The year 2022 has seen a mixed bag of results for the construction equipment and off-road industry. Early estimates suggest that while the growth was comparatively slow in the first half, the last quarter of the calendar year saw robust growth. It is estimated last year, more than 90,000 vehicles were sold across the country.
The off-road and construction equipment industry is expected to benefit from the continued focus on infrastructure development, metro projects across the country, and private infrastructure developments continuing to accelerate.
In fact, as per the Economic Survey 2022-23, India’s economic growth will come from path-breaking measures such as PM GatiShakti, National Logistics Policy and Production-Linked Incentives schemes.
“I think the last quarter which is the October to December period, was the best quarter where we saw a very good recovery in the market particularly driven by road construction activity picking up finally with the range updating and you know the activity level starting and a lot of customers starting to discuss concluding big deals and all that,” says Dimitrov Krishnan, Head, Volvo Construction Equipment (India).
In terms of segment-wise performance, the mining industry saw extremely strong growth, where the “demand exceeded supply”. Coming to the road construction segment, it was muted for the most part of the year except for the last quarter. Urban and real estate was better on the back of strong demand due to the ongoing metro construction and commercial work. Residential real estate was reasonably stronger and hence there was a lot of demand for concrete and equipment.
“I’m sure most manufacturers feel that this is a good a thing and hopeful that the momentum, which was there in Q4 CY2022, continues in 2023,” he adds.
Bauma CONEXPO 2023 and electrification
The five-day Bauma Construction Equipment Exhibition (CONEXPO) which begins today in Greater Noida, is expected to be one the most promising years for the industry. This is due to the fact that the biennial event is being held after a gap of almost four years. The last Bauma CONEXPO was held in December 2018.
Krishnan says that the event which is happening after a long gap is expected to drive a lot of interest, especially in a location like Delhi where the demand is quite high in terms of the market. He says the customers are eagerly looking forward to new technology trends, products, concepts, and new technologies, particularly in the space of sustainable power.
The event is expected to see over 600 exhibitors and more than 60,000 footfalls.
At the CONEXPO 2023, Volvo CE showcased a number of solutions, but the showstopper for the company is its first electric offering in the country, the EC55 Electric Compact Excavator, which will be available for customers by early-2024. The second key highlight is the Volvo EC 200D Crawler Excavator with Quick Coupler plus HB22 breaker.
The Volvo CE Chief says the idea is to showcase the company’s readiness to transition to zero-emission products. He says the aim is to tell stakeholders that the industry is getting ready to move towards sustainable direction, especially in urban areas and cities where pollution is a big challenge.
When queried about if Volvo CE would only look to import green products or also plan to manufacture them in India.
“In the beginning these will be imported products, but I can also tell you that at the same time we are also developing products in India that will be showcased later. We are working on multiple products that will be introduced in the market, which are engineered in India. We believe that we will need to create a market acceptance of these products and our interest. Initially, we also need to create an ecosystem that we in which these new products will be accepted by the customers,” says Krishnan.
Globally, the mobility industry is looking at various energy sources to power vehicles. More so for energy sources which is sustainable and green. Volvo CE (India) had also earlier showcased products that could use 20 percent biodiesel content, but the availability of the fuel was a challenge, and hence the adoption was below expectation.
At present, Volvo CE India has an installed capacity to manufacture around 3,500 units a year and manufactures around 2,000 – 2,500 units annually. But Krishnan is confident that with the new product range introduction, the company will see improved sales.
In terms of localisation, depending on the product the company has been able to achieve upto 90 percent localisation levels for certain products.
“Depending on the product, the localisation is between 55 percent to 90 percent and that continues to improve as want to increase the value addition in the local country. The demand for exports out of India is higher and it is improving. If you take the industry-wide improvement in terms of exports, it is quite tremendous between 2020, 2020 and 2021. There was almost 60 percent increase in industry exports from India. That is fairly big and the level of exports has stayed at that high level. It has not dropped off. Obviously, India as an export hub for construction equipment is getting more acceptance and is being utilized even by Volvo Group. We are exporting more excavators than before and we have been exporting compactors in the past,” shares Krishnan.
Headwinds and tailwinds
India continues to be seen as one of the fastest-growing economies globally with strong macro indicators. The year 2023 is a pre-election year, which will further aid to the growth of construction equipment industry, as governments usually focus on expediting execution on infrastructure projects.
He further expects the growth momentum seen in Q4 CY2022, to continue in Q1 CY2023 till the end of this year. The confidence is on the back of the large domestic demand for construction equipment, mainly driven by both government’s push towards infrastructure creation, metro projects as well as private construction. Then there is the new emission norm – BS (CEV/Trem) V standards – which will come into effect on April 1, 2024. It will cover a wider range of engines, including those smaller than 8 kW and those larger than 560 kW, and introduce PN (particular number) limits for those engines with rated power between 19 and 560 kW. Furthermore, in addition to accelerating pre-buying for customers it will also help improve exports.
On the other hand, high-interest rates, fuel costs and foreign exchange rates could play spoilsport for the industry.