Indonesia Compact Construction Equipment Market - Strategic Assessment & Forecast 2023-2029

Indonesia Compact Construction Equipment Market - Strategic Assessment & Forecast 2023-2029

The Indonesia compact construction equipment market is expected to grow at a CAGR of 5.86% from 2022 to 2029.

KEY HIGHLIGHTS

• The compact excavator accounted for the largest market share of the Indonesia compact construction equipment market in 2022. Construction industry end-users accounted for the largest share of compact construction equipment in Indonesia. The sales of compact equipment grew sharply in 2021 post-pandemic. The sales increased due to rising infrastructure investment & housing sector across the country.
• Infrastructure upgradation projects such as renovation of commercial buildings, railway stations, airports, repair of runways, and extension of roadways & bridges in rural parts of the country drive the Indonesia compact construction equipment market.
• Investment in infrastructure development projects, including investment in housing schemes & transport facilities, supports the growth of the construction industry. Some of the significant challenges, such as a shortage of labor and rising building materials such as timber, iron & steel prices, can impact the growth in 2023. However, the construction industry is expected to have robust growth in 2023.
• The mining industry is one of the primary buyers of heavy equipment in Indonesia. However, compact equipment has limited use in mining projects. There is a surge in the demand for nickel, tin, and coal due to the rise in industrial activities post-pandemic in 2022. Nickel and mining projects such as the Aquila nickel project and the Obi Island nickel project in North Maluku Province started in 2021.

SEGMENTATION ANALYSIS

Segmentation by Type

• Excavators
• Backhoe Loaders
• Wheeled Loaders
• Track Loaders
• Skid Steer Loaders
• Telehandlers
• Forklifts
• Aerial Platforms
• Others (Articulated Loaders, Truck Carriers)

Segmentation by Application

• Material Handling
• Maintenance & Utility Works
• Waste Management
• Other Applications

Segmentation by End Users

• Construction
• Mining
• Warehouse & Logistics
• Other (Maintenance & Utility Works, Landscaping, Power Generation)

MARKET TRENDS & DRIVERS

Government Investments in Public Infrastructure Projects Through the PPP Model

• The Indonesian government aims to invest USD 430 billion in infrastructure development projects from 2021 to 2024. There was a 20% rise in infrastructure investments from the last investment plan in 2015–2020.
• The country's infrastructure development projects are mainly in the transport sector. Investment projects are divided into three sectors – road, rail, and port development, accounting for 29%, 22%, and 23%, respectively.
• The Trans-Sumatra toll road project, one of the most significant projects worth USD 33.7 billion, is in progress. China supports a critical project - Jakarta-Bandung high-speed railways.
• In 2022, the government invested in 83 PPP projects for infrastructure developments, which include 50 projects in the transportation sector, including 13 ports and 15 railways projects. Asian Development Bank provided a loan of USD 100 million to the Indonesian government to support these projects.

Investment in Transport Sector Projects Under the National Strategic Plan

• In 2022, the Indonesian government introduced National Strategic Projects in Indonesia. The projects are focused on increasing Indonesia's economic growth, improving community welfare, and increasing regional development.
• There are over 200 projects in National Strategic Projects ranging from toll road development to new airport construction to broadband enhancement coverage, worth nearly USD 500 billion. These 200 projects consist of 56 roads, 57 dams, 11 railways, 16 railways, 15 energy, 16 ports, 12 water and sanitation, two housing estates, eight airports, nine irrigations, one education, one coastal embankment, and one technology and these projected to propel the Indonesia compact construction equipment market growth.
• In 2023, USD 456.2 million fund is allocated for housing infrastructure projects, including the construction of 5,379 flats, 3,362 unique houses, 145,000 units of self-help housing assistance spread throughout Indonesia through the (Bantuan Stimulan Perumahan Swadaya) BSPS scheme, to support poverty alleviation.

