Understanding India's Construction

Equipment Market
contents

Opportunities within India's construction equipment 3eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

market ee
Market overview 3
Key players 4
Key drivers and challenges 5
Opportunities 5
The road ahead 6

CONTACT US Suheil Murgai

Associate Director, Delhi
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Prerna Kumra
Consultant, Delhi
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Opportunities within Figure 1: Overview of the construction equipment sector

India's construction
Market Size (INR Bn)
461.5
500

equipment market
377.1
400 308.2
300 252.3
208.4
200
India's growth story has witnessed many cyclical changes across
a wide range of industries from agriculture and retail to 100
software, IT and real estate, all of which serve as key drivers of 0
the country's economy.
2012 2013 2014 2015 2016

Volatility in real estate and related industries, such as Source: Datamonitor, BMI
construction equipment, has resulted in demand-supply gaps
that hamper analysis of the sector and its trends. Figure 2: Construction equipment market share by segment,
2012
Material
Demand for construction equipment is a reflection of broader Material processing
macroeconomic trends such as interest rates, infrastructure handling equipment
investment and liquidity, which themselves indicate the health equipment 6%
of the overall economy. This demand equipment is expected to 11%
grow in line with the expansion of real estate development from
India's key urban centres into tier-2 and tier-3 cities.
Concrete Earth moving
equipment equipment
This paper provides insight into opportunities for various 68%
15%
construction equipment original equipment manufacturers
(OEMs) in terms of business channels, as well as outlining the
market structure by manufacturers and segments while Source: Datamonitor, BMI
indicating the road ahead in terms of infrastructure
requirements. The sector is made up of five main segments: earthmoving
equipment, road construction equipment, concrete equipment,
material handling equipment, and material processing
equipment.

Market overview Earthmoving equipment and road construction equipment

account for close to 70 per cent of India's construction
equipment market. Backhoe loaders, which comprise tractors,
The global construction equipment market was estimated at
front shovel/bucket backhoes and small backhoes, account for
INR5,551bn (US$90.5bn) last year and is expected to reach
65 per cent of the earthmoving equipment and road
INR7,310bn by 2016, representing CAGR of 7.7 per cent.
construction segment.
Emerging markets such as China and India are becoming
increasingly important on the global stage as key players shift
their production bases to Asia to drive revenue by benefitting Concrete equipment is the second largest segment with a
from the region's growing infrastructure investment, favourable market share of approximately 14 per cent. It comprises asphalt
government policies and mass-scale domestic markets. finishers, transit mixers, concrete pumps and batching plants.
Material handling equipment and material processing
equipment account for 10 per cent and 6 per cent of the market
India's construction equipment market, meanwhile, outpaced
respectively. Cranes are the largest category within the material
global growth trends with the market estimated at INR208.4bn
handling equipment.
at the end of last year. Revenue is expected to reach
INR461.5bn by 2016, CAGR of 20.5 per cent. Construction & Material Handling Equipment Industry

Products 56%

Spare Parts 21%

Unorganized Sector 15%

Services 6%

Exports 2%

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 Segments Market dynamics
Key players
Asphalt finishers
Major national and international players such as ECEL, JCB and Gujarat Appolo commands the
Action Construction Equipment dominate India's construction largest share closely followed by
equipment market. The recent influx of foreign direct Witgen in the large machine
investment in the construction sector saw many new entries to segment.
market, either in the form of joint ventures with Indian
companies or by foreign firms setting up their own local Transit mixers
manufacturing facilities. Key players operating across most Key players include Schwing Stetter,
market segments are JCB, Escorts, ACE and BEML. Greaves India, Ajax Fiori and Telcon.
Concrete
Concrete pumps (boom & line)
equipment
Segments Market dynamics Putzmeister leads the market with a
60% share followed by Schwing
Backhoe loaders Stetter and Sany.
JCB is the market leader with a 25%
market share followed by ACE, Batching plants
Escorts and Terex Equipment. Universal Construction Machinery &
Equipment leads the market with a
Excavators 40% share followed by Macons
Telcon (a joint venture between Tata Equipment and Cosmos Construction
and Hitachi Construction Machinery) Machineries and Equipment.
is the market leader followed by L&T
Komatsu.

Wheeled loaders Cranes

Major players include Caterpillar Account for the largest market share.
India, Telcon, JCB and BEML. They include:
Crawler cranes: Telcon is the
Skid steer loaders sole player in the Indian crawler
Market remains untapped. JCB, crane segment though some
Terex, Doosan and Gamzen are other equipment is imported.
prominent players. Tower cranes: Major players
include Manitowoc Group, ACE,
Earthmoving & Material ECEL and Zoomilion. The 5-6
Crawler loaders
road construction handling tonne segment accounts for 75-
Major players include Volvo and
equipment equipment 80% of the segment.
Sany.
Pick & carry cranes: ECEL is the
Crawler dozers market leader with a 45% share
Primarily used in the mining sector. followed by ACE and Voltas.
Major players include BEML, L&T Slew cranes: Tractors India Ltd
Komatsu, John Deere and and ECEL are the key players.
Caterpillar.
Diesel, electric and LPG forklifts
Motor graders Godrej and Voltas are dominant
Market leader is Caterpillar followed players.
by L&T Komatsu and TIPL.

