Challenges Faced by the Construction Equipment Industry
2015-08-04 Posted By:Infrabazaar
India’s construction equipment industry has the biggest prospective for expansion and opportunities for investment. Few major factors that currently drive the demand for construction equipment in India includes various infrastructural projects by public and private enterprise like maintenance, road construction, power plants, ports, telecommunication, urban infrastructural developments etc. There will be incremental growth when smart cities, fast train and clean India project would start in India. The Indian construction equipment industry is going to change in coming years due to modernization in the infrastructure, mining and construction sectors in India.
TechNavio's analysts forecast the Construction Equipment market in India to grow at a CAGR of 20.85 percent over the period 2013-2018.
However, there are multiple challenges that this industry faces. The emergence of foreign construction equipment manufacturers, including Chinese companies, in India, has forced domestic players to embrace advanced technology that meet global standards. While this is ensuring better efficiency, it is also reducing the need for skilled labor. Competition among key domestic and foreign players is set to intensify in coming years.
There are challenges in the interstate movement of equipment, in bridging skills gaps, in prohibiting unregulated import of used equipment, limiting over emission or pollution and maintaining high safety standards.
This sector includes high operation costs, maintenance costs. Poor networking with financial institutions are also delaying in loan executions. Small contractors who execute over 90 per cent of construction work are now lacking funds for modernization and expansion of equipment facilities.
Losses on account of idling equipment, lack of special incentives or schemes to finance the import of hi-tech construction equipment for infrastructure projects are some of the major challenges.
Absence of 100 per cent depreciation on construction equipment, particularly for affordable housing sector; non-reduction of excise duty on equipment manufacturing and inadequate development of skill are some of the road blocks for this industry.
Despite the challenges there is bright light ahead of the tunnel. Foreseeing large construction underway the construction equipment industry will see boom in coming days. The increased size of projects and steadily declining availability of manual labor also favor the demand for the mechanization of work at construction sites. Construction of highways, railways, bridges, ports are on the cards and hence, the construction equipment industry remains bullish about the long-term prospects and forecasts it to grow from estimated 66,000 units in 2012 to 105,730 units in 2016.