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High loan interest rates leading to decreased buyer activity, stagnation in the construction industry, and the impact of imports have resulted in a 10.5% decrease in sales of Russian-made construction machinery in 2024. Experts believe that these issues will continue this year, and the prospects for Russian-made construction machinery are not optimistic. (Excerpt from a report by Russia’s Business People newspaper)
According to the Russian Special Machinery Association (the association compiles data from factories accounting for 80% of Russia’s construction machinery total output), sales of construction machinery in the domestic market fell by 10.5% year on year in 2024, to 74.7 billion rubles.
Data from the association indicates the most significant sales decline was seen in the excavator sector, with a decrease of 51%, dropping to 222 units. Sales of pipeline layers and bulldozers experienced the slightest decline at 4.8%, falling to 1050 units. Crane sales dropped by 33.1%, to 1670 units. Road roller sales decreased by 17.7%, to 261 units. Grader sales fell by 40.9%, to 337 units.
Dmitry Babansky, from Russia’s SBS Consulting firm, explains that the decline in sales and production of construction machinery is related to the rise in loan interest rates. He states, “Extremely high central bank rates have made the situation very serious, significantly reducing the investment activity of machinery manufacturers and their customers.”
The Russian Special Machinery Association pointed out that over the past year, the inventory of machinery in dealers and factories has continued to increase due to decreasing consumer activity and a subsequent reduction in orders.
The association believes that another reason for the decline in indicators is the current rules for payments in government construction projects. According to these rules, developers won’t receive payment for work done in 2024 until 2025. Babansky adds that stagnation in the construction industry has also exacerbated this situation.
A surge in imports is one of the factors affecting the negative trend. The association states, “The situation is particularly severe in the excavator and loader segments, where the market share of foreign machinery exceeds 90%.” They add that Chinese companies currently dominate the market for these types of equipment in Russia. Due to scale effects in production and government support for exports, foreign manufacturers can offer lower prices.
According to the latest data from the Russian Special Machinery Association, from January to November 2024, imports of construction machinery in Russia increased by 7.4%, reaching 405 billion rubles.
The association believes the market in 2025 will face many challenges, including the import of counterfeit and inferior products, a shortage of working capital for businesses, and a shortage of Russian-made components. “Despite recent progress, Russia does not produce all the components needed for construction machinery, and those that are produced may not meet market demand,” the association adds. They believe that solving these problems requires large-scale investments and broad government support.
Babansky predicts that stagnation in the construction industry, a backlog of dealer inventories, and tight monetary policy within Russia will continue to affect the sales of construction machinery. He estimates that sales of Russian construction machinery may further decrease by 10%-15% in 2025.
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