India’s construction equipment market is experiencing a significant slowdown in FY2025, primarily due to election-related disruptions and delays in infrastructure projects. Sales growth has decelerated to just 3%, marking the slowest pace in recent years, a stark contrast to the double-digit growth observed in previous fiscal periods.
Key Factors Contributing to the Slowdown
1. Election-Related Disruptions
The enforcement of the Model Code of Conduct during the April-May 2024 general elections led to a suspension of new project announcements and a deceleration in ongoing initiatives. This pause in governmental activities significantly impacted the demand for construction equipment.
2. Delays in Project Execution
Ongoing infrastructure projects, such as the NH 66 highway expansion in Kerala, have encountered delays due to financial constraints and resource mobilization issues. These setbacks have further dampened the demand for heavy machinery.
3. Monsoon Impact
The monsoon season traditionally hampers construction activities across India. In FY2025, this seasonal slowdown compounded the challenges faced by the construction equipment sector.
4. Tight Financing Environment
Contractors and developers are grappling with stricter lending norms, including lower loan-to-value ratios and increased scrutiny of loan applications. This financial tightening has led to deferred purchases of new equipment, particularly among first-time buyers.
Sector-Specific Impacts
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Road Construction: This segment, accounting for 35–45% of construction equipment sales, has seen a 34% decline in project awards and a 7% drop in execution in the initial months of FY2025.
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Mining: Despite monsoon-related challenges, mining activities have shown resilience, with coal and iron ore production increasing by 5.8% and 8.9%, respectively, in the early months of FY2025.
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Real Estate: The ongoing upcycle in the real estate sector has provided some support to equipment sales, offsetting declines in other areas.
Outlook for the Remainder of FY2025
While the first half of FY2025 has been challenging, there is cautious optimism for a rebound in the latter half. Factors contributing to this potential recovery include:
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Resumption of Project Awards: Post-election, an increase in new project announcements is anticipated, which could stimulate demand for construction equipment.
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Pre-Buying Ahead of Emission Norm Changes: The upcoming implementation of CEV-V emission norms in January 2025 is expected to lead to a surge in equipment purchases as buyers aim to avoid potential price hikes.
Despite the current downturn, the long-term prospects for India’s construction equipment market remain positive, underpinned by sustained government focus on infrastructure development.
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