India's construction equipment sales boom defies election slump

India's construction equipment industry is defying historical trends in the ongoing general election season, as seen in the surge in industry volumes. Typically, sales witness a 10-15% drop, sometimes even going to 20%, as political uncertainty stalls project approvals. However, this year, industry volumes have increased roughly by about 20–27% year-over-year (YoY) since January, according to industry stakeholders. 

The general elections 2024 in India have been spread across seven phases, beginning on April 19 and lasting till June 1. The results will be announced on June 4. Traditionally, the slowdown starts a few months before the election dates and lasts until the formation of a new government.

Industry captains attribute this unexpected boom to the government's ongoing infrastructure push. This focus on projects like Bharat Mala and Sagarmala, city infrastructure, and mining, coupled with pre-election impetus, has fuelled project execution and boosted demand for equipment.

Describing the current trends as an "outlier," Dimitrov Krishnan, MD, Volvo Construction Equipment (India), said, " This (election) year, what we see is that since January, we have been in an election kind of environment in the country. But we haven't seen any drop in volumes at all. In fact, what we have seen in the past four (January-April)  months is that the industry is still growing at 20% over the previous year."

He touched upon the company's renewed focus on the compaction segment, which remains a key product category under the company's product portfolio, and aligns well with several segments that they participate in, especially road construction.

Krishnan's remarks come just weeks after the Indian Construction Equipment Manufacturers' Association (ICEMA)'s latest report, suggesting construction equipment industry to have grown by 26% year-on-year (YoY) with 1,35,650 units in sales, thereby surpassing all the expectations during FY24 as compared to 1,07,779 units in the previous fiscal year.

While the domestic sales witnessed a 24% increase, the sales jumped by 49% during the comparable period. ICEMA stated that the government's infra-led growth agenda and pre-election impetus on projects in the pipeline triggered positive growth in all five major construction equipment segments. ICEMA is an apex association for construction equipment manufacturers, representing over 90 companies.

The total sales of earthmoving equipment, which remains the largest equipment segment of the CE industry increased to 93,531 units in FY24, translating into a 21% spike when compared with  77,164 units sold in FY23. Of this segment, the lion's share accounted for 55% and 35%  respective growth in sales of backhoe loaders and crawler excavators, which together make up 90% of the total earthmoving equipment sales.

Material handling equipment, including pick and carry cranes and telehandlers, recorded 61% growth in sales volume in FY24, and accounted for 14% of total CE sales, as compared to 9% in FY23. Concrete equipment such as concrete mixers, batching plants, concrete pumps, and boom pumps together recorded a 19% year-on-year increase in FY24, news agency PTI reported citing the ICEMA report.

Industry leaders across major manufacturers share the optimism. Shalabh Chaturvedi, MD for India and SAARC at CASE Construction Equipment, described demand as "extremely bullish," particularly for vibratory compactors due to a government mandate for completing pending projects.

"That (sales demand) started to happen. January was high, February was higher and March was through the roof. We exhausted almost our entire inventory in the month of March."

"It was almost like on an allocation basis that first come first serve basis that a person was getting a compactors. So the demand has been quite good not only for us but for the industry as well," added Chaturvedi.

Deepak Shetty, CEO and MD of  JCB India said, "The Construction Equipment industry in India has seen a growth of almost 27% this year. This has been due to the focus on infrastructure development, particularly in rural India where a significant amount of work is taking place."

"Some temporary disruptions are usually there during elections for a few weeks. The slowdown was expected but it is less than what it was in the past due to the infrastructure focus" Shetty noted, while adding that he expects the year to register a double-digit growth on an overall basis.

According to Shetty, the large-scale infrastructure projects such as Bharat Mala, Sagar Mala and, creation of new airports will certainly create opportunities for backhoes, excavators and wheeled loaders. Furthermore, more recently, with the focus on railways, dedicated freight corridors and affordable housing through the PM Awaas Yojna, the domestic demand for construction equipment is likely to witness an uptick.