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Jan Zhang

Jan has more than 10 years of experience in industrial automation and manufacturing research. Jan is leading Interact Analysis' APAC operations and is also research director for our industrial automation and robotics research. Read More

Trade shows are, in a sense,  a barometer of industry. The Bauma CHINA 2018 and Bauma CONEXPO INDIA 2018 that Interact Analysis analysts have attended around early December are a good example, reflecting clearly the development trend and status of the off-highway vehicle market in these two countries. 

The confidence of exhibitors, the discussion of technology and the attitude towards the ongoing and upcoming projects confirmed strong business growth in 2017 & 2018, and also delivered optimistic expectations about the outlook for off-highway vehicle markets for the coming few years. 

China and India, being the world’s second largest and sixth largest economies, have both experienced remarkable growth rates in recent years. The off-highway vehicle markets have also enabled Interact Analysis to glimpse the macroeconomic status in these two countries and some of the government initiatives. 

Interact Analysis put together its key findings from the two Bauma shows to share with you. 

Market Overview and Outlook

The demand for construction machinery in emerging countries has increased rapidly since 2000. From 2008, China surpassed the United States to become the largest construction machinery market in the world, and the Indian market has also risen rapidly in recent years. Although both markets experienced slowdowns between 2013 and 2015, they picked up again with very strong growth since the second half of 2016.

China –

Chinese off-highway equipment sales almost doubled in 2017 and then experienced another 50%+ sales growth in 2018; whilst the Indian market has also experienced over 25% growth in the past two years. But when asking about short-term forecast, views on the China market seems to be more cautious and conservative than that given for the Indian market. For the China market, the consensus view is that the growth rate will definitely slow-down in 2019, but disagreement persist about the extent. Some exhibitors feel that the market demand may have reached peak in 2018, but more people believe that infrastructure investment and buying confidence may continue to boost the market, and a 5%-10% growth rate can be expected for 2019.

India –

The Indian market is still in a relatively early phase. It is very much like what the Chinese market looked like 15-20 years ago. Although the overall scale of construction machinery in India lags far behind China – the total sales volume of construction machinery is less than 1/3 of China’s – its development rate is astonishing. The Indian government plans to invest heavily in infrastructure and construction activities such as roads, railways, urban development, which will strongly drive the off-highway equipment market demand. As a result, a more stable and comparatively faster growth rate is projected for this market.

Market Trends Observed

If analysing the market by vehicle type, the structures of the Chinese market and Indian market are quite different.

China – 

  • Excavator is already the largest segment for the Chinese construction equipment market, and medium-size machines have been the largest segment in terms of sales volume.  
  • With  rising labor costs and more attention on safety/efficiency, aerial working platform seem to becoming a “new segment” that sees strong growth opportunities. 
  • Leading local companies have got complete product lines for construction machinery already, taking more shares from international players and leading the market. 

India – 

  • For the Indian market. backhoe loaders and excavators are the two largest segments. Backhoe Loaders alone contributed around 35% of the overall sales by volume during FY 17-18, much higher share than any other regions, which is a very India specific phenomenon.  
  • Pick and Carry (a type of mobile crane), is another India specific equipment phenomenon, accounting for a majority of the material handling equipment market, showing over 40% growth in 2018 and very well covered by local OEMs. 
  • In general, India is still a very cost-sensitive market. Low to medium specification equipment is still the main stream in the market.

Emission standard and replacement of non-eco-friendly equipment

Construction demand from infrastructure projects will be the main driver for both regions for 2019. However, another important driver that may be underestimated is stricter emission control, though it remains a uncertain about the full implementation time.

China – 

The tentative implementation date of the Phase IV is January 2020. However, some uncertainty exists over the exact implementation date as suggested by both OEMs and engine suppliers, with the implementation time potentially being delayed until 2021 to give them more time for preparation. And pre-buying ahead of the implementation time is likely to be triggered and occur during 2019-2020.

India – 

All wheeled equipment, including backhoe loaders and wheeled loaders will have to use BS4 engines by October 2020. For other off-highway equipment types, the implementation to BS4 has not been finalized yet. The time frame is likely to be around 2021-2022. 

Competitive Landscape

China – 

  • After several industry up-down cycles in the past few years, including  overcapacity, vicious competition, deterioration of business quality etc. both the main enterprises and distributors are becoming rational.  
  • The share of domestic brands has increased dramatically in the past few years. Take excavators as an example, the market share of domestic brands has increased from less than 5% in early 2000 to about 50% in 2018.  
  • The competitive advantage of leading companies will be more obvious, the degree of concentration may increase, and the number of new entrants will decrease. 
  • Some of the leading local OEMs in China, including SANY, XCMG, ZOOMLION, LIUGONG have all got a complete production line of construction equipment. They will be more active in pursuing  overseas markets (such as Southeast Asia, South Asia, Russia, the Middle East), and will further tilt towards high-end products.

India –

  • India’s economic growth, particularly after the financial crisis, has attracted the attention of foreign businesses. More and more equipment manufacturers are building factories in India or entering the Indian market through joint ventures.  
  • Multinational manufacturers have brought India the most advanced technology production processes, including JCB, CATERPILLAR, KOMATSU, HITACHI, VOLVO, SANY and LIUGONG. At present, Indian manufacturers of construction equipment are in the stage of joint venture imitation and importation of technology. Some joint ventures started to separate.  
  • Currently, the equipment produced locally is fully geared to the needs of the domestic markets; however, local manufacturers are beginning to gradually export some low-end products to other countries in South & South East Asia and South America.

These observations and post-show take-aways are part of our ongoing research of the global off-highway vehicle research. The full study will be published by end of March 2019. If you want to get more detailed information of this upcoming report, please see the proposal via this link below:

Our detailed post-trade show report which includes more specific announcement & findings from the trade shows is also available. You can access these by simply entering your email address at the below links:

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More reports are available on the Commercial Vehicle area from Interact Analysis. 

 

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Posted by Jan Zhang

Jan has more than 10 years of experience in industrial automation and manufacturing research. Jan is leading Interact Analysis' APAC operations and is also research director for our industrial automation and robotics research. Read More