infrastructure activities may also escalate demand, with 8.3% CAGR estimates. Industry players prioritize lower price points as opposed to high energy efficiency in price sensitive regions. They also aim to reduce production cost and meet emission regulations. Investment in technology, innovation and R&D are the key growth strategies employed to address changing customer requirements. Competitors aim at providing product differentiation as the customer loyalty depends on competitive pricing, quick delivery and after-sales technical support. Rental companies have enabled contractors to complete specific job requirements with greater cost control and flexibility. Rising trend towards usage of used heavy machinery across several countries is expected to prove as a threat to the new products that are to be launched in the industry.

 

Market dynamics of various types of Earthmoving equipment

The earthmoving equipment market in India is estimated at about US$ 1.4 billion. The predominant sub-segment in this is excavators, which account for just over half the market.

Excavator: The excavator market in India was around US$ 733 million in FY’06 with a total of about 4455 units being sold. There is a sizeable market for used equipment as well. Excavators have registered a 30 per cent CAGR (Compounded Annual Growth Rate) for the past four years.

Road building equipment are used in the various stages of road construction. Widely used ones are excavators, diggers, loaders, scrapers, bulldozers, etc. Globally, leasing is the most popular way of obtaining new equipment and constitutes around 45-55 per cent of construction equipment market in the US. In India, however, equipment leasing is not as widespread; it constitutes only around 5-8 per cent of construction equipment market.

Backhoe Loaders: India is the second largest market for backhoe loaders in the world with a market size of approximately US$ 358 million. The market has been growing at a rate of close to 37 per cent CAGR over last four years. Going ahead growth is likely to be at least 11 per cent CAGR over the next few years. Most industry players however expect much faster growth (around 30-40 per cent) in the near term. JCB India is the leader in this segment with a share of over 70 per cent. The total market for wheeled loaders was approximately US$ 64 million in FY’06 with a total of about 1321 units being sold and has been growing at a CAGR of about 41 per cent over the last 4 years. The growth is expected to continue at 10 per cent CAGR over the next few years. As in the case of backhoes, faster growth of about 20-30 per cent is expected in the near term. Reconditioned equipment account for about 5 10 per cent of this segment. The segment has seen erratic growth over the last 3 years owing largely to delays in the road infrastructure development plans of the Government. However, the CAGR over the last 3 years has been healthy at 20 percent.

Tunneling & Drilling Equipment: Tunneling & Drilling equipment are primarily used for mining, irrigation, construction (road, ports, airports, railways, power, etc.), urban infrastructure, and pipeline infrastructure. The product range in this category includes Rotary / DTH drilling, hammer track drill, boring equipment, and demolition equipment. Bharat Earthmovers Limited (BEML) & Caterpillar lead the market of construction vehicles, consisting primarily of dumpers & dozers.

 

Buldozers: Generally bulldozers are believed to be the most heavy-duty machines on the market. Bulldozers are incredibly strong and the best choice for shifting large amounts of dirt on sites where there are wide open spaces, rough grading, and grinding rock. Bulldozers are easily identified by the huge blade at the front of the equipment that is controlled with the use of hydraulic pistons.

Skid Steer Loaders: Skid steer loaders can be used for the widest range of purposes of all heavy earth moving machinery. It’s also equipment which is very easy to use and being on wheels, with a tight turning range, is the best choice for smaller sites. Skid steer loaders help lower soil compaction, work well in difficult conditions such as snow/mud, and have a limited impact on finished zones because of their tread system.

Motor Graders: Most often employed to fine grade and shift small amounts of dirt and prepare the base before laying asphalt, motor graders are identified by their longer adjustable blade used to make surfaces smoother. They also feature an additional blade so they can be used for mining underneath the ground.

Trenchers: Trenchers are mostly used to dig trenches before pipes are laid down. A range of different trencher machines are available including walk-behind modules, smaller-sized trenchers or heavier equipment used to trench firmer ground. Trenchers are highly versatile in that they utilise alternating digging functions according to the needs of the job. They should be dealt with by experienced construction professionals because they can be very dangerous.

