The Indian construction equipment (CE) industry has the potential to grow at 19-22% cumulative annual growth rate (CAGR) to reach US$20-25 billion by 2020, from the current market size of US$3.3 billion (2010).
The volume of equipment sales is expected to increase from over 60,000 units in 2010 to 3,30,000 units in 2020, says the `Vision 2020: Commanding New Heights’, a study on CE industry by the Confederation of Indian Industry (CII) and the Indian Earthmoving and Construction Industry Association Ltd (IECIAL).
This growth forecast is based on the structural change globally in the CE industry since 2006, the stagnation in the developed economies and the emergence of new markets like India and China with 23% CAGR, India’s increasing share, from 2% in 2004 to 6% in 2010, growing urbanisation, shortage of skilled manpower, India’s planned investments of US$1 trillion in infrastructure and the greater role for the private sector in infrastructure development.
In order to convert this big business opportunity for the CE industry, it is suggested that the financial intermediaries like banks and non-banking financial institutions, the government and industry associations should work together and create an enabling environment.
However the major task is with the original equipment manufacturers (OEMs) themselves. They have to equip themselves on multiple fronts. They include increased investments in collaboration with the suppliers, improving the manufacturing competitiveness, introduction of new products to meet the customer requirements, and upgrading the skills of the sales force.
Some of the key imperatives for the OEMs to realise the CE industry potential, according to the study, are to incorporate customer insights into their new product offerings, build a robust spare and services business, introduce new service offerings, address the after-sales support needs of different customers and build capabilities to deliver service to the customers.
The OEMs can also think of enhancing alternative revenue streams and allied businesses, like buying back of used equipment to accelerate replacement cycles and establishing a supporting eco system for amenable customers with the channel partners and financiers.
The study envisages that with increasing participation of private players in infrastructure development and increasing capital requirements, organized rental is poised for growth. Streamlined laws and tax regimes to facilitate smooth movement of equipment across States will enable the emergence of large organised players.
Another important area that the OEMs must concentrate for a robust growth of the CE industry, the study says is skill development to meet the industry’s requirement of over two million skilled personnel, in addition to the current employees, for the maintenance and operation of equipment by 2020.
Leveraging the economies of scale that the domestic market offers, the Indian CE industry can also be an export hub, especially for components like tyres, cylinders and wiring harness and equipments such as backhoe loaders, excavators and road equipment. In order to support the efforts of the CE industry to realize its potential to support the huge infrastructure development needs of the country, the study suggests that the Union government should rationalise taxes and duties, focus on manpower development, limit import of used equipment and develop a comprehensive roadmap for the introduction of safety and emission norms.
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