EPC World takes a closer on the changing market dynamics and trends driving the road construction equipment industry in India
Infrastructure plays a pivotal role in the process of nation building as well as in driving a healthy economy. The contribution of infrastructure towards boosting economic activities has especially been crucial in the Asia-Pacific region, particularly in a developing economy like India. With the Government announcing ‘Infrastructure’ as one among its core growth agenda for development the sector has opened up a slew of opportunities not just for the construction businesses but also for the allied sectors like the equipment industry. Of which the road construction equipment industry has been a frontrunner in driving the business volumes for the construction equipment sector.
With NHAI already awarding projects worth ₹ 48,000 crore within the first six months of the year is by itself a clear indicator of the Government’s approach towards the roads and highway sector. Furthermore, with plans towards adding another ₹ 2 trillion worth contracts for the sector, the demand for the equipment business is only expected to scale up. The sentiments was rightly pointed out by Dr. Sukhbir Singh Sandhu, Chairman, National Highway Authority of India in recent media event. He said, “We have planned to award contracts worth ₹ 2 trillion during the year. This will open up good opportunities for companies involved in the construction and construction equipment business.”
However, the sector witnessed a standstill and was hard hit by the ongoing uncertainties due to one of the worst ever pandemic of Covid-19. While the nation-wide lockdown and phased unlock measures of the economy slowed up the business activities, stakeholders involved in the road construction equipment business reflect a positive sentiment. The undeterred focus of Government towards bringing an infrastructure uplift has been a major contributor towards pushing the prospective foresights of the sector.
Mapping the Market
The road construction machinery market witnessed a prospective leap in the recent past mainly due to the big ticket projects, Bharatmala Pariyojana for instance in India, and infra-facelift projects put forth by the Central and the State Governments. As per the market analysts the road construction equipment and machinery market is expected to witness a CAGR of about 4 per cent during the period 2020-2025. Wherein, big ticket projects like Bharatmala, Smart Cities, Urban India and evolving developments in tier-II and tier-III regions will particularly boost up the demand in countries like India.
A recent report by Global Market Insights indicates the earthmoving and road building segments holding a mammoth 55 per cent market share in the overall equipment business. And further expects the value to scale up at over USD 90 billion in 2026. Backhoes, excavators, loaders and compaction equipment is suggested to particularly drive in this business volumes for the road construction equipment industry.
Picturing the current scenario a senior analyst points out motor graders as the other major business driver in the road construction equipment business. The equal likeability of the machinery among the large and smaller contractors is a major reason behind its increased usability, points out the analyst.
On the other hand the excavator market is expected to see a growth of over 5 per cent from 2020 to 2026. Increased activities in the construction, road building, mining and commercial construction is believed to run in this show for the excavator markets. Furthermore, the several advantages of excavators – like the ability and agility to operate in diverse terrains, flexibility to mount additional tools and high durability are proliferating their market demand, states the GM Insights report.
Commenting on the growth shoots seen in the sector, Deepak Shetty, Deputy CEO & Managing Director, JCB India Ltd said, “The Government’s impetus on construction of roads and highways has always played a pivotal role in growth of the sector. The reforms in the sector are a step in the right direction as it is expected to give a strong push to highway construction. The Government has also committed an investment of ₹ 111 lakh crore in the National Infrastructure Pipeline. At a national level, Railways, Irrigation and large projects like Sagarmala and Bharatmala should also be given the impetus. This will strengthen logistics and develop requisite infrastructure enhancing capacity at ports, improving operational efficiency and connectivity. All of this would require the use of smart construction equipment.” He further added, “Going further, two key sectors are set to emerge in the coming years – first being Infrastructure development in Rural India and the other in the creation of a world-class Healthcare infrastructure across the country. Rural India, is set to emerge as a strong growth driver, especially with the recent push by the Government through programmes such as PMGSY. Additionally, the movement of migrant workers will allow creating a better rural-urban re-balance. Schools, colleges, industries will need to be created and segments like municipal waste, village roads, rural infra are set to grow.”
Opining on similar lines was Dimitrov Krishnan, Managing Director, Volvo CE India. He shared, “In the months to come, we foresee that the roads and highways sector will be a key driving force for the construction business in India. The roads and highways industry has historically delivered excellent results in India. It has been responsible for close to 70 per cent of all construction equipment demand in the country over the past three years. Despite the impact of COVID-19, we have found that the industry has bounced back very strongly especially with the restarting of works in the middle of this year. We also see the government’s push for the construction of national and state-level highways and roads as a very positive sign for the industry. The Minister of Roads, Mr Nitin Gadkari, has said that he would like to increase daily road building from 30 km to 60 km. As a result, we expect very healthy interest in Volvo CE road construction equipment like pavers, compactors and excavators.”
