India Construction Machinery Industry Outlook 2016

8/10/2019 India Construction Machinery Industry Outlook 2016

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TABLE OF CONTENTS

List of Figures .............................................................................................................................5

List of Tables ..............................................................................................................................7

1. Asia-Pacific Construction Machinery Industry Introduction.................................................9

2. Asia-Pacific Construction Machinery Industry Market Size 2006-2011 ............................. 10

3. Asia-Pacific Construction Machinery Industry Segmentation, 2006-2011 .......................... 11

3.1. By Equipments............................................................................................................ 11

3.2. By Countries ............................................................................................................... 12

4. India Construction machinery Industry Introduction and Market Size, FY2006-FY2011 . 13

5. India Construction Machinery Imports and Exports, FY2006-FY2011 ............................ 15

6. India Construction Machinery Industry Segmentation........................................................ 19

6.1. Trucks Machinery Market ........................................................................................... 20

6.1.1. Trucks Machinery Market Size, FY2006-FY2011 ............................................. 20

6.1.2. Truck machinery Market Segmentation, FY2006-FY2011 ................................. 21

6.2. Earthmoving Machinery Market .................................................................................. 22

6.2.1. Earthmoving Machinery Market Size, FY2006-FY2011 .................................... 226.2.2. Earthmoving Machinery Market Segmentation, FY2006-FY2011 ..................... 24

6.3. Road Construction Machinery Market ......................................................................... 25

6.3.1. Road Construction Machinery Market Size, FY2006-FY2011 ........................... 25

6.3.2. Road Construction Machinery Market Segmentation, FY2006-FY2011............. 26

6.4. Cranes Machinery Market ........................................................................................... 27

6.4.1. Cranes Machinery Market Size, FY2006-FY2011 ............................................. 27

6.4.2. Cranes Machinery Market Segmentation, FY2006-FY2011 ............................... 28

7. India Construction Machinery Industry SWOT Analysis ................................................... 29

Strenghts ..................................................................................................................... 29

Weaknesses ................................................................................................................. 30


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Opportunities .............................................................................................................. 30

Threats ........................................................................................................................ 30

8. Market Share of Major Players in India Construction Machinery Industry, FY2011 ......... 31

9. Trends and Development in India Construction Machinery ................................................ 32

Changes in Policies and Market Scenario .................................................................... 32

Nascent Stage of Used and Rental Construction Machinery Industry in India .............. 33

Total Investment in Infrastructure in India................................................................... 33

Increasing Foreign Direct Investments in Construction Sector ..................................... 34

10. India Construction Machinery Industry Future Outlook and Projections, FY2012-

FY2016.................................................................................................................................... 34

10.1. Cause and Effect Relationship between Macro Economic and Industry Factors and

India Construction Machinery Industry ................................................................................. 36

11. Macro Economic and Industry Factors ............................................................................ 38

11.1. Nominal GDP, FY2006-FY2016 ........................................................................... 38

11.2. Inflation Rate, in Percentage, FY2006-FY2016 ..................................................... 38

11.3. Construction Sector of India, FY2006-FY2016 ..................................................... 40

11.4. Mining and Quarrying Sector of India, FY2006-FY2016 ...................................... 41

12. Market Share of Major Players in Asia-Pacific Construction Machinery Industry, 2011 . 42

13. Asia-Pacific Construction machinery Industry Future Outlook and Projections, 2012-2016

44

14. Company Profile ............................................................................................................ 45

14.1. Komatsu Limited ..................................................................................................... 45

14.1.1. Company Overview .......................................................................................... 45

14.1.2. Business Strategy ............................................................................................. 45

14.1.3. Financial Performance ...................................................................................... 46

14.2. Zoomlion Limited.................................................................................................... 47

14.2.1. Company Overview .......................................................................................... 47

14.2.2. Business Strategy ............................................................................................. 48


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LIST OF FIGURES

Figure 1: Asia-Pacific Construction Machinery Industry Market Size on the Basis of Revenue

from Sale, in USD Billion, 2006-2011 ....................................................................................... 10

Figure 2: Asia-Pacific Construction Machinery Segmentation on the Basis of Countries, by

Contribution, in percentage, 2006-2011 ..................................................................................... 13

Figure 3: India Construction Machinery Industry Market Size on the Basis of Sales, in Units and

USD Billion, FY2006-FY2011 ............................................................................................... 15

Figure 4: Imports and Exports of Construction Machinery in India, in USD Million, FY2006-

FY2011 .................................................................................................................................... 16

Figure 5: India Construction Machinery Segmentation on the Basis of Contribution in Overall

Sales Revenue, in Percentage, FY2006-FY2011 ..................................................................... 19

Figure 6: India Construction Machinery Segmentation on the Basis of Contribution in Overall

Sales Volume, in Percentage, FY2006-FY2011 ...................................................................... 20

Figure 7: Trucks Machinery Market Size on the Basis of Revenue, in Units and in USD Million,

FY2006-FY2011 .................................................................................................................... 21

Figure 8: Earthmoving Machinery Market Size on the Basis of Sales, in Units and in USD

Billion, FY2006-FY2007 ........................................................................................................ 23

Figure 9: Road Construction Machinery Market Size on the Basis of Sales, in Units and in USD

Million, FY2006-FY2011 ....................................................................................................... 26Figure 10: Cranes Machinery Market Size on the Basis of Sales, in Units and in USD Million,

FY2006-FY2011 .................................................................................................................... 28

Figure 11: Market Share of Major Players in Indian Construction Machinery Industry, in

Percentage Contribution, FY2011 ............................................................................................ 32

Figure 12: Foreign Direct Investments in Construction Sector in India, in USD Million,

FY2007-FY2012 .................................................................................................................... 34

Figure 13: India Construction Machinery Industry Future Projections on the Basis of Sales

Revenue, in USD Billion, FY2012-FY2016 ............................................................................ 36

Figure 14: Nominal GDP, in USD Billion, FY2006-FY2016 .................................................. 38

Figure 15: Inflation Rate, in Percentage, FY2006-FY2016 ...................................................... 40

Figure 16: Construction Sector Market Size, in USD Billion, FY2006-FY2016 ...................... 41


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LIST OF TABLES

Table 1: Asia-Pacific Construction Machinery Industry Segmentation on the Basis of

Equipments Sold, in Units, 2006-2011 ...................................................................................... 11

Table 2: Imports and Exports of Certain Construction Machinery in India, in USD Million,

FY2006-FY2011 .................................................................................................................... 17

Table 3: Imports and Exports of Certain Construction Machinery in India, in Thousand Units,

FY2006-FY2011 .................................................................................................................... 18

Table 4: Truck Machinery Market Segmentation on the Basis of Sales, in USD Million,

FY2006-FY2011 .................................................................................................................... 22

Table 5: Trucks Machinery Market Segmentation on the Basis of Sales, in Units, FY2006-

FY2011 .................................................................................................................................... 22

Table 6: Earthmoving Machinery Segmentation on the Basis of Sales, in USD Million, FY2006-

FY2011 .................................................................................................................................... 24

Table 7: Earthmoving Machinery Segmentation on the Basis of Sales, in Units, FY2006-

FY2011 .................................................................................................................................... 25

Table 8: Road Construction Machinery Segmentation on the Basis of Sales, in USD Million,

FY2006-FY2011 .................................................................................................................... 27

Table 9: Road Construction Machinery Segmentation on the Basis of Sales, in Units, FY2006-

FY2011 .................................................................................................................................... 27Table 10: Crane Machinery Segmentation on the Basis of Sales, in USD Million, FY2006-

FY2011 .................................................................................................................................... 29

Table 11: Crane Machinery Segmentation on the Basis of Sales, in Units, FY2006-FY2011 ... 29

Table 12: Cause and Effect Relationship between Macro-Economic and Industry Factors and

India Construction Equipment Industry Prospects ..................................................................... 36

Table 13: Market Share of Major Players in Asia-Pacific Construction Machinery Industry on the

Basis of Contribution in Sales, in Percentage, 2010-2011 .......................................................... 43

Table 14: Financial Performance of Zoomlion on the Basis of Sales Revenue, in USD Million,

2009-2011 ................................................................................................................................. 49

Table 15: Zoomlion Revenue from Sales of Segments, on the Basis of Revenue from

Consolidated Statement from all the Regions, in USD Million, 2009-2011 ................................ 49


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Table 16: Correlation Matrix of the India Construction Machinery Industry .............................. 56

Table 17: Regression Coefficients Output ................................................................................. 58


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The global construction

equipment market continued to

grow in 2011 due to robust

growth in emerging markets as

well as on-going investments in

infrastructure around the world

1.

