Disclaimer: this article was originally published by Mechanical Intelligence Station. Source: https://mp.weixin.qq.com/s/njfyXhn_4JI2cArQH-QngQ
The Indian engineering machinery market is not only growing but also continually evolving. Accompanied by rapid urbanization, massive infrastructure projects, and a shift towards advanced technologies, the country’s growth rate has surpassed all other markets. (Excerpted and translated from Rental Briefing Network reports) When many of us think of rapidly growing construction machinery markets, China has been the most conspicuous one over the past two decades. Of course, while China has experienced explosive growth, it has also seen equally dramatic declines. Perhaps less flashy and often overshadowed by its high-profile neighbor, the undervalued star in steady and rapid equipment growth is actually the world’s most populous country—India. To meet the needs of its approximately 1.5 billion people, India’s investment in infrastructure over the past decade has continued to grow, leading to a compound annual growth rate in demand for construction machinery at 10% during the same period. This has made India the hottest growing market globally, particularly when compared to the global growth rate of 2%. While all markets have cycles, India has been growing steadily, with only occasional pauses.
Source: Off-Highway Research and abcg
India’s shifting product
portfolio is an exemplary case where the Indian market has traditionally been dominated by backhoe loaders, followed by unique mobile cranes particularly favored by Indian operators. In fact, backhoe loaders remain the engineering machinery of choice for small, independent Indian enterprises. Nonetheless, given the need for higher efficiency and faster delivery by bigger infrastructure projects, India’s industry product mix has been shifting to one more similar to other developed regions. As is the case elsewhere around the world, excavators are on an unstoppable rise in India, with their market share having increased by nearly 10% in the past decade—at the expense of the backhoe loader share, which has declined even more. This is very much in line with the trajectory of the mature Chinese construction machinery market. Currently, India’s excavator industry in value may have already surpassed the backhoe loader market, and by 2030, excavator sales are also expected to exceed those of backhoe loaders. However, considering the unique place of backhoe loaders among Indian contractors, it is expected that they will not decline as far or as quickly as in the US and Europe since their peak in the 1980s. Another distinction of the Indian market is its avoidance of equipment popular in Europe and the US—such as compact track loaders and wheeled loaders, which are rare across the Indian subcontinent. This trend may change as the impact of Chinese OEMs introducing low-cost wheeled loaders to the country becomes increasingly apparent. In fact, Chinese manufacturers already account for half of India’s emerging wheeled loader market.
Source: Off-Highway Research and abcg
Shift among major players
With the growth of excavators, the players impacting the market are also changing. Many global brands are positioning themselves to participate in this sector, but there is a clear set of winners.
One-third of the increase in excavator sales over the past decade came from Chinese manufacturers, which now hold over 20% of the entire market. Excavators are not entirely new to India, but domestic manufacturers and their more mature foreign joint venture partners have not capitalized on this shift, despite having an inherent local advantage—and thus have lost market share.
One reason is that developing cost-optimized (i.e., cheaper) local variants of a global machine design is challenging, so even once-dominant Japanese excavator players have not leveraged the growth of the Indian market. Aggravating this situation is that Construction machinery made in China are increasingly finding a balance between productivity, quality, and cost, meeting the needs of Indian contractors. Other manufacturers will have to develop unique variants tailored especially to the Indian market and manufactured in India if they want to thwart the seemingly inevitable takeover by Chinese OEMs.
As the Indian market continues its strong growth, with a more mature and diverse product portfolio, winning the Indian market will become a new growth battleground for all construction machinery OEMs.
Source: Off-Highway Research and abcg
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