Construction Equipment Sales Soar High in 2017
It is safe to say from statistics sourced form the ICEMA (Indian Construction Equipment Manufacturer’s Association) that the sales volume in the industry saw a whooping 41.5% growth in 2016 as compared to the shoddy sales volumes in 2015. This jump in the sales volumes is largely dominated by increased sales of backhoe loaders, excavators, pick and carry cranes and earth moving machines. While the numbers are yet to reach the levels in 2011 before the industry went down in a slump phase, the forecast for the coming year is largely positive and expected to cross the 2011 figures by a sizeable margin.
The volume of sales of the construction equipment industry is expected to touch 96,730 units in FY18. If this forecast is to be believed, then the sales volume prospect for FY17 seem quite bright by every measure. At 52,100 the sales figures in the industry at a 4 year high since the slump started. There is no denying the fact that a tidal wave of growth awaits the industry thanks to the Make in India project focusing on development of infrastructure across the country.
The fact that various road development and expansion projects have been awarded has been a key factor in the surge of sales of road construction equipment across the country. Wanting to make the most of a growing tidal wave, the OEM’s have started putting in their moolah in creating a strong manpower base and technical prowess so they can launcher new products and enter new segments.
The top management at various OEM’s credits this surge in the sales volume to a rather low base in the past few years in addition to the increased activity in the construction of roads and highways. While the fiscal year 2012-14 saw a rather low compound annual growth rate at a meagre 1% CAGR in the total planned expenditure in key infrastructure sectors, the FY 2015-17 is expected to soar many folds at 21% CAGR if not more. Key infrastructure projects like urban development, roads and highways have seen a sizeable increase in the allocated funds. The funding has seen a constant increase post fiscal 2013-14.
The increased funding for these sectors is likely to fuel sales volumes from construction equipment companies in the year to come. The last two months of 2016 saw a slump in the sales due to demonetisation. The effects of demonetising are slowly but surely receding and creating a favourable ground for increased sales volumes in the months to come. Despite the demonetisation taking a toll at the end of the year, most companies saw rather impressive sales figures in the first nine months of the fiscal year. The positive outlook of the head honchos has to also do with the fact that the government policies are being changed to create favourable conditions for execution of projects.
Even Mahindra and Mahindra, considered a rather fresh face in the industry, making its debut n 2011 saw its sales crossing easily crossing the previous year’s sales quire comfortably. The President Designate for Mahindra’s automotive sector was quoted saying to a leading newspaper that the effects of demonetisation would wear off and the industry would grow at a much faster rate as compared to the previous year’s 2 percent.
Executives at firms are of the belief that while growth is there, it is coming from vacuum and that such high rates will not be sustainable mostly because the sluggish real estate sector has taken a major hit due to demonetisation and is unlikely to recover any time soon. Despite that a 20-30% growth rate is expected and deemed sustainable.
Most brands including Mahindra are planning on diversifying its product range and launching new products to spread its presence across markets. Mahindra is set to launch 3 new products in the fiscal year in addition to the existing range having new variants being added to the line up to cater to the wave of increasing demand.
All said and done, the sales of construction equipment in the present fiscal year is expected to grow at healthy rate surpassing the previous year’s sales all thanks to the the government’s increased focus on core infrastructure projects.