25 minute read
The Dimensions of
Cover Story - 2
Construction Equipment
Advertisement
the dimensions of construction equipment mArket
According to the latest report of Markets and Markets, the global construction equipment market is projected to grow from USD 208.3 billion in 2021 to USD 250.4 billion by 2026, at a CAGR of 3.8% during the forecast period. This growth is generated by various factors which cover various aspects, like increase in infrastructure investment post-COVID-19 pandemic is likely to fuel the demand of construction for construction equipment and increasing investments in urban infrastructure are expected to drive the construction sector, and by that is expected to boost the construction equipment sector, and thereby is expected to boost the construction equipment market during the predicted period.
Construction Equipment is specialized machinery that is used to carry out construction tasks. These equipment can perform various tough and heavy-duty tasks such as drilling, hauling, digging, paving, and grading. Construction, manufacturing, infrastructure, and oil and gas industries are the key users of the construction equipment. The emerging underlining on publicprivate partnership is expected to be one of the major growth driver of the construction equipment market.
These collaborations refer to a joint venture between the private sector and the government for the construction of public
ent PM tion equi C Constru
infrastructure. The private sectors manage the projects and contributes technical and operational knowledge to government programs in this sort of partnership.Besides, as the world’s population grows, the demand for infrastructure such as housing and transportation also increases, therefore, the demand for these machines is expected to rise due to an increase in construction activities around the world. Furthermore, government programs encourages people to buy new homes due to reduced loan rates and boost packages are likely to increase the growth of the market. The COVID-19 pandemic constitute a significant challenge in front of various economies across the world. It is evident that various businesses were majorly hampered due to the outbreak of the coronavirus. In addition, governments across all the countries were forced to enforce lockdowns over their countries, due to which all the businesses were sent under a temporary closure. Overdue to this, the supply of various goods and services was regulated. Additionally, due to the travel restrictions imposed by governments, the worldwide supply chain was majorly devastated. The COVID-19 pandemic also had a major impact on the construction equipment sector. Due to the lockdown, construction activities around the world were majorly standstill. The majority of the construction projects were canceled or postponed. Containment policies led to a significant drop in economic activity.
Expansion: Increase in infrastructure investments post the COVID-19 pandemic
Construction is among the significantly impacted industries due to the COVID-19 pandemic. Globally, the sales of the construction equipment have fallen but now the factors that are impacting the equipment manufacturers
include investments in infrastructure, residential, commercial, and industrial construction, mine and well institutional construction. There is a significance demand for projects such as hospitals and other medical facilities, laboratories, and shipping and other logistics Countries like US, UK, China and India are among the significantly affected countries in the construction equipment sector. Moreover, some countries have begun moderately reopening activities across sectors including the construction industry. For instance, China has begun industrial and commercial construction projects. Industrial output increased in April since January as the country began introducing new projects, and demand for construction equipment such as excavators increased significantly.
Restriction: Decreased Deal Value of Construction Equipment Projects
The COVID-19 pandemic has significantly impacted the construction and infrastructure sectors and offers a wide range of challenges to the construction industry, which are expected to hamper ongoing projects and decrease new infrastructure investments globally. Unpredictably of recovery from the pandemic has hindered the confidence of investors, thereby affecting the sales of construction equipment. The report stated that “Some construction projects have been delayed as a result of pandemic. For example, according to Associated General Contractors of America (ACG), small construction firms are not expected to experience cancellations of upcoming projects, and 56% of firms with revenues of USD 50 million or less reported that their projects had been postponed, compared with 71% midsized firms (with revenue between USD 50.1 million and USD 500 million), and 69% large firms (with revenues more than USD 500 million). “ In addition, possible distribution in the supply chain of construction equipment, including structural materials, are expected to lead to market growth in the short term. Thus, the market for construction equipment is expected to witness lingering growth. Therefore, the demand for construction equipment is expected to be affected owing to the low growth in infrastructure investments.
