Construction equipment sales slow down by as much as 12% in FY22 – The Financial Express

Construction equipment sales have shrunk by as much as 12% during FY22 compared to last year, with soaring steel prices impacting demand. For certain products, the fall has been more than 20%.

Deepak Garg, managing director, Sany Heavy Industry India, told FE, “Consumption or sale of construction equipment is a direct indicator of economic activity in the infrastructure space. Speed of road construction, for instance, has slowed down in the last eight months and one of the main reasons is that steel prices are so high that contractors or construction companies cannot afford [them]. And now cement prices have also shot up.”

In a recent report, Icra said there has been a 10-20% increase in prices of construction equipment, mainly due to increasing input cost along with change in emission norms. Equipment utilisation levels have also moderated due to extended monsoon and its impact on the infrastructure activities.

Rentals continue to remain under pressure, while inventory holding has come down to up to 30 days, compared to up to 60 days pre-Covid. Also, most equipment dealers are reporting a tighter lending environment, with loan to value reduced by 500 basis points from before the pandemic for the first-time buyers segment.

According to Garg, the ongoing war between Russia and Ukraine will continue to impact the industry for three to six months. However, if steel prices do not recover, they will slow down the construction further. “If steel prices do not normalise in two to three months’ time, it may have a very severe impact on the construction equipment sector. This is the main input to the business, and there is limited scope for escalation in contracts, which will affect the sector,” he said.

The Indian Construction Equipment Manufacturers Association has approached the government on behalf of the industry to work out necessary mechanisms to help in mitigating high steel prices, and has also asked the government to expedite ongoing projects.

Garg said the industry is also working on technological improvements and encouraging more localisation in India to reduce cost. “We are working towards making India a bigger sourcing base for the world for construction equipment and components,” he said. The industry is also increasing usage of connected equipment through which it can increase work efficiency and reduce work slack.