ASIA-PACIFIC CONSTRUCTION MACHINERY

INDUSTRY INTRODUCTION

The construction machinery industry is an important segment in most global economies.

Construction machinery includes many different types of equipment, including concrete

machinery,excavators, hoisting machinery, road machinery, pile driving machinery and others.

These types of machinery are used in a wide range of applications, including building

construction, surface mining and infrastructure projects, which include transportation and energy

infrastructure construction. The global construction

equipment market continued to grow in 2011 due to robust

growth in emerging markets as well as on-going

investments in infrastructure around the world. Emerging

markets such as Asia, the Middle East, Russia and Brazil

showed a steady growth while demand in developed

markets in North America and Europe continued to show signs of recovery. The demand in

China, a country whose rapid growth rate in recent years resulted in ranking it as the worlds

largest construction equipment market, saw slow growth substantially in the first half of 2011

due to tighter credit conditions. Competition in that market also heated up due to growing local

investment by major global players as well as strong growth by local makers.

The construction machinery industry has been fragmented among various players of which

Komatsu, Zoomlion and Caterpillar have the highest share. Currently 20 large and global

manufacturers and nearly 200 small and medium manufacturers of earthmoving and mining

machinery are present in India. The rising developmental activities in infrastructure and

manufacturing sector had enhanced the demand for construction equipments as the demand for

these equipments is highly correlated with growth of sectors such as infrastructure, construction,

real estate, mining and manufacturing industry. In the recent years, India had witnessed massive

investment in the construction industry from both public and private enterprises.

The Asia-Pacific construction machinery industry is expected to grow at a CAGR of 26.6% from

2012-2016 with Chinas market showing the fastest and the largest growth. The main drivers of

this high industry growth were strong demand from the real estate construction industry and the

construction of many infrastructure projects.

The growth in the South Korean construction industry will be fuelled by infrastructure sectorwhich is expected to grow at a CAGR of 4.81% and will also be aided by road, rail, energy and

other individual sectors. Industrial construction is expected to record the second highest CAGR

of 3.8% supported by the metal and material processing industries.


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The Asia-Pacific construction industry

market had grown at a CAGR of 17.0%. Itwas because of China and India that the

global construction equipment industry

had recovered to projected sales revenue

of USD 152.5 billion in 2011

2.


INDUSTRY MARKET SIZE 2006-2011

The Asia-Pacific construction industry market had grown at a CAGR of 17.0% to reach a market

size of USD 83.9 billion in 2011 from USD 38.2

billion in 2006. The construction machinery

market in this area has gradually become the

most focused sector in the world. China is the

largest market for construction machinery in

Asia-Pacific as the infrastructure in South China

and Sichuan province was severely damaged following the rare snow-ice disaster and earthquake

and thus required rebuilding which had resulted in an increased demand for construction

machinery.

It was because of China and India that the global construction equipment industry had recoveredin 2011 registering sales revenue of USD 152.5 billion as against USD 145.5 billion in 2010 and

USD 116.3 billion in 2009 after peaking at USD 100 billion in 2007. In 2009, Asia-Pacific's

positive market growth was reflected on the basis of the headcount numbers with only one in

seven companies in this region making any type of job cuts at all. Conversely, 35% of

respondents said their organization had increased its direct labor force.

Figure 1: Asia-Pacific Construction Machinery Industry Market Size on the Basis of

Revenue from Sale, in USD Billion, 2006-2011

Source: AM Mindpower Solutions

34.8

43.6

51.2

58.664.7

79.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2006 2007 2008 2009 2010 2011

USDBillion


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3.


INDUSTRY SEGMENTATION, 2006-2011

3.1. BY EQUIPMENTS

The construction machinery industry can be segmented into five broad categories of earthmoving

equipments, construction vehicles, material handling equipments, construction equipments and

others. Earthmoving equipments are those machineries which are used as heavy-duty vehicles,

specially designed for executing construction tasks mostly involving earthwork operations. The

contribution of these machineries was 64.5% in 2011. The market for earthmoving equipments

had increased at a CAGR of 10.3% from 2006-2011.

Construction vehicles include rigid dump trucks and articulated dump trucks used for dumping

waste soil and for transporting construction materials to construction sites. The market for

construction vehicles had increased at a CAGR of 6.0% from 2006-2011. On the other hand,material handling equipments includes cranes, forklifts, hoists and others. These equipments are

basically used for lifting and handling heavy materials and objects. The market for these

equipments had increased at a CAGR of 9.4%.

Construction equipments market had incremented at a CAGR of 2.5% from 2006-2011. These

equipments include road rollers, concrete mixtures, road machines, stone crusher, pavers and

others. These equipments have varied applicability and are mainly used in construction activities.

The overall volume of construction machinery sold in Asia-Pacific had increased at a CAGR of

7.7% from 2006-2011.

Table 1: Asia-Pacific Construction Machinery Industry Segmentation on the Basis of

Equipments Sold, in Units, 2006-2011

Segments 2006 2007 2008 2009 2010 2011

Earthmoving Equipments 393,991 472,073 457,829 336,962 560,759 642,313

Construction Vehicles Equipments 768 607 804 819 920 1,030

Material Handling Equipment 56,852 68,794 77,357 61,460 77,460 89,076

Construction Equipment 218,531 213,606 191,061 161,971 246,467 246,859

Others Equipments 17,855 19,140 20,769 9,454 15,170 16,714

Total 687,997 774,220 747,820 570,666 900,776 995,992



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China is the leader in global constructionmachinery industry. The contribution of China

in the Asia-Pacific construction machinery

industry was 73.0% in 2011. The secondhighest contribution was by Japan which had a

share of 19.5% in 2011. The third largestcountry in terms of construction machinery

market is India which has a share of 4.6%

3.2. BY COUNTRIES

The Asia-Pacific construction machinery industry has been segmented into four countries of

which China has the highest contribution in the overall industry. The contribution of China was

73.0% in 2011. It is the leader in global construction machinery industry. The constructionmachinery industry of China had showcased a 29.8% annual growth from 2006-2011 because of

the investments in new constructions and government spending on public infrastructure.

The second highest contribution was by

Japan which had a share of 19.5% in 2011.

There has been a decline in contribution of

Japan from 2006-2011 because the market

for construction machinery in Japan had

declined at a CAGR of 2.5% from 2006-

2011. In 2009, Japan sank into recessionary

phase during the global financial crisis. But

the economy had recovered in 2010 with the construction machinery industry showcasing a

growth of 65.9% but in the year 2011, the growth of the construction machinery had slowed to

28.5% from 2010 due to earthquakes and the nuclear plant radiation leakage in Fukushima.

The third largest country in terms of construction machinery market is India which has a share of

4.6% in 2011 in the overall Asia-Pacific construction machinery industry. South Korea

contributes the least in the overall market with a share of 2.8% in 2011. Even though South

Korea has the smallest share of all, it is among the largest producers of these machineries in the

world. But most of the machineries produced are exported as the domestic consumption is very

low.


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In FY2011 growth of construction

machinery had increased at a much slower

rate of 4.7% from FY2010. This was due

to the euro zone crisis due to which there

was a decline in the foreign investment

from abroad. On a whole the construction

machinery industry of India had grown at

a CAGR of 16.7% from FY2006-FY2011

power plants, developing telecommunication sector and urban infrastructure had paved the way

for the construction equipment demand to grow phenomenally.