Electrification is shaping the construction equipment market and offering significant opportunities and design possibilities. Electrification has been increasing in most market segments such as cars, buses, etc. including construction equipment. Advanced
www.constructionmirror.com
ent PM tion equi C Constru
technologies are increasingly mature and affordable as they are also increasing regulations on emissions that have changed the future of the construction equipment industry. As several cities around the world have announced bans on the use of diesel within city limits, and thus it is impacting the operation of construction equipment in these cities. The stricter emission regulations are being implemented for heavy machinery and equipment on the global, regional and local levels across the Asian and European countries. The emission and noise-pollution standards implemented by these regulations can be easily overcome with the use of electric construction equipment. This opens a door of opportunities for construction manufacturers for the introduction of electric variants of existing/new products in the market.
Wheeled Loader> 80HP segment and 100-200HP segment are estimated to be the largest market during the forecast period.
By equipment type, the wheeled loader >80 HP segment is estimated the construction
equipment market in 2021. These equipment are used primarily to load/unload and bulk material movement in construction, quarry, and crushes. They are widely used in large scales infrastructure projects such as roads and highways, dams, ports, and airports. An increase in roadways and residential buildings in India and China is driving the demand for these equipment. Government initiatives in infrastructure development have further anticipated the demand for wheeled loaders. Construction equipment with this power output allows manufacturers to improve machine capability and downsize the engine to one of lower displacement. This reduces maintenance costs and improves fuel economy and better component layout. Construction equipment with a power output range between 100-200HP is primarily suitable for road, airport construction projects, and commercial projects. Excavators (crawler and wheeled), loaders (backhoe, skid-steer), and motor grader are considered under earthmoving equipment. These equipment are designed for construction activities.
The largest share of the earthmoving equipment market is projected to be dominated by Asia Pacific region in terms of value and volume by 2026. The construction equipment market has experienced growth in terms of the number of projects such as dams, airports, and hydroelectric projects, because of which many international companies have started their manufacturing plants in that specific regions. The regions such as China and India creates immense opportunities for the construction equipment market to grow as they are the most populated countries in the world.
The urbanization and the demand for better infrastructure facilities are creating significant growth opportunities for the earthmoving construction equipment. The global construction equipment market is dominated by global players such as Caterpillar Inc., Komatsu Ltd., Xuzhou Construction Machinery Group (XCMG), and Sany Heavy Industries. These companies develop new products, adopt new technologies, expansion of strategies, and undertake collaborations, partnership, and alliances & amalgamates to gain traction in the market. According to the ‘Research and Market’, India construction equipment market is expected to grow at a CAGR of 8.9 % during 2022-2028. The earthmoving segment is the largest in the Indian construction industry, followed by material handling and road construction equipment. Excavators and Backhoe loaders were the fast-growing major construction equipment in the market in 2021. The government is investing in the infrastructure development, growth in renewable energy and the country’s mining industries that is leading in increasing demand for excavators and backhoe loaders.
Some of the key players of construction equipment that are majorly contributing in the construction equipment growth like JCB is the leading manufacturer of Backhoe loaders in India and ACE is India’s leading material handling and construction equipment manufacturing company with a majority market share in hydraulic cranes, mobile cranes, mobile cranes and tower cranes segment. • India is the largest market for Backhoe loaders in the world. It can operate on muddy and uneven surfaces and on top of that it is highly flexible, cheaper that makes it extremely popular in the Indian construction market.
• Various running smart city projects and civil engineering projects give rise to the demand for mini excavators in the market.
The real estate and housing projects support the demand for large towers and fixed cranes in the Indian Market.
• The infrastructure investment in 2021 and the national infrastructure development plan drive the construction industry growth. The focus of the government is on the renewable energy resources for power generation that will attract significant FDI inflows in 2021. • As we can see the surge in commodity prices and rise in demand for coal and iron ore in the market support the country’s mining industry growth. The most popular initiative of the government ‘Make in
India’ & ‘Amtanirbhar Bharat encourage the development of manufacturing sectors.
