China – India: Emerging Market for Construction Equipment

Introduction

The global construction equipment market size was estimated at USD 76.8 billion in 2017[1]. The market is forecasted to expand at an average of 4.8% over the period of 2018 to 2025[2]. Rising government funding for development of advanced public infrastructure specifically in the western region of China has been the main driver for this market to flourish[3].

The rapid infrastructure development in western China is anticipated to further boost the demand for construction equipment (refer Figure 1 above).

Asia: The New Market

Additionally, development of rental market for these machineries in Europe, North America and China is expected to foster global market growth while the rental market in India has got a lot of room to improve[4] (refer Figure 2 above).

In China, residential segment has been witnessing high demand for construction equipment owing to rapid pace of urbanization[5]. Urbanization triggers not only the requirement for residential space but also other infrastructures such as schools, hospitals, roads, and commercial spaces.

Thus, to cater to demand for these public infrastructures, governments spend a substantial amount on construction activities. For instance, Chinese government spent about 15% of its GDP on development of roads between 2000 and 2020[6].

Industry Overview

Given the long lifespan and lack of regular use; most companies prefer renting out old machinery to gain profits[7]. Many companies are now exploring opportunities in rental business resulting in the global rental market to expand (refer Figure 3 above). Hence, rise in rental of used machinery is anticipated to boost overall market expansion in near future.

Despite being one of the highly developed global regions, North America persists in high demand for large equipment followed closely by Europe and China respectively (refer Figure 7 above). It is also one of the most prominent markets for dump trucks. The region is considered to be growing horizontally – new constructions are built on new lands; unlike Europe and Japan where constructions are more vertical- in forms of skyscrapers and buildings[8].

China Gaining Prominence

China, just like other nations has witnessed a steady increase in sales of heavy construction equipment from 2012 to 2016 (refer Figure 8 above). The devaluation of Chinese currency had slightly affected China’s overall demand in 2016. However, the country bounced back on track in 2017 with around 35% market share in the Asian market.

To conclude, China has a large number of manufacturing facilities for heavy construction equipment[9]. Many global companies outsource manufacturing functions to Chinese factories owing to low production and labour costs and availability of better manufacturing facilities. Being one of the most prominent markets, China is expected to witness the highest regional growth of over the forecast period[10]. Notably, other Asian countries such as India and Indonesia are fast becoming promising regional markets for construction equipment.