However the global recessionary condition in FY2009 led to the decline in construction

investment as well as a decline in investment in infrastructure sector. This resulted in a decline in

the construction machinery industry inFY2009. In FY2009, the revenue from sales of

construction machinery industry had declined

by 24.6% from FY2008. However in FY2010,

the construction machinery industry had grown

at a rate of 33.2% from FY2009 due to

investment in infrastructure, mainly in

construction of stadiums, road construction,

hotels and real estate. The reason for such a high increase in construction and infrastructure

sector was the CWG (Common Wealth Games) held in India. Another reason for a high rise in

the industry was the investment spending which had increased as well as increase in foreign

direct investment in the real estate sector and in the infrastructure sector. In FY2011 growth of

construction machinery had increased at a much slower rate of 4.7% from FY2010. This was

largely because of the euro zone crisis due to which there was a decline in the foreign investment

from abroad. On a whole the construction machinery industry of India had grown at a CAGR of

16.7% from FY2006-FY2011.

In India both premium and latest state-of-the-art technology equipments and value for money of

low cost products exist simultaneously. The high technology state-of-the-art products were

manufactured in economical quantity only if the users had to use them due to environmental and

ecological reasons. The reason for latest technology equipment not finding favor with the users

was due to the fact that these were very expensive. Most of the components were imported and

with the rupee depreciation the cost of these components had gone up and hence the equipments

were not affordable as the cost of projects increased. Further reason for India taking a longer

period for evolving towards state-of-the-art equipment was partially due to socio economic

factors.

Currently 20 large and global manufacturers and nearly 200 small and medium manufacturers of

earthmoving and mining machinery are present in India. The product range comprises of

backhoe loaders, compactors, mobile cranes, pavers, batching plants, crawler crane, transit

mixer, concrete pump, tower cranes, hydraulic excavators, dumpers, mining shovel, walking

draglines, dozers, wheel loaders, graders, drilling equipment and others. In the construction

machinery industry of India, JCB has the largest share in the market followed by L&T and then

BEML.


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The Indian construction machinery

industry has a negative trade balance of

USD 1,583.9 million in FY2011. The

import and exports of construction

machinery has showcased positive growth

with imports increasing at a CAGR of21.4% from FY2006-FY2011

Figure 3: India Construction Machinery Industry Market Size on the Basis of Sales, in

Units and USD Billion, FY2006-FY2011

Source: Report of the Working Group on Capital Goods & Engineering Sector for the 12th Five Year Plan (2012-2017), ECEL

Annual Report FY2010

5.

INDIA CONSTRUCTION MACHINERY IMPORTS

AND EXPORTS, FY2006-FY2011

Currently, the equipment market is largely import driven, with India importing construction

machinery worth USD 1.6 billion in FY2011, representing a decline by 0.5% over 2010. The

import and exports of construction machinery

has showcased positive growth with imports

increasing at a CAGR of 21.4% from FY2006-

FY2011. The Indian construction machinery

industry has a negative trade balance of USD

1,583.9 million in FY2011. In FY2007, theimports market was estimated to be USD 936.4

million of which the earthmoving, excavation and hauling equipment categories commanded

around 25%. The imported used equipments which included high-end hydraulic mobile cranes,

excavators, motor graders, vibratory compactors comprised a negligible 0.4 % of the total

construction equipment market.

32,344

48,08143,284

37,70744,760

54,0551.5

2.0

3.0

2.3

3.13.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

10,000

20,000

30,000

40,000

50,000

60,000

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

USDBillion

Units

Volume Value


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India has exported a wide range of construction machinery to countries in Africa, Indonesia,

Malaysia and South America. The value of export was INR 228 crore during FY2011. The

export effort were led by BEML limited which contributed about INR 200 crore in construction

machinery exports in the FY2010. Export has grown at CAGR of 6.3% over the last six years.

The exports of Indian construction machinery industry were estimated at USD 35 million in2004-05. The growth in exports from FY2001-FY2005 was around 30%. The potential exports

market for construction equipment from India is projected to be around INR 1 billion and the

imports are projected to be INR 11.3 billion in FY2016.

Figure 4: Imports and Exports of Construction Machinery in India, in USD Million,

FY2006-FY2011

Source: Report of the Working Group on Capital Goods & Engineering Sector for the 12th Five Year Plan (2012-2017)

620.3

936.4

1,364.9

1,237.6

1,642.0

1,634.3

37.1

41.5

57.5

59.7

72.5

50.4

0.0 200.0 400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 1,600.0 1,800.0

FY'2006

FY'2007

FY'2008

FY'2009

FY'2010

FY'2011

USD Million

Exports

Imports


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Table 2: Imports and Exports of Certain Construction Machinery in India, in USD Million,

FY2006-FY2011

Segments FY2006 FY2007 FY2008 FY2009 FY2010 FY2011

Track Laying Bulldozers and Angle dozers

Imports 5.16 11.25 15.69 25.05 24.02 28.16

Exports 1.32 0.92 9.76 16.62 28.95 7.96

Other Bulldozers and Angle dozers

Imports 7.08 13.99 11.83 14.81 9.27 16.39

Exports 3.58 2.04 2.24 2.8 5.91 3.58

Graders and Levelers

Imports 18.16 28.36 61.57 53.59 30.44 55.48

Exports 0.34 2.28 0.54 0.97 1.92 1.51

Scrapers

Imports 0.06 0.9 1.63 0.33 0.28 0.05

Exports 0.01 0.14 0.02 0.16 0.08 0.31

Tamping Machines and Road Rollers

Imports 0.91 6.24 9.19 10 2.2 6.25

Exports 1.97 0.65 5.95 1.93 3.09 4.34

Front-end Shovel Loaders

Imports 2.02 8.03 17.2 68.82 14.38 25.88

Exports 0.57 1.87 3.33 9.31 5.17 6.41

Machinery with a 360 Degree Revolving Super-Structure

Imports 6.87 9.83 15.51 11.26 64.6 68.9

Exports 0.15 0.75 20.87 20.16 9.16 15.91

Other Mechanical Shovels, Excavators and Shovel Loaders

Imports 146.1 205.29 252.63 295.65 189.4 255.54

Exports 10 18.3 13.25 25.27 33.82 60.54

Total Imports 186.36 283.89 385.25 479.51 334.59 456.65

Total Exports 17.94 26.95 55.96 77.22 88.1 100.56

Source: Department of commerce


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Table 3: Imports and Exports of Certain Construction Machinery in India, in Thousand

Units, FY2006-FY2011


Track Laying Bulldozers and Angle dozers

Imports 0.05 0.12 0.17 0.15 0.21 0.16

Exports 0.02 0.01 0.04 0.13 0.23 0.04

Other Bulldozers and Angle dozers

Imports 0.08 0.17 0.11 0.1 0.09 0.07

Exports 0.04 0.12 0.03 0.03 0.01 0.12

Graders and Levelers

Imports 0.33 0.40 1.14 0.85 0.32 0.51

Exports 0 0.03 0.01 0.03 0.14 0.05

Scrapers

Imports 0.02 0.12 0.07 0.05 0.09 0.05

Exports 0 0.03 0.01 0.04 0 0.02

Tamping Machines and Road Rollers

Imports 0.07 0.18 0.30 0.30 0.19 0.14

Exports 0.14 0.03 0.11 0.06 0.08 0.13

Front-end Shovel Loaders

Imports 0.05 0.18 1.41 0.25 0.09 0.14

Exports 0.03 0.05 0.08 1,043.69 0.25 0.16

Machinery with a 360 Degree Revolving Super-Structure

Imports 0.32 0.63 0.87 0.30 0.95 0.75

Exports 0 0.01 0.23 0.24 0.11 0.19

Other Mechanical Shovels, Excavators and Shovel Loaders

Imports 2.73 2.70 7.07 254.40 8.80 6.38

Exports 0.24 0.46 0.27 0.75 12.11 3.25

Total Imports 3.65 4.50 11.14 256.40 10.74 8.20

Total Exports 0.47 0.74 0.78 1044.97 12.93 3.96

Source: Department of commerce


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6.

