Construction Equipment Sales in India Remain Flat in Q1 Due to Low Demand

New Delhi:

Sales of construction equipment remained largely flat in the first quarter of this fiscal year, following robust growth in the previous two fiscal years. This stagnation is attributed to a slowdown in the awarding of road construction projects and subdued demand due to elections.

Although the Indian Construction Equipment Manufacturers’ Association (ICEMA) has yet to release official sales data for the quarter, industry estimates place sales at around 24,000 units, similar to the volume reported in the same period last fiscal year.

Estimates Show Sales at 24,000 Units Amid Slowed Road Construction Orders

Industry Outlook and Factors Affecting Demand Senior industry executives anticipate that sales of construction equipment will remain sluggish this year. The impact of elections has dampened first-quarter sales, and the rainy season, which typically slows down construction activity, is likely to keep demand subdued for the rest of the first half of FY25. However, the industry hopes that the upcoming budget will include provisions beneficial to the sector.

National Highways Authority of India (NHAI) Contract Awards The National Highways Authority of India (NHAI) awarded contracts for just 4 km in the first three months of the current fiscal year, a stark contrast to the 611 km awarded a year earlier and the 969 km during the April-June period of fiscal 2023. This significant reduction is due to the Ministry of Road Transport and Highways' November 2023 decision to halt the creation of new liabilities under Bharatmala Pariyojana Phase-1 until a revised scheme is approved. Consequently, the NHAI did not award any mega highway projects in the first quarter of this fiscal year.

Previous Fiscal Year Performance and Future Projections>

Sales of construction equipment in the local market increased by 24% to 123,671 units in FY24, following a 29% growth in the previous fiscal year. However, Sandeep Singh, Managing Director at Tata Hitachi Construction Machinery, indicated that the coming three months would be challenging. He projected that industry volumes might decline by 10-15% in Q2, making it difficult to achieve similar volumes as the previous year for the entire fiscal year.

Payment Delays and Purchase Decisions

In addition to the reduction in new road contracts, delays in the release of payments for infrastructure projects have also affected demand. Industry observers noted that payments to contractors and subcontractors for infrastructure-related projects were delayed in Q4FY24 and Q1FY25 due to state and national elections. This caused contractors and subcontractors to adopt a wait-and-watch approach, resulting in subdued purchase decisions for tippers and construction equipment until the end of Q1, with expectations of a pickup post-budget announcement.