• The surge in infrastructure development projects across India such as DelhiMumbai Trade Corridor, Gujarat International Finance Tec-City, Chennai Metro Rail and Diamond Quadrilateral. The Indian Railway infrastructure will see
www.constructionmirror.com
ent PM tion equi C Constru
an investment of $ 715.4 billion by 2030.
The Indian energy sector is expected to offer an investment opportunity by $300 billion over the next 10 years. In 2020-2021, the communications sector had allocated $5.36 billion to develop the post and telecommunications department that sis mega project for the construction market to seek growth. • Real estate sector in India is expected to reach $ 1 trillion by 2030. As per the projected growth trends during the pre
COVID-19 era, the sector’s contribution was likely to rise to 13% of India’s GDP by 2025. As per ICRA estimates, Indian firms are expected to raise $48 billion through infrastructure and real estate investment trusts in 2022.
• According to ICEMA, apart from COVID-19 related supply chain disruptions, the construction equipment industry is facing the challenges due to abnormal increase in steel prices since July 202. In 2022, demand for steel is expected to increase by 17% to 110 million tones, driven by rising construction activities.
The Market Driving Factors
Increasing Perforation of Electric and Autonomous Construction Machines
The construction equipment market is being transformed by electrification, which presents a considerable opportunity and design options for various equipment across the market. Electrification has been rising in various market segments, including construction equipment, such as cars, buses, and other vehicles. This has been made achievable by the rising development and increasing affordability of modern technology and machinery, as well as the enforcement of pollution restrictions, which have altered the future of the construction equipment business. Several cities throughout the world have imposed forbid on the utilization of diesel within their boundaries, affecting construction equipment operations in certain area. In China and Europe, stronger emission standards for heavy machinery, as well as equipment are being imposed at the global, regional and municipal levels.
Rental services are significantly gaining the haulage of consumers in the worldwide construction equipment industry these days. According to the Construction Equipment Rental Association, emerging and most populated economies are expected to see increased demand for rental services.
Regional and local rising firms are anticipated to build a position in the leasing service industry,
generating sizeable revenue from their local customer base. In order to benefit their business and customers simultaneously, construction companies focus on sectors such as general infrastructure, utility, and electrical, oil and gas, as well as commercial and residential development. Developing and the most populated economies such as India and China are expected to witness surging demand for rental service business over the forecast period. The regional and local emerging players are likely to establish their footprint in the rental service business, creating plentiful revenues from their regional customer base. Large Apart from that with infrastructure plans receiving improved budgetary allocations in developing countries, the construction equipment rental market’s growth would be gradually, as governmental projects show a higher preference for the rental use of equipment. Furthermore, it is safer, comfortable, and more affordable for governments to work with rental companies than owing their acrobatic of construction machinery.
Adoption of Advanced Construction Equipment
Consumers across the globe are demanding more-efficient, technologically upgraded equipment for augmenting constructing activities. The adoption of upgraded equipment reduces labor costs, tracking of work done in every single stage of the process, and also brings down operational cost. The key players are on expanding their business domain by providing products, services or solutions along with new values which take full advantage of Information and Communication Technology, ICT and IoT technologies. On top of that, they are engaged in introducing advanced equipment that can not only regale the customer’s requirements but also overcome social and environmental problems. Thus, the end-users are more attracted to these machines.
The government and private sector across the globe are making large investments in the construction of new residential & commercial buildings and public infrastructure, supporting growth of the construction industry. According to the Institute of Civil Engineers, the global construction equipment market is expected to reach around $ 8 trillion by the end of 2030, driven by infrastructure development across the US, India and China.
Segmentation of the Market by Equipment Type Analysis
Material Handling Equipment & Cranes Segment to Show Lucrative Growth Rate in the Forecast Period
Based on equipment type, the market is segmented into earthmoving equipment,
www.constructionmirror.com
ent PM tion equi C Constru
material handling equipment and cranes, concrete equipment, road building equipment, civil engineering equipment, crushing and screening equipment. And others. The material handling equipment segment is projected to have exponential and significant growth owing to the rising need for cranes and other machinery across several domains for handling heavy construction materials and products. Furthermore, road building and earthmoving equipment segments are expected to show progressive demand as the investments for industrial and commercial construction projects are rising in developing countries such as India and China.
