INFRASTRUCTURE AND HIGHWAY PROJECTS BEING AWARDED, THE DEMAND FOR COMMERCIAL VEHICLE WILL RISE.

According to you what are the key market trends likely to be seen in these times, the impact it will have for the overall construction equipment industry, specifically your area of business in this sector?

The worst is over for the CV industry. In the month of February, the industry witnessed 30% increase in demand of HD vehicles and going forward we expect more and more demand to come in, on the back of positive industry sentiments and replacement demand. Apart from this, we are also expecting good sales on the back of big infrastructure and highway projects granted by the government during the Union Budget 2021, which will ultimately boost the demand for construction vehicles such as tippers, haulage trucks etc. We are also witnessing demand from the coal mining sector. As in the commercial coal mining, out of 38 mines put on auction, 19 have successfully been auctioned. All of these together will help the mining segment to grow, which will drive the sales of HD trucks.

What are the current market drivers and what kind of demand do you foresee?

There are quite a few factors working in tandem to finally have kicked in a recovery in the HD segment, with respect to demand and sales. We have been witnessing demand for our HD vehicles, especially tippers and haulage trucks in segments like construction, mining, agriculture, logistics etc. For instance, at VECV we recorded a sale of 30,000 units of which 25% were HD trucks and 7% buses. Going forward, with the Government’s increased focus on the infrastructure segment and the implementation of incentive-based, voluntary scrappage policy, the demand is going to further increase.

Which industry segment is likely to be the biggest consumer of construction equipment?

With more and more infrastructure and highway projects being awarded, the demand for tipper trucks will rise. We are also observing huge demand coming from the mining sector.

What is the current market size for construction equipment on lease? Is the industry likely to see consolidation in coming years? Your views.

The US$6.5 billion Indian Construction Equipment Industry, expected to grow back of Substantial infrastructure investments in highways, railways, airports, ports, and power will drive higher demand for construction equipment. Construction equipment finance caters to all types of construction equipment. As the segment requires large capital expenditure, financing accounts for approximately 80-85% of the total equipment purchased. Most financing is procured through loans while leasing is the second most common mode of financing. Specific when it comes to construction equipment leasing it is still at a nascent stage accounting for 6-8% of the overall construction equipment market, whereas the global average for leasing is 50-60% of the overall construction equipment business. The penetration of leasing and equipment rental is fairly high globally. Compared to countries like the U.S., China and Japan, India’s leasing and rental business is still at a nascent stage. Unfavourable tax treatment of leasing in India has been a key reason. The introduction of GST is expected to clarify the ambiguity on the tax front. The market sets to become more organised. Another major advantage of GST will be the enhanced mobility of the asset. Interstate movement of such assets and re-deployment at multiple locations on multiple projects will be easier and thereby ensuring optimal utilisation of the asset over its economic life. Leasing, as a financial tool will be key for the infrastructure growth of the country.