Manufacturers of construction equipment worldwide can expect to see major growth over the next few years, according to a new study by global business-advisory firm, AlixPartners.
Growth will be fuelled by the massive infrastructure projects needed to satisfy population growth and the expansion of the middle class in emerging markets. Overall sales will increase at a compounded annual growth rate (CAGR) of 6.3% into 2015, driven by demand in China, North America and India, according to Global Construction Equipment Industry Outlook.
China holds the key to global demand, as 60% of all global construction equipment sales are in China, led largely by Chinese original equipment manufacturers (OEMs). This trend looks set to continue, as major local players are performing well financially and middle-class growth in China brings with it a demand for public projects such as better roads, schools, water systems and other infrastructure.
Despite the recent slowing of China's overall GDP, its construction equipment sales revenue growth is still expected to significantly outpace the global industry trends and grow at a CAGR of 33% and above into 2015, according to the research.
The study also claims that while macro-economic factors such as rising populations and urbanisation provide strong long-term fundamentals for the industry, construction OEMs will need to be on their toes as new entrants in new markets grow. Global demand for heavy construction machinery remains strongly correlated to local GDP, and tied to government-backed infrastructure projects. This poses significant challenges for OEMs as they seek to balance projects in fast-growing emerging markets against ongoing work in the slower-growing developed markets, particularly in Europe.
While growth in China and other emerging markets will continue to dominate the global construction equipment industry, the research predicts growth in developed markets as well. This will mainly be due to new emissions standards, which will require significant R&D in these markets and will likely lead to demand for replacement vehicles with a better environmental footprint.