Segmentation by Application Analysis
Based on application, the market is segmented into residential, commercial, and industries. The industrial application segment is anticipated to portray progressive growth in the near future owing to rising industrialization and foreign direct investments for several international manufacturing plants in developing countries. Commercial infrastructure development across developed and developing countries is likely to depict a considerable market worldwide. Rapid population growth in Asian and African countries is expected to uplift the market with stable growth for the residential sector applications. Growth witnessed in the region is likely to be the emergence of online retail facilities, availability of machinery on a rental basis, rising government investments in infrastructure development, enhancement in capital investments.
The Growth of Construction Equipment Market in Last One Year
The sales of construction equipment is expected to increase in healthy double digits in the ongoing financial year as the government is spending on infrastructure projects, especially in rural areas.
The industry evaluates sales of construction equipment (domestic sales and exports) to grow 15-20% in fiscal 2023, compared with an 8% fall last fiscal year. Even though exports grew 60.5% to 7,802 units in FY22, local sales fell 11.4% to 77, 58. “Last fiscal, the industry output declined by about 8% due to fall in demand for road construction and earth-moving equipment but the government’s focus on infrastructure investment to increase economic activity would in turn also help boost demand for them. But a steep rise in input costs and constraints in the supply chain are concerns,” JCB India. The central government has budgeted a 36% increase in its capital spending to a record Rs 7.5 lakh crore this fiscal year, with a special focus on infrastructure development to stimulate the growth. It has expanded the scope of the National Infrastructure Pipeline to include 9,335 projects (from 6,835 projects at the time of launch), with total anticipated investments Rs 108 lakh core during FY20-FY25, minister of state for finance Pankaj Chaudhary stated. There are various government projects and schemes like the scheme to provide drinking water to rural homes, building if smart cities, commencement of new metro rail development projects and construction of new airports at Navi Mumbai (Maharashtra) and Jewar (Uttar Pradesh) will contribute to the growth of the construction equipment industry. Sector
ent PM tion equi C Constru
movinf towards electro mobility, autonomous solutions using tech like IoT virtual reality and self-learning machines India is poised to become the second-largest player in the Construction Equipment (CE) industry behind China by 2030 as the country is bound to witness ‘quantum growth’ in infrastructure development projects in the next 5-10 years. With a solid push from the government’s ambitious infrastructure development plans like National Bank for Financing Infrastructure and Development, National Monetization Pipeline and Gatishakti, India will rise to be a key player, the second-largest in the Construction Equipment by 2030. The industry had witnessed a significant impact on production, demand and supply chain due to the outbreak of COVID-19 and it lead to reduce activity and cut costs. The widening supply-demand gap added to its woes with surging material and logistics costs. The sector also witnessed an unusual increase in demand, and also huge supply-side constraints simultaneously. India had seen a drop in demand in FY22 mainly due to factors such as pre-buy in the last quarter (Q4) of the previous fiscal in connection with emission regulation change to CEV4; the second wave of COVID-19 in the first quarter of FY22; lower road construction rate in the second part of 2021; higher raw material prices pushing up selling prices; and, supply-side shortages due to global disturbances caused by the pandemic and the Ukraine war. (Mr. Jernberg, the president of Volvo Construction Equipment. Technological advancement the world over in the construction space had been quite rapid in recent times. Environment concerns had driven ecofriendly engine developments leading to lower emissions. The use of electronics and telematics had driven efficiency while ongoing developments in hydraulics would reduce power losses, delivering much higher value for the users.
Globally, the construction equipment industry is gradually moving towards electro mobility and autonomous solutions using technologies like IoT, virtual reality and self-learning machines. India shall also witness such technological changes in the coming years.
