Why China’s construction equipment market won’t start to recover properly until 2025

A Volvo articulated dumper on display at Bauma China. Photo: Volvo CE

China’s construction equipment market has yet to see any signs of recovering in 2023, after a slump in 2022.

And it could take until 2025 before the Chinese market starts to undergo a “good recovery” and even longer before unit sales return to levels last seen in the 2020-21 peak.

That’s according to a comprehensive new market report examining the construction equipment industry in China by Off-Highway Research.

It found that, at the halfway point of 2023, there had been a year-on-year fall of 39% in domestic construction equipment sales, amid weak demand and reduced customer confidence.

As a result, Off-Highway Research now expects that full-year sales levels will be less than 40% of their level two years ago, although this is still “well above” the trough experienced in 2015-16, it said.

The Chinese government has continued a proactive fiscal policy, increasing public investment in infrastructure projects, supported by bonds issued at the local level.

But the report noted that the effect of this attempt at stimulating activity was so far limited. That’s because the financial situation of local government remains difficult and progress in implementing new projects has fallen behind target.

Delayed payments for completed jobs also remains a problem.

Meanwhile, the real estate sector continues to remain depressed. The sector has been subdued ever since the collapse of Evergrande Group in 2021 sparked China’s worst property market crisis on record.

Evergrande, which has more than $270 billion in total liabilities, set out a restructuring plan earlier this year.

Its struggles illustrate the general deterioration in developers’ credit ratings. The difficulty they are experiencing in obtaining new loans from financial institutions means that there is currently little investment in projects other than in the most developed tier-1 areas.

Outlook for China’s equipment market

Off-Highway Research predicted total unit sales to be 170,000 in 2023 in China, ahead of a “slight recovery” in 2024 as a result of steady demand in all important product sectors and a recovery in demand for mini excavators.

An increasing need to replace old equipment could see a recovery to sales of 300,000 units by 2027, although this would still be below the 2020-21 peak, the report said.

The sluggish short-term recovery is partly down to sharp growth between 2017 and 2020 and in particular the overheated sales in 2020-21, which means the market now has a very large machine population.

Off-Highway Research managing director Chris Sleight said, “The recovery of the market depends heavily on the replacement of old fleets, which should take place in the next five years but not before then.

“Such a replacement level will depend on a change in the economy from the problems that it has experienced since 2020 to a smoother development. While investment activity is now supporting the economy, it may not be sustained if a real improvement in the economy cannot be achieved.”

Off-Highway Research also warned that overall demand for construction equipment is unlikely to return to the last peak “for the foreseeable future”. This is largely as a result of depression in the real estate market, it added.

For the full report, which gives details on the structure of the Chinese market, a full economic review, and analysis of different equipment segments including details of market share held by individual OEMs, click here.