INDIA CONSTRUCTION MACHINERY INDUSTRY

SEGMENTATION

Though the economic slowdown had its moderate effects on the construction machinery

industry, it regained momentum in FY2010 showing a stupendous growth which is expected to

continue in the years to come. The earth-moving segment, in particular, has been driving the

overall construction equipment industry in India with the strong demand emanating from the

government backed infrastructure projects. The segment is expected to register a CAGR of

nearly 21% during 2011-2015. The contribution of earthmoving machinery had been the highest

throughout the review period. In FY2011 the contribution of earthmoving machinery had been

81.1% in the overall revenue from sales of construction machinery industry. The earthmoving

segment includes backhoe leaders, excavators, wheeled loaders, dumpers/tippers, skid steer

loaders. The contribution of earthmoving machinery was 71.8% in the volume of machines sold.

The second largest construction machinery segment is the road machinery segment. The roadconstruction machinery contributes 7.9% in FY2011. India has the third largest road network in

the world which was the main reason for high demand of road machineries. However, in terms of

volume sold the contribution of road machinery was 16.8% in FY2011 indicating that the prices

of these machineries are low. The third highest contribution of 7.5% was of crane machinery and

the fourth highest was of truck machinery of 3.3% in FY2011.

Figure 5: India Construction Machinery Segmentation on the Basis of Contribution in

Overall Sales Revenue, in Percentage, FY2006-FY2011

Source: ECEL Annual Report FY2010, AM Mindpower Solutions

78.9% 81.9% 80.9% 83.0% 80.1% 81.1%

8.0%7.6% 7.3% 7.3% 8.4% 8.0%

8.6% 8.1% 8.3% 6.4% 7.8% 7.5%4.4% 2.4% 3.4% 3.3% 3.6% 3.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

inPercentage

Earthmoving Equipments Road Machinery Cranes Trucks


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Dump trucks find their major applications

in the power sector where they aredeployed for coal mining and construction

of hydroelectric projects. These machines

are also used in large iron ore mines,

limestone quarries and those construction

sites which require substantial earthwork

to be carried out

Figure 6: India Construction Machinery Segmentation on the Basis of Contribution in

Overall Sales Volume, in Percentage, FY2006-FY2011


6.1. TRUCKS MACHINERY MARKET

6.1.1. TRUCKS MACHINERY MARKET SIZE, FY2006-FY2011

Articulated dump trucks are those dump trucks which have a hydraulically operated open-box

bed hinged at the rear, the front of which can be lifted to allow the contents to be deposited on

the ground behind the truck at the site of delivery whereas, rigid dump trucks are those whose

bed cannot be lifted from the front. Dump trucks are available in three sizes small (31-50 tons),

medium (51-80 tons) and large (more than 80 tons).

In FY2011 in the overall sales of trucks

articulated dumps truck only contributed 8.4%whereas rigid dump trucks contributed 91.6%.

Dump trucks find their major applications in the

power sector where they are deployed for coal

mining and construction of hydroelectric

projects. These machines are also used in large

70.2% 73.2% 71.2% 71.9% 72.1% 71.8%

18.1% 16.9% 18.2% 16.1% 15.7% 16.8%

9.3% 8.7% 8.7% 9.8% 10.2% 9.5%2.4% 1.3% 1.9% 2.2% 2.1% 1.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

inPercentage

Earthmoving Equipments Cranes Road Machinery Trucks


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iron ore mines, limestone quarries and those construction sites which require substantial

earthwork to be carried out. These trucks are not permitted to operate on the highway owing to

their large size and high axle loads. The sales of rigid dump trucks had declined by 4% despite

strong mining activity. The decline was the result of an ongoing shift in this market towards

larger machines and the cyclical nature of buying patterns by the major coal companies.Figure 7: Trucks Machinery Market Size on the Basis of Revenue, in Units and in USD

Million, FY2006-FY2011


6.1.2. TRUCK MACHINERY MARKET SEGMENTATION, FY2006-

FY2011

Truck construction machinery includes articulated dump trucks and rigid dump trucks. The

revenue from the sales of articulated dump trucks had increased at a CAGR of 14.0% from

FY2006-FY2011. The revenue from the sales of rigid dump trucks had increased at a CAGR of

10.2% from FY2006-FY2011.

In FY2011 1,000 units of rigid dump trucks were sold in India. The units sold of articulated

dump trucks had increased at a CAGR of 9.6% from FY2006-FY2011. Despite the recent

global economic downturn, Indian demand for rigid dump trucks reached record levels in

FY2009 as the government owned coal companies, the major buyers of these machines,

768

607

804 819920

1,030

65.1

48.0

105.0

76.3

109.0 107.2

0.0

20.0

40.0

60.0

80.0

100.0

120.0

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

USDMillion

Units

Volume Value


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22


In FY2006 India was the second largest

market for backhoe loaders in the world

with a market size of approximately USD444.9 million. Backhoes are perhaps the

only market in India amongst

construction equipment that have

reached a stage of maturity and scale

where exports could be considered

increased production to meet insatiable demand from the power sector. The articulated sector had

also enjoyed a period of good sales in the last five years and saw record levels in 2008.

Table 4: Truck Machinery Market Segmentation on the Basis of Sales, in USD Million,

FY2006-FY2011


Articulated Dump Trucks 4.7 3.0 12.2 3.1 7.0 9.1

Rigid Dump Trucks 60.4 44.9 92.8 73.2 102.0 98.2


Table 5: Trucks Machinery Market Segmentation on the Basis of Sales, in Units, FY2006-

FY2011


Articulated Dump Trucks 19 13 33 11 20 30

Rigid Dump Trucks 749 594 771 808 900 1,000


6.2. EARTHMOVING MACHINERY MARKET

6.2.1. EARTHMOVING MACHINERY MARKET SIZE, FY2006-FY2011

The earthmoving machinery market in India was estimated at USD 2.6 billion in FY2011. The

earthmoving machineries have been segmented into crawler dozers, loaders and excavators, mini

excavators, backhoe, skid steer and wheel loaders and motor grader.

Excavators are extensively used in many roles

such as digging of trenches and foundations,

demolition, general grading/landscaping, heavy

lifting (lifting and placing of large concrete pipes),

river dredging, mining and brush cutting with

hydraulic attachments. Excavators come in a range

of capacities and are usually classified on the basis

of tonnage. The lower end excavators, referred to


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as mini excavators, find greater usage in urban infrastructure development and road

development. The heavier duty excavators are used in mining and heavy construction.

In FY2006, India was the second largest market for backhoe loaders in the world with a market

size of approximately USD 444.9 million. Backhoes are used for all construction applications

and hence have a very high utilization for renters. Backhoes are perhaps the only market in Indiaamongst construction equipment that have reached a stage of maturity and scale where exports

could be considered.

Loaders are used mainly for uploading materials into trucks, laying pipes, clearing rubble and

digging. The flexibility of usage is low as compared to a backhoe and loaders are largely used as

complimentary products for material re-handling in construction and mining applications. A

complete range of products and comprehensive maintenance and service support are becoming

the critical success factors for players in the industry.

Figure 8: Earthmoving Machinery Market Size on the Basis of Sales, in Units and in USD

Billion, FY2006-FY2007


22,692

35,175 30,82027,116

32,255

38,8051.2

1.7

2.5

1.9

2.52.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

40,000.0

45,000.0

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

USDBillion

Units

Volume Value


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6.2.2.

EARTHMOVING MACHINERY MARKET SEGMENTATION,

FY2006-FY2011

The predominant sub-segment in the earthmoving machinery market is excavators, which

accounted for 43.5% of the overall market. Backhoes accounted for 30.5% and loaders

contributed for 9.2% in the market for earthmoving machineries. The market for crawler

excavators had increased at a CAGR of 22.7% from FY2006-FY2011. The market for backhoe

loaders had increased at a CAGR of 12.0% from FY2006-FY2011. The growth driver for this

market was the housing and urban construction. The demand of loaders has risen because of

increased global demand for iron ore mining activities in the country.