Conclusion
The Indian construction equipment industry is a key wodge of the manufacturing sector and is poised for magnificent growth in the coming years based on India's overall manufacturing sector and infratsructure development. Earthing equipment, material handling equipment and road construction equipment are key segments expected to contribute to the expansion of the growth of the construction equipment sector. To anchorage this opportunity, Indian construction equipment manufacturerrs need to focus on developing individual and merged capabilities to develop global competitiveness across the sector. Collabrative stives to provide integrated services, industry bodies to promote the industry's interest and working with the Government to promote technology development are some of the key measures to be taken. CM
Follow us on:
Q. As we all know, Honda is already taking the ecommerce battle to India's hinterlands! So how would Honda tap the community group buyers from tier 2 into smaller towns across India differently from other brands?
This is an interesting way to differentiate through the tier one, tier two or tier three approaches that we had earlier. Though, if you look at the latest NASSCOM data, you will find that the growth in userbase from tier 2, tier 3, or tier 4 towns cities or places has been much more than what we would call tier 1. That brings forth a crucial outlook change that we discovered many years back when we introduced our range of engines and water pumps. Hinterlands in India have witnessed major growth in terms of product utility, and therefore, with this announcement we are positioned to transform their buying experience towards convenience. We aim to smash the general conception that consumers may not receive their products if they’re opting for online orders from villages, or tier 2 and tier 3 towns. We at Honda Power India are well prepared to meet the growing demands of our customers from across the country and will ensure that our products seamlessly reach our customers through the mechanism of delivery, where we have covered all the pin-codes PAN India with support from our dealers. Our customers will be able to get the product sitting in the comfort of their homes. That's the change that we want to bring!
Q. So, what is your approach for Honda to keeping up to date with the latest ecommerce trends and new technologies?
The first approach that Honda India Power has tried to cultivate is to not make the customer wait or get lost in the endless loops of ‘clicks’ before acquiring the information he/she intends to. We have focussed on enabling the customers by offering a smooth, steady, and quick browsing experience. The second approach we have integrated is to enhance the customer’s experience of going through our product portfolio and choosing the product that suits his needs the best. From our diverse range of products to the selection of dealers for delivery and installation, we have given our consumers complete autonomy without any nudge from the company’s side. Through and through, we have followed a very enabler-oriented approach, which is the cornerstone of our offering to the customers, wherein we’re enabling them with their choice, approach, and buying decision- all from the convenience of their home.
Q. As we can notice the customer churn is on the rise, how would you boost the repeat purchase rates and increase the customer retention?
From an analytical standpoint, a very important parameter is understanding the number of customers who are taking the entire journey to the end. If the journey does not seem interesting to them, or if they do not find the answers to their queries, they will just go away. Therefore, what we have ingrained into their experience is the engagement factor. We have tools in place to identify any intentional or unintentional break in the user journey. From here, we have set up a backup, which is our online call centre. Once the break is captured, our team from the calling centre will assist the customer in completing his user journey. Through this, we also assess the factors that lead to the user’s incomplete journey. From browsing to the receipt of the product, we at HIPP aim to offer end-to-end support to fulfil the customer requirements, thus enabling retention in the long term.
www.hondaindiapower.com
nterview i
Q. How has the business environment changed over the past 5-10 years? Has it become more competitive?
Owing to India’s huge growth potential in the agricultural and construction segment, many OEMs like us have entered the Indian markets within the last decade. While the opportunity for mechanization is huge, a lot of agricultural work is still done manually. At Honda India Power, we provide a complete range of premium quality solutions to boost mechanisation in agriculture. We are expecting the market to grow multi fold in the coming years. This has added to the competitive landscape of India as an opportune market for agricultural products. However, as the first OEM to introduce online sales through e-commerce directly, we will be reaching the customers who actually need these products, but face challenges because of proximity to the outlet problem. Through this e-commerce launch, we can reach those customers and provide the same experience, that he or they will have when purchasing offline. We’re taking this opportunity to lead a step ahead. And the great factor is that we will be offering our products through our official website, wherein our customers can first search for products that they’re interested in, and also purchase those products within the same website. So, it's going to be a one-stop solution, where we will be catering to our customer demands all with the same website. This will render us a competitive advantage in this industry.