Foreseeing the future prospects he further briefed, “We predict very positive growth in the road construction industry in 2020 and beyond. This is especially the case in India where road development is a key focus in government policy and there is still a great opportunity for road and highway infrastructure development. From a company viewpoint, we see this as a strategic opportunity for us to offer products and services that customers in this space require, such as pavers, compactors and excavators.”
While the industry had to witness a sluggish growth due to the ongoing pandemic and global lockdown measures that followed, the scenario has brought in an all-round boost to the digitized activities. From day to day chores to heavy construction digitization has deep-rooted its presence today in all forms of economic activities. Road construction equipment today are getting smarter and tech-upgraded to aid the ongoing demand for minimal human intervention.
Sensing the mood JCB India upholds its digital stronghold in the equipment business. “We have introduced products that deliver a combination of value, new digital technology and world-class quality. Supporting the government’s vision of ‘Atmanirbhar’ Bharat, we aim to continue to bring global technologies and skillsets in India, through indigenous manufacturing and competitive products. We believe that we are stronger together. Industry is focusing on greater adoption of technologies like Telematics, IoT, Big data, VR and Data Analytics along with Machine Learning. Customers today want utility and efficiency of the equipment without compromising on safety. Newer concepts like Telematics, IoT, Big Data, VR and Data Analytics along with Machine Learning have the capability to play a major role in meeting customer demands and increasing the efficiency of the sector,” shared Singh.
Drawing out the role of technology in shaping and scaling up the future of equipment business, Krishnan pointed out, “India has been accelerating towards more automation across all industry sectors for the past few years. According to industry estimates, the industrial automation market in India is worth $2 billion and the market is expected to grow by $2.58 billion in the next 4 years. In the wake of COVID-19, many of India’s construction sites shut down due to workers being quarantined. Automation was one of the key solutions to this manpower problem by reducing dependency on manual labour. Volvo CE is a leading pioneer in the development of automated equipment for the construction industry. We believe that the productivity gains of autonomous machinery have the potential to transform the industry. In our Electric Site research project in Sweden, we found that autonomous machines performed their tasks more efficiently and precisely than humans with a 50 per cent increase in fuel efficiency, a 40 per cent reduction in operator cost, a 70 per cent cut in energy costs and a 98 per cent reduction in carbon emissions. Over their working lives, we believe autonomous machine owners could achieve a lower lifecycle cost than those with traditional diesel-powered machines.”
Apart from the digitized drive, a major focus is also been in the demand for electric dump truck market. Also known as dumpers or tipper trucks, these machineries equipped with hydraulic pistons in the front and an open-box bed hinged at the rear, is seeing a growing demand in the construction activities not just in India but on a global level as well. Komatsu Ltd., Caterpillar and Epiroc are few among the majors involved in the global electric dump truck market. As per a recent market report, a major chunk of the global electric dump truck market is currently held by hybrid mining dump trucks due to their higher capacity, power output, fuel efficiency, and reduced maintenance cost.
The GM Insights report indicates the cost of machineries as one of the prime concerns affecting the construction business. However, to surf through this challenge customers involved in the construction business are showing an increased inclination towards sensor based technologies in machineries – mapping the operational performance.
The report stated, “One of the major market factors challenging the market growth is the high market price of these machines. Budget constraints in small construction projects restrict the adoption of costly construction machines. Moreover, high repair & maintenance cost of the equipment is challenging the industry growth. However, in response to the growing market trend, OEMs are focusing on integrating sensor technologies for driver assistance and reduced equipment down-time. This factor is expected to drive the market over the forecast timeframe.”
Another surge seen due to the rising operational cost of machineries was the growing inclination towards rental business or used construction equipment. Owing to the high purchasing cost associated some of the equipment, smaller construction companies today prefer using rental services and second hand road construction machineries. As the market reports the used concrete equipment segment is anticipated to grow at a rapid pace through 2026 owing to increasing government investments in the development of road infrastructure globally.
Though the Covid-19 pandemic has hard hit the commercial activities, with economies gradually opening up its businesses and Government’s push towards infra-development is expected to bring in the necessary boost for the road construction equipment industry to look forth for a promising future and regain its lost galore.