Among the largest selling machine, the backhoe loader constituting 37% of total volume sold of

construction equipment in the country has grown at an annual rate of 7.7% from FY2006-

FY2011. The crawler excavator, the second largest selling equipment category had registered a

growth of 29% from that of FY2010 in terms of units sold. In 2011, in terms of revenue

generated from sales, crawler excavators contributed 39.2% in the overall market. The revenue

from sales had increased from a CAGR of 22.7% from FY2006-FY2011.

Table 6: Earthmoving Machinery Segmentation on the Basis of Sales, in USD Million,

FY2006-FY2011


Crawler Dozers 99.8 102.0 164.6 114.6 178.5 176.7

Motor Graders 45.0 63.8 103.1 48.0 105.4 106.5

Crawler Excavators 452.1 690.5 1,131.2 684.0 1,130.7 1,259.0

Crawler Loaders 0.4 0.7 0.9 0.5 0.8 0.7

Mini Excavators 1.0 0.9 3.9 334.4 5.8 7.5

Backhoe Loaders 444.9 658.8 802.4 580.0 793.4 785.3

Skid Steer Loaders 4.2 6.0 17.4 7.9 11.9 13.3

Wheel Loaders 121.2 143.1 244.5 137.4 226.7 251.3



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Table 7: Earthmoving Machinery Segmentation on the Basis of Sales, in Units, FY2006-

FY2011


Crawler Dozers 550 599 608 562 700 800

Motor Graders 360 544 553 342 600 700

Crawler Excavators 5,904 9,606 9,897 7,944 10,500 13,500

Crawler Loaders 3 6 5 4 5 5

Mini Excavators 24 22 64 71 100 150

Backhoe Loaders 13,797 21,769 16,673 16,001 17,500 20,000

Skid Steer Loaders 175 265 480 290 350 450

Wheel Loaders 1,879 2,364 2,540 1,902 2,500 3,200


6.3. ROAD CONSTRUCTION MACHINERY MARKET

6.3.1. ROAD CONSTRUCTION MACHINERY MARKET SIZE, FY2006-

FY2011

Sales of road construction equipment has registered a decline of 1.1% from FY2011, indicating

the governments frequently repeated claims of building 20 km of highway every day was not

put into practice. Sales of compaction equipment had declined by nearly 3.0% in FY2011

despite the enormous potential in the market. The construction equipment business is very

sensitive to the governments decision making process. The major impediments to its growth are

the slow speed of awarding contracts, the time taken to start projects and obstructions to

completing them within the set time frame originating from the current socio-political

environment. The revenue from sales of road construction machinery had inclined by a CAGR of

16.5% from FY2006-FY2011.The initial impetus had been given by the investments in the

Golden Quadrilateral (GQ) and North-East-West-South (NEWS) corridor. Significant

investments were made in road construction sector from FY2005-FY2010. The National

Highway Authority of India (NHAI) had drawn up detailed plans for highway development as

part of the National Highway Development Program (NHDP). The total potential orders were of

USD 55 billion for these five years.


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Table 8: Road Construction Machinery Segmentation on the Basis of Sales, in USD Million,

FY2006-FY2011


Asphalt Finishers 37.5 48.5 63.2 92.5 73.0 114.1

Compaction Equipment 49.1 70.6 91.3 131.1 94.7 144.5


Table 9: Road Construction Machinery Segmentation on the Basis of Sales, in Units,

FY2006-FY2011


Asphalt Finishers 687 954 879 920 1150 1350

Compaction Equipment 2335 3219 2905 2787 3400 3800


6.4. CRANES MACHINERY MARKET

6.4.1.

CRANES MACHINERY MARKET SIZE, FY2006-FY2011

In FY2011, the revenue from sales of cranes had grown by 0.5% from FY2010. The past few

years have also witnessed a phase of restructuring in the industry through acquisitions and joint

ventures. This reflects the active interest of international majors in the Indian market. The market

for cranes had increased at a CAGR of 13.5% from FY2006-FY2011. The key drivers are the

construction and industrial sectors. In the construction sector the key growth driver was urban

infrastructure (investment growth of 13% annually). In industrial applications, the key demand

drivers were steel and power industries (growing at around 9 % annually). Cranes prevalent in

India primarily consist of slew cranes, crawler cranes and tower cranes. These are higher value

more sophisticated cranes and are typically used for heavier duty work.

Demand for these cranes was driven primarily by the power, refinery and mining sectors. With

increasing average scale of infrastructure and construction projects the growth rate of slew

(specifically yard/rough terrain) and tower cranes had surpassed the average growth rate of the

overall cranes segment. With improved road networks by 2008-09, demand for truck mounted

cranes had also witnessed a spike.


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Figure 10: Cranes Machinery Market Size on the Basis of Sales, in Units and in USD

Million, FY2006-FY2011


6.4.2.

CRANES MACHINERY MARKET SEGMENTATION, FY2006-

FY2011

The market for mobile cranes in value terms had increased at a CAGR of 13.3% from FY2006-

FY2011. The market for cranes is dominated by mobile cranes which have a contribution of

98.0% in FY2011. The RTLTs cranes contributed 1.9% in the overall market for cranes in

FY2011. The contribution of RTLTs cranes had increased from 1.3% in FY2006 to 1.9% in

FY2011 as the market for RTLTs cranes in terms of revenue from sales had increased at a

CAGR of 23.2% for the same period.

However in the case of units sold the market for RTLTs cranes had increased at a CAGR of87.8% from FY2006-FY2011. This was due to the rise in construction of high storey buildings

in India which led to increase in the demand of these cranes, as they are used for lifting heavy

materials to higher heights.

5,862

8,126 7,876

6,0657,035

9,070128.0

164.8

253.3

147.6

240.0 241.1

0.0

50.0

100.0

150.0

200.0

250.0

300.0

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

8,000.0

9,000.0

10,000.0

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

USDMillion

Units

Volume Value


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Table 10: Crane Machinery Segmentation on the Basis of Sales, in USD Million, FY2006-

FY2011


Mobile Cranes 126.3 164.2 253.3 146.7 212.2 236.3

RTLTs Cranes 1.7 0.6 0.0 1.0 27.8 4.8


Table 11: Crane Machinery Segmentation on the Basis of Sales, in Units, FY2006-FY2011


Mobile Cranes 5859 8115 7870 6050 7000 9000

RTLTs Cranes 3 11 6 15 35 70


7.INDIA CONSTRUCTION MACHINERY INDUSTRY

SWOT ANALYSIS

STRENGHTS

The demand for construction equipment is correlated to the level of construction activity

in the country. Despite economic slowdown, the infrastructure development was not

affected in India and thus the demand for construction machinery was high

It has been witnessed that with steady infrastructure demand and marginal pickup in

realty sector there is an increased enquiries for construction equipment especially from

original users who accounts for about 70%-80% of the total demand for construction

machineries

The National Highway Authority of India (NHAI) has accelerated plans for national

highway development which has led to the increase in road construction machinery

The current approach of domestic buyers towards Chinese machinery companies remains

cautious on concerns related to quality and availability of long-term after-sales services


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WEAKNESSES

Delay in decision making and lag in policies and infrastructure project approvals had led

to the slow growth of construction and infrastructure development

The Chinese construction machinery companies currently hold over 12% in the wheeled

loader segment, around 13% of the dozer segment and enjoy a strong presence in

concrete mixers, with the potential to expand their presence in the Indian markets

OPPORTUNITIES

The demand for high tech products such as boom concrete pumps, high capacity batching

plants and others has seen some improvement in demand. Though the equipment hiringsegment that account for the balance of the demand has not picked up yet, but is expected

to follow suit with pickup in construction activity

Equipment rental and leasing business in India is small relative to developed markets and

has a strong growth potential and the after sales revenue component in India is currently

low and can be increased considerably

THREATS

The Indian construction machinery industry see China as a future threat because of the

low cost construction machinery imports which China is able to provide without lacking

the quality. The Chinese loader market alone stands at over 125,000 as against 2,000-

3,000 wheeled loaders sold in India per annum. With such economies of scale, the

Chinese equipments have a competitive advantage of being significantly cheaper than the

Indian equipment

Imports into India also originate from other countries too either because of non-

availability of such products in India (higher tonnage cranes and mining equipment for

instance) or due to cost advantage. The trend can be more pronounced in material

handling equipment as over 10-15% of the equipment in the country is currently

imported. Developing nations like India are key destinations for used cranes imports from

countries like Australia.


