Construction equipment industry grows by 25% in FY2023, could rise 15-20% in FY2024

The Indian construction equipment (CE) industry, which aspires to become the world's second largest by 2030, is believed to have grown by 25% year on year in FY2023, surpassing 100,000-unit sales for the second year in a row.

The main reason for this smart rise in the industry’s fortunes is the sharp increase in road and infrastructure construction activity across the country, driven by the massive governmental spend as well as private sector programmes.

The current and future project pipeline is expected to enable the CE sector achieve 15-20% growth year-on-year growth in FY2024 before declining sharply to flat growth and even -10% in FY2025, following the general elections. 

Speaking to Autocar Professional, Dimitrov Krishnan, MD, Volvo Construction Equipment (India), and current President of the Indian Construction Equipment Manufacturers' Association (ICEMA), which represents over 90 companies, said that since November-December 2022, when road building activity started to pick up speed, there has been a lot of demand for related CE equipment.

He expects the average pace of road construction to have recorded more than 30km per day in FY2023. In February, when road work was in high gear, the industry was averaging 40km every day. While the government is yet to release official data on road construction for the last fiscal, ICEMA is likely to release industry growth numbers later this month. 

Dimitrov Krishnan, MD, Volvo Construction Equipment (India): “The pickup in road construction has come as good relief for the CE industry.”

This pace of road construction work and resultant YoY growth has undoubtedly strengthened market sentiment, following a particularly weak performance in first-half FY2023. And the average of 30km new roads per day in FY2023 is far better than the 19km/day in FY2022, albeit less than the 32km/day in FY2021. "The pickup in road construction has come as good relief for the industry," remarked Dimitrov. 

Meanwhile, the ongoing boom in both new projects in the commercial and residential real estate sector continues to a strong driver of growth in the CE industry, leading to increased demand for heavy-duty trucks. Vehicle offtake from the mining industry is also on the upswing. 

Dimitrov though is cautious about near-term growth for the industry. With general elections to be held in India in mid-2024, he says the CE industry’s growth cycle is likely to slow down in FY2025. Typically, this sector witnesses a slowdown in the fiscal year following elections and the CE industry, having fared extremely well in FY2023 and likely to do so also in FY2024, could see flat growth or even go negative to the tune of 10% in FY2025.