Q. What are the current common risks for the E-commerce industry and how do you mitigate them?
The biggest risk that we see is with the completion of a transaction through an authenticated payment gateway, so it is not seen as phishing by our customers. Many online portals attempt to defraud the customers, which is a huge risk factor in retaining our potential customers. And therefore, we will have to mitigate that by ensuring that we take this message to as many people as we can reach out to and apprise them that the official Honda India Power Products website (www.hondaindiapower.com) is the one and only brand website where our customers can shop from with peace of mind. Thus, we try and reduce the attempts of misrepresentation by any miscreant who tries to take advantage of our products or squeeze money out of people who want to visit us and stay with our brand.
Q. What are your next investment plans for the next two years in the e-Commerce Industry?
Since this is a one-of-its-kind announcement, at this moment we would like to see how it goes. The product portfolio which we will be offering initially is limited to five categories of products which are generators, water pumps, brush cutters, tillers and lawn mowers. We will further consider expanding the product line to be offered through our vast dealership network in India.
Q. In March 2022, Honda India Power Products announced the launch of marine power products to expand its footprint! Can you please tell us more about the model of this project?
Honda India Power is the first four-stroke outboard manufacturer in the world. With increased global emphasis on environmental protection, many countries including India are moving towards more environmentally
friendly and fuel-efficient solutions. While a vast majority still uses the 2-stroke OBMs, we believe that there's a big potential that our products can be well accepted in the country owing to their durability, fuel efficiency and reliability in various marine applications. Honda specialises in 4 Stroke technology and has been studying the changing trends in the Indian market for some time. We have seen the usage of 2-stroke products decline in past few years leading to an accelerated shift towards 4-stroke gasoline-run engines. We aspire to make Honda 4 Stroke OBM’S Customers preferred choice in the Indian market.
Q. What is that one positive change you want to see in the market to cater for the new customers?
Owing to increased smartphone penetration and uninterrupted internet access, the e-commerce industry has been growing at a breakneck pace in India. Even during the pandemic, there were many e-commerce sites that were successfully established. According to a recent survey, the e-commerce industry is expected to witness a growth trajectory of 84% by 2024 compared with 2020. I think we are in the right time and direction to introduce our e-commerce website. In such a time, the positive change would be the inclination of customers towards purchasing our authentic, genuine, and reliable products online as well.
Q. Since 2014, the government of India has announced various initiatives, namely Digital India, Make in India, Start-up India, Skill India and other innovation funds. According to you, how is such a program likely to support the growth of e-commerce in India?
The government has played a pivotal role in promoting the growth of the Indian E-Commerce Industry. Owing to all these campaigns and initiatives that you mentioned, we can anticipate a boost in investments, we can see a lot of attraction towards the businesses, as well as the adoption of better-than-before technologies. Companies which hadn't decided to come to India are now foraying into the Indian market. The start-up ecosystem has expanded immensely, with quick conversions to unicorns. All these positive endeavours have had an optimistic effect on the growth of our company as well. As you have seen in the past that the mechanization and the ease of taking the physical labour away from the lives of the people are getting a lot of attention. While people earlier did not have such comprehensive access to these facilities as there were not many options, this is not the case in today’s thriving business environment. The unique offerings that Honda provides are a step towards mechanization in India, where we can enrich the lives of customers with comfort and convenience.
Q. Take us through your approach to generating strategies for addressing current and future e-commerce market scenarios.
The most important strategy for e-commerce platforms is the sheer engagement of the consumers. As you see, a lot of mushrooming has started to happen which earlier was limited to a few e-commerce platforms. now that mushrooming is happening on a large scale, the only e-commerce strategy that enables the platform to attain a successful growth graph is only engagement. the more platform is able to engage with the consumers directly and understand their needs, the more it is going to grow. It's just a matter of time! CM