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In Indian construction machinery industry, JCB

had the highest market share of 34.1% in

FY2011. The second largest market share was

of Larsen & Toubro. The company had a shareof 18.1% in FY2011 and the sales of

construction machinery had increased at a

CAGR of 16.1% from FY2006-FY2011

8.

MARKET SHARE OF MAJOR PLAYERS IN INDIA

CONSTRUCTION MACHINERY INDUSTRY, FY2011

The worldwide technology leaders in the construction equipment sector are Komatsu,

Caterpillar, Hitachi, Terex, Volvo, Scania, Case, Ingersoll Rand, HAMM, Bomag, John Deere,

JCB, Poclain, Bitelli, Hyundai, Kobelco and Daewoo. Almost all the companies have presence in

India either as joint ventures or have set up their own manufacturing facilities or marketing

companies. A hand full of large players are dominating the construction machinery industry,

accounting for more than 90% of the industrys revenues. The unorganized sector contributes

only about 10% in value terms.

In Indian construction machinery industry,

JCB had the highest market share of 34.1%

in FY2011. JCB India was setup in 1979.

It took the company 24 years to sell theirfirst 25,000 units in the country. Today the

backhoe is now generically known as the

JCB irrespective of the manufacturer. It is

said that every 1 out of 2 construction equipments sold in India is a JCB product. The second

largest market share was of Larsen & Toubro. The company had a share of 18.1% in FY2011.

The companys revenue from the sales of construction machinery had increased at a CAGR of

16.1% from FY2006-FY2011.

The third largest contribution was by BEML (Bharat Equipment Manufacturers Limited). BEML

had a market share of 9.8% in FY2011 and its revenue from the sales of construction machineryhad increased at a CAGR of 0.3% from FY2006-FY2011. The emergence of new players and

expansion plans are expected to make the construction machinery industry more competitive and

fragmented. However, these new capacities will find their presence comfortably in the domestic

market only with the growing mechanization and proposed large infrastructural projects.


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Figure 11: Market Share of Major Players in Indian Construction Machinery Industry, in

Percentage Contribution, FY2011

Source: Company reports

Note: *the revenue for Hitachi CM and Sany has been computed on the basis of the percentage contribution of construction

machinery in the overall revenue in the domestic market

9.

TRENDS AND DEVELOPMENT IN INDIA

CONSTRUCTION MACHINERY

CHANGES IN POLICIES AND MARKET SCENARIO

The Government of India had permitted 100% FDI in construction and development projects to

attract more investment in the construction machinery industry. A limit of USD 2 million on

lump sum payments under the automatic route had been restricted. The royalty levied was 5% on

domestic sales and 8% on exports after deduction of taxes. The depreciation on general plant and

machinery was proposed to be 15%. There were specific initiatives by the government that had

positive impact on the engineering sector such as tariff protection on capital goods was removed,

various initiatives taken to focus on infrastructure development and construction. The

Government of India had also introduced initiatives to increase power generation and improve

34.1%

18.1%9.8%

5.6%

3.9%

28.4%

JCB India

Larsen & Toubro (L&T)*

BEML

ECEL*

ACE

Others


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the quality of power supply. The custom duties on various equipments have been reduced. All

these policy changes had favored the growth of construction machinery industry in India.

NASCENT STAGE OF USED AND RENTAL CONSTRUCTION MACHINERYINDUSTRY IN INDIA

While there is good potential for used equipment, India does not have an established common

platform for trading in used equipment. The current rental penetration in India is at around 7-8%

which remains low as compared to the global standards of 50% to 80%. An average of 30% of

the equipments sold in Europe and over 60% in the UK are to rental operators. A robust rental

market enables reduction in investments in projects by outsourcing the equipment requirement

(including spares and services) and improving capacity utilization of equipment. The key

equipments in the rental fleet in India currently are backhoe loaders, cranes, excavators, motor

graders and vibratory compactors. Thus the under developed market for used and rentalconstruction machinery had led to the growth of the construction machinery of India as these

machineries can only be purchased.

There are various structural and operational concerns that are needed to be resolved for the

Indian equipment rental markets to evolve. Concerns include lack of synchronization of

interstate tax policies (on movement of equipment between states) and logistics of the

equipment. Further the dominance of unorganized market participants that operate on cash

transactions (on rentals, thereby avoiding taxes and enjoying an unfair advantage to the larger

rental operators) prevents the evolution of a more organized system.

TOTAL INVESTMENT IN INFRASTRUCTURE IN INDIA

To improve the countrys railway infrastructure, in the Eleventh five year plan the total

investment was estimated at INR 261,808 crore over FY2007-FY2012 which was an increase

of 118.8% over the Tenth five year plan. The development of urban infrastructure had been the

priority area for the Government of India and thus the Government had encouraged private

participation in this segment. Investment in urban infrastructure had doubled from USD 5.4

billion in FY2005 to nearly USD 10.9 billion in FY2010. The amount required for urban

transport infrastructure investment in cities with population 100,000 or more during the next 20

years was of USD 49.3 billion. To catalyze development of urban infrastructure, 100% FDI had

been permitted in housing and urban infrastructure projects. These investments had led to

increased demand for backhoe loaders, excavators and cranes.


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The Indian construction and earthmoving

equipments industry is likely to grow to USD

9.1 billion by FY2016 from USD 3.2 billion in

FY2011. The roads and bridges sector will

continue to be a major demand driver for the

construction equipment industry with the

National Highway Development Program

(NHDP) expected to generate orders worth

USD 55 billion over the next five years

urban population under safe water supply and sanitation services by the year FY2021 at USD

41.2 billon.

In order to explore huge opportunities major

international players have ambitious plans

for Indian market. The Indian constructionand earthmoving equipments industry is

likely to grow to USD 9.1 billion by

FY2016 from USD 3.2 billion in FY2011.

With the developed markets of Europe and

the US still smarting from the effects of the

economic recession, most of the

international manufacturers are increasingly looking towards growth in the emerging economies

such as China, India, Russia and Brazil, where the focus is still on infrastructure development.

It is expected that the user sector with the growing FDI are likely to be more geared towards thestate-of-the-art technology machines which are more productive, low in maintenance cost and

provide comfort for operators. The users will not only look at the initial cost of the equipment,

but will also focus on total cost or cost per ton of usage. It is anticipated that 5 years hence, the

need for more and more mechanization and enhancement of scale may lead to change in the level

of technology in use.

The construction equipment industry in India has evolved with growing domestic demand. The

roads and bridges sector will continue to be a major demand driver for the construction

equipment industry with the National Highway Development Program (NHDP) expected to

generate orders worth USD 55 billion over the next five years. In addition, the maintenance ofnational and state highways and other roads is likely to create demand for road construction and

maintenance related equipment. Increased government focus on the development ofGreenfield

ports and airports and capacity expansion at existing ports is expected to maintain a consistent

demand for construction equipment. The capacity expansion in the steel, cement, oil refining and

power sectors to meet growing infrastructure investments in India is also expected to generate

demand for construction equipment. The equipment rental business is another opportunity driver

thus creating an expectation of positive growth till FY2016.

The governments initiatives, increasing population and economic development will also play an

important role as a growth driver for this industry. The government has implemented severalpolicy measures to improve investor confidence and to attract foreign investment. The

government is also encouraging public private partnership (PPP) for infrastructure development.