Rigid & articulated dump trucks Crushing equipment

Dominated by Hitachi, L&T Komatsu, Large capacity crushers (about 300
Terex, Volvo and Tata Motors. Material tonnes per hour) are more in
processing demand than mid-size crushers
Vibratory & static compaction equipment (about 150-200 tonnes per hour).
equipment Major players include Terex and
L&T Komatsu and Schwing Stetter are Puzzolona.
market leaders.

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Key drivers and Opportunities
challenges End User Analysis
Infrastructure
Key drivers
Costs of construction Planned investment
Robust economic development: India's 12th Five Year Plan
(INR, billions)
is targeting 11 per cent growth for the construction sector Sector equipment as share of
up from 7.8 per cent in the previous plan. total projects 11th plan 12th plan
Infrastructure growth: Substantial infrastructure investment
of INR45 trillion under the 12th plan will drive higher Roads 21-23% 3,142 9,145
demand for construction equipment.
Growing OEM presence: India offers significant potential as Railways 6-8% 2,618 6,433
an OEM hub due to its lower costs and the availability of
skilled labour. At least 10 new equipment manufacturers
are expected to establish bases in India this year. Ports 5-7% 880 1,977
Higher FDI in construction: Increased construction activities
create favourable conditions for foreign direct investment Airports 21-23% 310 877
in the equipment sector. Cumulative FDI inflows of
INR7.8bn in the earthmoving machinery segment from Irrigation
21-23% 2,533 5,043
April 2000 to December 2011. projects
Urban
21-23% 1,437 -
Key challenges development
Limited land banks: Scarcity of land for infrastructure
development hinders growth of Indian construction Power 5-7% 6,665 18,202
equipment market.
Project bottlenecks: Regulatory issues, environmental Storage 4-5% 224 1489
concerns and delays in project approval hampers
construction projects and limits sales of construction
Telecom 21-23% 2,584 9,438
equipment in India.
Rising crude prices: Rising oil prices increase other input The construction equipment industry received a huge fillip in
costs, such as fuel, which erodes profits of end users and the 12th Five Year Plan compared to the previous plan due to
reduces demand for equipment. surging construction activity, especially civil engineering
Higher steel prices: Rising cost of steel weakens profits and projects. Infrastructure investment was supported by key events
significantly hinders market growth. such as the 2010 Commonwealth Games, which fuelled the
Lack of skilled labour: There are few government incentives need for worldclass facilities.
to build a skilled workforce within the construction
equipment market. Major construction equipment Real estate
companies have to resort to establishing costly training
centres to upgrade the skills of their workers. Cost of construction equipment
Real estate sector
as share of total projects

Buildings 4-5%

Medium-size industry 7-9%

Mineral plants 20-22%

Despite cyclical fluctuations in the real estate sector, analysts

predict the market will grow at 14.2 per cent CAGR from 2011-
20, a dynamic which will provide numerous opportunities for
construction equipment OEMs. Even though tracts of residential
and commercial land currently remain unsold, the long-term
outlook is positive due to the scarcity of available space in major
metropolitan areas as well as tier-1 and tier-2 cities. This
anticipated growth in the construction industry augurs well for
the construction equipment sector.

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 The road ahead
Gujarat
Gujarat increased construction spending by 33 per cent to
INR505.99bn in its 2012-13 budget.
Project investment over the past five years totals
INR39601.48bn. As India's economic growth continues expanding into less-
developed states such as Orissa, West Bengal and Madhya
Space and environmental constraints restrict expansion in
Pradesh, it has become imperative that key players in the
Tamil Nadu and Delhi for major tier-1, -2 and -3
construction equipment market not only establish
manufacturers.
manufacturing facilities in India, but also ensure they have a
Abundance of non-agricultural land in Gujarat makes it an strong distribution structure that enables them to penetrate
attractive site for manufacturing plants. more remote parts of the country. The construction equipment
Investment-friendly government and relative transparency market provides both established players and new entrants with
eases the business set-up process. a range of opportunities. While established players can
leverage their existing distribution structure to reach potential
Madhya Pradesh customers in these emerging regions, new players can make
their foray into the market through joint ventures with
Madhya Pradesh is targeting economic growth of 12 per
companies. The fact that each state government has a separate
cent under the 12th Five Year Plan with the state
budget for infrastructure development provides a platform
government focusing on infrastructure development
which should enable all construction OEMs to get a substantial
through public-private partnerships.
slice of the pie.
The state government plans to invest about INR35bn to
develop 77 industrial areas to facilitate investment.
The planning commission approved investments of
INR280bn from 2012-13.
Some 150 new projects are expected to be developed in
the state with power generation a major investment draw.
Government announced the availability of 20,000 hectares
of land in the state.
Madhya Pradesh is also focusing on the development of 27
new industrial estates in the state.

West Bengal
Thirty-five per cent of the INR233.71bn budget for 2012-13
has been set aside to develop infrastructure and power
facilities in the state.
State government announced plans to strengthen and
widen 1,046km of roads in 11 under-developed districts
and construct eight new bridges.
Constructing affordable housing for low-income families
was another key state initiative.
Urban infrastructure development has been allotted a 40
per cent share of investments.

Orissa
Infrastructure development accounts for INR61bn of the
INR172bn 2012-13 budget.
Orissa announced plans to invest INR50bn in developing
public-private partnerships for roads and buildings,
housing and urban development and the energy sector.
The state has emerged as major hub for mineral and metal
industries. Both sectors use construction equipment on a
large scale.
The Public Works Division is planning to construct 606km
of roads and 16 bridges.
The Housing and Urban Development Department has
been allocated INR15.74bn from 2012-13.

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