The way forward

The government is aiming serious investments in some of the core areas of infrastructure. We have detailed some of the projects which will shed light on the growing prospects of the earth moving equipment business/industry.

 

Roads

The FYP lays out an aggressive scheme for road network development approximately INR 9.15 lakh crores of investment is planned over the five-year period. An investment of INR 37,880 crores in National Highways Authority of India (NHAI) and state roads is proposed in the new government’s Union Budget, including INR 3,000 crores for the northeastern region.
Further, INR 14,389 crores has been earmarked for the improvement and construction of rural roads through the Pradhan Mantri Grameen Sadak Yojana (PMGSY) program.

Airports

Airport improvements are also planned, with INR 88,000 crores of development earmarked during the ongoing FYP period to cater to the expected doubling of passenger- and cargo-carrying capacity in the same period. According to the announcements in the Union Budget FY1415, the government will launch a scheme for the development of new airports in tier 2 and tier 3 cities through public-private partnerships. They will also put forward plans to build 200 low-cost airports in the next 20 years to connect tier 1 and tier 3 cities.

Irrigation

The government also plans to invest INR 5 lakh crores in irrigation during the FYP period to realize its target of increasing the gross irrigated area for India by 13 million hectares. The Union Budget earmarked an investment of INR 1,000 crores to create infrastructure for the rural irrigation scheme known as Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), which is aimed at guaranteeing water to farmers. A large-scale river-linking project has also been announced, and the government has set aside INR 100 crores to fund a detailed study.

Urban infrastructure

Urbanization is a priority in the Union Budget, which outlines planned investments in many different areas of urban infrastructure development. A total of INR 50,000 crores has been allocated for urban infrastructure projects. Development of 100 smart cities as satellite towns of larger cities and modernization of existing mid sized cities which also include Metro rail projects planned for cities with populations greater than 20 lakh.

 

Market Potential:

Among product types, the crawler/ wheeled/compact loaders segment is estimated to account for a major share and dominate the earth moving equipment market over the projected period. The segment is estimated to gain 90 basis points between 2017 and 2025, owing to China remaining the biggest market for wheeled loaders as the country accounts for the largest share of the earth moving equipment market. The segment is estimated to create 2x incremental opportunity than that of the mini excavators segment between 2017 and 2025. The crawler/wheeled/compact loaders segment is expected to create a total incremental opportunity close to US$ 15 Bn between 2017 and 2025. The segment is projected to reach a market value of more than US$ 65 Bn by 2025 end, expanding at a CAGR of 7.2%. The crawler/wheeled/ compact loaders segment is estimated to be an attractive segment in terms of market share owing to the increasing demand from the construction industry in Asia Pacific.

The global earthmoving equipment market is expected to reach USD 184.56 billion by 2022, according to a new study by Grand View Research, Inc. Technological advancements such as facilitation of real-time monitoring for detecting and monitoring equipment failure are anticipated to fuel product demand. Vendors are increasingly investing in R&D to develop solutions in order to improve machine operations. Technology products such as AccuGrade Grade Control System and Computer Aided Earthmoving System (CAES) are increasingly being incorporated. Manufacturers also offer products with GPS technology and other electronic control modules and database tools for enhancing product offering. Increasing mechanization of construction processes coupled with strong economic growth in Asia Pacific earthmoving machinery market is anticipated to boost consumption in the region. Rising expenditure on infrastructure activities is also expected to escalate demand significantly over the coming years. Earthmoving Equipment Market size was USD 104.97 billion in 2015 with revenue estimates of USD 192.45 billion by 2023, at 7.9% CAGR. Increasing transport infrastructure development worldwide and favorable government initiatives is expected to drive growth.

Image and References:

  • www.businessworld.in,
  • www.thehindu.com
  • www.aljazeera.com
  • www.atkearney.in
  • www.ibef.org
  • www.resolute-equipment.com
  • www.persistencemarketresearch.com
  • www.gminsights.com
  • www.jcb.com/en-in
  • www.tiplindia.in/cat
  • Mahindra & Mahindra

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