The scale of investment in infrastructure for the next five years is now being projected at USD 1

trillion. India will continue to be one of the most important markets for suppliers of construction


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Initial butUnderdeveloped

Rental

Construction

Machinery

Industry

Positive;

Cause:The rental construction machinery industry in India wasunderdeveloped because of no proper government regulation and

lack of uniformity in rental prices.

Effect: Due to the nascent stage of rental market, the construction

machinery as a whole had grew, as these machineries can only be

purchased thus leading to an increase in the revenue from sales.

Augmenting

Inflation Negative; Cause:Inflation had increased due to the rise in nominal interest

rates which led to an increase in the capital inflows thus inclining

the money supply in the economy.

Effect:The inclining inflation rate led to an upward movement of

prices due to which the prices of construction materials had also

increased. Thus leading to an incline in construction cost anddecline in construction activities. Thus the growth of construction

machinery market had slowed.

IncliningDemand for

Construction and

Real EstateDevelopment

Positive; Cause:The increase in construction and real estate developmental

activities was due to the rising business development opportunities

in the India. Also the increase in the person disposable income and

the demand for modern housing resulted in more infrastructuraldevelopment.

Effect: Withthe increase in construction and real estate

development there was an increase in the demand for constructionmachinery since the relationship between construction machinery

industry and the construction and real estate sector is considered tobe complementary.

Increase in the

Foreign DirectInvestments

Positive; Cause: The Government of India had encouraged FDI in

construction and real estate sector by increasing nominal interestrate and providing tax reduction on these investments. The

government had also permitted FDI in energy and engineering

sectors. Foreign investments were encouraged to provide the Indian

economy with a financial boost so as to recover from the globalslowdown of FY2009.

Effect: The increase in FDI had led to an increase in construction of

offices and public infrastructure construction as most of the FDIwas in the form of acquisitions of Indian companies or mergers and

joint venture between Indian and foreign multinationals. Thusleading to an incline in the demand of construction machineries.


Notes: Shaded region denotes the degree of impact


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11.

MACRO ECONOMIC AND INDUSTRY FACTORS

11.1.

NOMINAL GDP, FY2006-FY2016

The rising GDP of the economy showcases the strong economic development of the nation and

presents favorable opportunities for business and investment in the country. The gross domestic

product in India has been rising continuously since FY2006. It increased from USD 808.8

billion in FY2006 to USD 1,680.6 billion in FY2011. It is expected that the GDP of India will

incline to USD 2,739.1 billion in FY2016 which will further assist the economy to attract

investments in the real estate development projects, higher infrastructure investments and will

also result in higher public expenditure. Thus the expected increase of 10.3% from FY2012-

FY2016 will lead to the growth of construction machinery industry in India. The demand of

base equipment like excavators, loaders and even dump trucks would continue to grow by thepositive GDP factor.

Figure 14: Nominal GDP, in USD Billion, FY2006-FY2016

Source: MOSPI

11.2.INFLATION RATE, IN PERCENTAGE, FY2006-FY2016

808.8940.5

1,092.21,233.0

1,414.2

1,680.61,833.4

2,032.8

2,248.4

2,481.7

2,739.1

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011 FY'2012 FY'2013 FY'2014 FY'2015 FY'2016

USDBillion


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With the rise in inflation rate of a country, the cost of construction material will increase. Thus

with the increase in prices of construction materials the construction activities are expected to

decline. Thus the decline in construction activities will result in decrease in the demand for

construction machinery. Inflation refers to a general rise in prices measured against a standard

level of purchasing power. In FY2011 the average inflation rate for the fiscal year was 7.5%representing a decline of 43.0% from the previous year. On an average the inflation rate in India

had increased at a CAGR of 4.0% from FY2006-FY2011. The rate of inflation is expected to

decline at a CAGR of 11.7% from FY2006-FY2011. The decline will be due to the expected

decline in the nominal interest rate which would be a result of capital flows out of the country.


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Figure 15: Inflation Rate, in Percentage, FY2006-FY2016

Source: IMF

11.3.CONSTRUCTION SECTOR OF INDIA, FY2006-FY2016

The Indian construction sector experienced strong but fluctuating growth rates from FY2007

through to FY2010 and is expected to retain solid growth rates through till the end of the

forecasted period by FY2016. The Indian construction sector had total revenues of USD 128.2

billion in FY2011 representing a CAGR of 16.9% from FY2006-FY2011. The civil

engineering sales proved the most lucrative for the Indian construction sector in FY2010 with

total revenues of USD 41.9 billion, equivalent to 87.6% of the sectors overall value. In

comparison the sales of non-residential building had generated revenue of USD 5.9 billion in

FY2010 representing 12.4% of the overall sectors aggregate revenues.

The performance of the market is forecasted to accelerate at a CAGR of 17.4% for the five year

period from FY2012-FY2016, which is expected to drive the market to a value of USD 286.2

billion by the end of FY2016. The increase in the construction sector of India will lead to theincrease in the construction machinery industry of the country. This is because as more

construction will take place, the demand of these machineries will also increase.

6.2% 6.4%

8.3%

10.9%

13.2%

7.5%6.9%

4.9%4.0% 4.0% 4.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%


inPercentage


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Figure 16: Construction Sector Market Size, in USD Billion, FY2006-FY2016

Source: MOSPI

11.4.MINING AND QUARRYING SECTOR OF INDIA, FY2006-

FY2016

The Indian Government had consistently and in a pragmatic manner opened up the Indian mining

sector to usher private investment in the sector and infuse funds, technology and managerial

expertise. The opening up of the Indian mining sector had, therefore generated considerable

global interest. The Indian mining sector was opened up to foreign direct investment in 1993

after the announcement of the New Mineral Policy.

In India, 80% of mining is in coal and the balance 20% is in various metals and other raw

materials such as gold, copper, iron, lead, bauxite, zinc and uranium. The Indian mining sector

had grown at a CAGR of 15.1% from FY2006-FY2011. The stable performance of sectors like

mining will create future demand of the base equipment involving excavators. The mining sector

is expected to grow at a CAGR of 14.6% from FY2006-FY2011.

58.870.6

85.298.8

110.0128.2

145.9163.3

191.0

222.8

286.2

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0


USDBillion


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In the construction machinery industry ofAsia-Pacific, Komatsu contributes 12.0% in

2011 showcasing its leadership. The second

highest contribution is of Zoomlion. These

companies are making strategies to benefit

from the Chinas construction boom in a

profitable way

Figure 17: Mining and Quarrying Sector Market Size, in USD Billion, FY2006-FY2016

Source: MOSPI

12.

MARKET SHARE OF MAJOR PLAYERS IN


INDUSTRY, 2011

The construction machinery companies in Asia-

Pacific are benefiting from infrastructure and

construction related activity. The companies are

making strategies to benefit from the Chinas

construction boom in a profitable way and are

diversifying from pure contracting to enhance

margins and build a sustainable long term

business. In the construction machinery industry of Asia-Pacific, Komatsu contributes 12.0% in

2011 showcasing its leadership. The sales revenue of Komatsu from Asia-pacific had increased

at a CAGR of 2.8% from 2006-2011.

The second highest contribution is of Zoomlion. The Chinese construction machinery

manufacturer has a market share of 7.6% in the overall Asia-Pacific construction machinery

industry. Zoomlion revenue in 2006 was USD 0.6 billion which had risen to USD 6.2 Billion at a

CAGR of 58.5%. Out of all players only Hitchi and Kobelco showcased a negative CAGR of

0.6% and 6.1% from 2006-2011. Zoomlion acquired Hunan Puyuan Construction Machinery's

20.723.4

27.330.6

34.5

41.947.5

56.365.5

68.4

82.8

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0


USDBillion


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truck crane business and Zhongbiao's environmental and sanitation machinery business in 2003.

