Trendlines: Soft landing for global CE?

10 May 2023

Aerial view of construction equipment Sales for the global construction equipment industry fell 7% last year from the record high established in 2021, and they’re projected to slip another 5% this year. (Photo: Adobe Stock Photo)

Sales for the global construction equipment industry fell 7% last year from the record high established in 2021, and they’re projected to slip another 5% this year. The downturn was entirely due to the collapse of demand in China. Outside of China, sales actually grew 7% in 2022.

Off-Highway Research is still classifying the 2022-2025 downturn as a soft landing. Only single-digit year-on-year falls in equipment sales are expected and the volume of machines sold throughout the forecast period should stay above 1 million units per year.

Here’s an overview of the markets by region.

Europe stable

Construction equipment sales in Europe rose 4% in 2022 to 216,861 units. This increase from 2021’s already high level of 208,288 machines sold maintained the market at a high level.

The strongest growth in 2022 was seen in the larger markets of Southern Europe – most notably Italy, which saw sales rise an impressive 18% – while Spain grew 17%. France was up 8% and growth in the UK was more subdued at 4%, but the volume of equipment sold was the highest ever seen. The German market declined 1%, but this must be seen in the context of the extraordinarily sales there the last four to five years.

The forecast for Europe is for the market to stabilize at a high level. Although single-digit percentage annual declines in sales are expected for the next three years, the market is forecast to remain above 200,000 units over the medium term.

India rising

The most recent high in the Indian construction equipment industry was in 2018. The market was disrupted in 2019 by a general election, which always causes a downturn in sales due to the legal requirement to suspend the awarding of public works contracts once an election is announced.

The market sank further in 2020 due to the pandemic and only recovered modestly in 2021 as COVID variants impacted the country. Inflation also increased equipment prices and adversely affected the financial viability of construction projects. As a result, India only saw a 2% rise in sales last year.

Broad-based growth in equipment sales is expected to resume this year, with the market forecast to rise 10%, driven by infrastructure investments. With a general election in 2024, this year’s budget has a particularly strong emphasis on investment as Prime Minister Narendra Modi seeks a third term in office.

The election next year will temporarily derail growth and there will be further market-specific disruption due to the introduction of CEV Stage 5 engine emissions regulations in April 2024. However, we remain bullish about the medium- and long-term growth prospects in India and expect equipment sales to resume their ascent from 2025 onwards.

North America

As noted here last month, North America was the best performing of the major markets in 2023, with an 8% increase in sales to take demand to a record high of 318,855 machines sold.

Although a modest 1% decline in sales is expected this year, the market will still enjoy the second-highest volumes ever seen. Infrastructure investment is on the rise in the region, thanks in part to the stimulus plans which were put in place during the pandemic years.

Chris Sleight, managing director, Off-Highway Research.

Machines used in infrastructure construction are higher value/lower volume than the compact equipment sales which are driven by residential building. This is therefore expected to lead to a shallow dip in sales from 2023-2026. But a housing shortage is expected to stimulate an upturn in compact equipment sales toward the end of the forecast period.

And in China

The Chinese market collapsed in 2022, declining 39%. This was due to the stimulus money running out, compounded by turbulence in the Chinese real estate sector and the country’s difficulties in getting to grips with COVID.

The market is forecast to fall again this year, but at a slower decline of about 18%, to settle at just below 195,000 units. Domestic demand may flatten out during 2024-2025 and the recovery will be very slow.

A real recovery is expected during the period of the 15th Five Year Plan (2026-2030), primarily as a result of increased sales of compact equipment and the returning replacement demand. By then the market may return to 270,000 to 300,000 units, but even that volume is still very much lower than what has been seen in the recent past.

Looking at the overall picture, Off-Highway Research’s forecast is for a 7% decline in global sales in 2023. Stripping China out of the equation, the remaining countries of the world will only see a 5% downturn overall.

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