Though caterpillar is known to be the world leader of construction machinery manufacturers but

the business group is still to capture market in this region. The company has a market share of

7.0% in 2011 and its revenue from sales had increased by 13.8% annually from 2006-2011. The

Chinese manufacturer XCMG had shown the highest growth from 2006-2011 represented by anincrease of 65.7% annually. In fact, the Chinese large in-house companies had supplemented

organic growth and scaled up rapidly through consolidation. In the past decade, Sany had

acquired assets from its parent company to expand its capabilities while Zoomlion has targeted

third parties to scale up its product offerings.

Table 13: Market Share of Major Players in Asia-Pacific Construction Machinery Industry

on the Basis of Contribution in Sales, in Percentage, 2010-2011

Market Share (in Percentage) 2010 2011

Komatsu* 14.1% 12.0%

Zoomlion 6.3% 7.6%

Caterpillar 10.7% 7.0%

Sany 5.1% 6.1%

Volvo 5.0% 5.2%

XCMG 4.2% 4.6%

Hitachi* 7.4% 4.5%

Lonking 2.4% 2.1%

Doosan Infracore 1.6% 1.5%

JCB India* 1.4% 1.5%

Hyundia 1.6% 1.4%

Kobelco* 1.4% 1.0%

Larsen & Toubro (L&T)* 0.8% 0.8%

BEML* 0.5% 0.4%

ECEL* 0.2% 0.3%

ACE* 0.2% 0.1%

Others 37.0% 44.1%

TOTAL 100.0% 100.0%

Source: AM Mindpower Solution

Note: *the revenue has been converted into calendar year December ending from fiscal year March ending


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The Asia-Pacific construction

machinery industry is expected

to grow at a CAGR of 26.6%

from 2012-2016 and is

expected to showcase a growth

of 52.4% in 2014

13.


INDUSTRY FUTURE OUTLOOK AND

PROJECTIONS, 2012-2016

Over the next 10 to 15 years, construction of large-scale infrastructure will continue, including

projects of national high-speed railway networks, national highway networks, the second stage of

the west-to-east natural gas pipeline and south-to-north

water diversion. This will stimulate an increase in demand

for construction machinery to some extent. Another key

demand driver for construction machinery is the strong

growth in fixed asset investments spurred mostly by

downstream segments including infrastructure and property

investments. For instance, social housing, though comparatively smaller investments, is

significant in construction project volume and substantially increases the need for equipment.

Additionally, demand from foreign markets is also expected to grow. Together, these factors

have bolstered the development of the construction machinery industry in Asia-Pacific making it

the world's fastest growing market. The Asia-Pacific construction machinery industry is expected

to grow at a CAGR of 26.6% from 2012-2016 and is expected to showcase a growth of 52.4% in

2014 as China, the third largest construction machinery market, is expected to amplify by 84% in

the same year. By the end of 2016 China is expected to capture 88% of the market followed by

7% share of Japan and 4% and 2% share each of India and South Korea.

Figure 18: Asia-Pacific Construction Machinery Industry Future Projections on the Basis

of Sales Revenue, in USD Billion, 2012-2016

Source: AM Mindpower Solution

117.7 108.4

165.3

239.6

272.8

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100.0

150.0

200.0

250.0

300.0

2012 2013 2014 2015 2016

U

SDBillion


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BKF will engage in sales of new equipment, rental and used equipment businesses and all related

service businesses in Thailand. At present, BMW plans to have 60% stake and the Komatsu

Group 40%, in BKF. As a result of the planned reorganization, BMW and Komatsu are

determined to promote closer collaboration between the two as distributor and manufacturer and

further expand sales and profits of the forklift truck business.

Komatsu to Launch the First Hybrid Hydraulic Excavator in Singapore

In December, the company with UMW Equipment & Engineering Private Limited, the exclusive

Komatsu distributor in Singapore, will launch their newest product, HB205-1 hybrid hydraulic

excavator. The product will serve as the next generation of its kind, using Komatsu Hybrid

System, with better specification and performance with reduced fuel consumption and CO2

emission. This product launch will signify the commitment of Komatsu to develop environment

friendly products, initiated since 2008 when Komatsu succeeded in introducing the first hybrid

hydraulic excavator to the market.

14.1.3.

FINANCIAL PERFORMANCE

The Great East Japan Earthquake of March 11, 2011 and the subsequent tsunami brought about

very extensive damages, with respect to production, the buildings and facilities of some plants of

the company were damaged but these divisions were quickly repaired. As a result, all affected

plants resumed production by the end of March. However, the group is still experiencing

uncertain procurement conditions for some electronic parts of construction equipment as well asfor our electric power supply.

The sales and service operations were seriously affected by tsunami. At some bases located

along the Pacific coast of the Tohoku region, the buildings, facilities and construction equipment

were washed away. While it took some time for the company to recover its full-scale operations,

it restarted the maintenance and repair service for construction equipment, which is

indispensable for the restoration and reconstruction of the affected regions by deploying

manpower from other Komatsu bases nearby.


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Figure 19: Financial Performance of Komatsu Limited on the Basis of Sales Revenue in

Asia-Pacific, in USD Billion, FY2006-FY2011

Source: Company reports

14.2.ZOOMLION LIMITED

14.2.1.

COMPANY OVERVIEW

Zoomlion Heavy Industry Science & Technology Development Company Limited was founded

in 1992. The company is mainly engaged in the research and development and in manufacturing

of advanced technologies and equipment for national key infrastructure construction projects,

including construction engineering, energy engineering, environment engineering and

transportation engineering projects.

The company has manufacturing bases located around the world, including Zoomlion

Technology Park, Lugu Industrial Park, Quantang Industrial Park, Lugu Environmental

Protection Industry Park, Changde Guanxi Industrial Park, Changde Deshan Industrial Park,

Wangcheng Industrial Park, Yiyang Yuanjiang Industrial Park, Yueyang Xiangyin Industrial

Park, Shanghai Industrial Park, Shaanxi Weinan Industrial Park and Jiangyin East China

Industrial Park in China, as well as CIFA Industrial Park in Italy. Zoomlion has subsidiaries and

8.0

9.0

8.17.7

9.8 9.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

FY'2006 FY'2007 FY'2008 FY'2009 FY'2010 FY'2011

USDBillion


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marketing and research institutions in over 40 countries, creates values for customers in over 80

countries across six continents and owns a complete sales network and strong service system

covering the whole world.

14.2.2. BUSINESS STRATEGY

Introduction of Innovative Technology

The Company acquired the exclusive rights of the technology of flat top tower crane from JOST

of German which will uplift the technology of tower crane of the Company to the international

standards. The company also plans to introduce a number of new high technology products in the

international market, including 3,200 tons track cranes and truck-mounted concrete pumps with

80 meter carbon fiber arms which are the longest 7-foldarms and 6-axles truck-mounted pumps

in the world. The product has entered into the Guinness World Records and is expected to mark

the leading position of Zoomlion in the international market of truck-mounted pumps. The

company has also developed a dual brand 63 meter truck-mounted carbon fiber pump, the

longest truck-mounted crane arm with 5-axles chassis in the world. The Company also

introduced a 50-meter truck-mounted carbon fiber pumps, the longest truck-mounted crane arm

with 3-axles chassis.

14.2.3.

FINANCIAL PERFORMANCE

In 2011 the Company recorded an overall turnover of approximately RMB 46,323 million

showcasing a growth of 43.9% from 2010. The companys gross profit was approximately RMB

15,007 million. Net profit attributable to equity holders of the Company was RMB 8,066 million

which was 72.9% more than 2010. As on 31stDecember 2011, the total assets of the Company

was approximately RMB 71,543 million and the net assets was approximately RMB 35,595

million. The total Asia-Pacific revenue had increased at a CAGR of 58.5%. The Companys

revenue from China is approximately 95% of the overall revenue from the sales of construction

machinery. The total purchases by the Company from the top five suppliers amounted to RMB

5,060,505,200 accounting for 17.92% of the aggregate annual purchase of the Company an

Documents

India Construction Machinery Industry Outlook 2016