Intense Rivalry Between Chinese and Other OEMS in the Indonesian Market

• The level of competition among manufacturers in the Indonesia compact construction equipment market has grown due to a surge in demand for Chinese OEMs, which are available at cheaper prices and accessible financing facilities.
• Chinese manufacturer SANY controlled 21% of the market share in the excavator segment in the Indonesia compact construction equipment market in 2022. The Chinese manufacturers are providing cheap equipment at 20% lower price than its Japanese rivals.
• China is investing heavily in various infrastructure development projects in the Indonesian market. For instance, over 500 units of SANY equipment are used for the construction of a high-speed railways project between Jakarta and the City of Bandung that is under progress in 2023. Other OEMs in the country, such as Kobelco, Komatsu, Caterpillars, Hitachi, and Hyundai Construction Machinery, are increasingly focusing on continuous improvement in aftersales services, which are supported by digital technology.

Adoption of Electric & Hydrogen Fuel Technologies

• Concerns over environmental issues led the Indonesian government to aim at carbon neutrality by 2060. Such factors triggered the need for electric construction machinery. The increasing government focus on carbon emission reduction in 2021 further supported the demand for electric construction equipment in the Indonesia compact construction equipment market.
• Major construction equipment manufacturers such as Volvo Construction Equipment, SDLG, and XCMG launched electric and compact mini excavators in Indonesia to tackle the growing market demand.
• In 2021, Volvo Construction Equipment launched EC55D compact excavators in the Indonesia compact construction equipment industry for innovative city projects.
• In 2022, Hyundai Construction Equipment signed a Memorandum of Understanding (MOU) regarding plans to jointly develop hydrogen fuel cell construction equipment with Hyundai Motors and Hyundai Mobis.

INDUSTRY RESTRAINTS

Surge in Building Material Prices Hampers the Construction Projects

• In 2022, the government of Indonesia increased the fuel and oil prices in the market. The increase in fuel prices is expected to affect other commodities, including housing and property sectors. A rise in fuel prices will affect building materials such as iron, cement, sand, steel, and bricks.
• According to the Central Statistics Agency (BPS), in 2022, diesel prices increased by 37.8%, cement rose by 8.5%, asphalt increased by 15.3%, and steel roof prices fell by 3.85%.
• The cost of construction projects of buildings for roads, bridges, and ports increased by 9.6%, followed by the cost of electricity, gas, water, and communication center installation by 5.6%.
• The construction cost of residential building projects also witnessed growth of 4.2% in 2022.

Skilled Labor Shortage Hampering the Industry Growth

• Indonesia is facing the challenge of a shortage of skilled labor force. The country needs ~113 million skilled workers by 2030 to achieve economic growth in the manufacturing, infrastructure, and agribusiness sectors.
• The country depends on foreign laborers from Bangladesh, Nepal, and India for cheap labor. Shortage of skilled labor force triggered during COVID-19 in 2020, the lockdown situations & insurgence of the second wave of infection in 2021 further impacted the Indonesian labor market.
• In 2022, Indonesia has the lowest rate of foreign participation in the labor market among Southeast Asian countries. Indonesia has only 0.7% participation of foreign laborers, whereas the involvement of foreign laborers was higher in Malaysia at 13% and Singapore at 35%.

VENDOR LANDSCAPE

• Caterpillar, Hitachi Construction Machinery, SANY, Komatsu, Kobelco, and Kubota are leaders in the Indonesian compact construction equipment market. These companies have substantial market share and offer diverse sets of equipment.

Prominent Vendors

• Caterpillar
• Komatsu
• Volvo Construction Equipment
• Hitachi Construction Machinery
• Kubota
• SANY
• JCB
• Xuzhou Construction Machinery Group Co. Ltd. (XCMG)
• Kobelco
• Zoomlion Heavy Industry Science & Technology Co. Ltd
• Hyundai Construction Equipment
• Yanmar

Other Prominent Vendors

• Liebherr
• Sumitomo Construction Machinery
• LiuGong
• Takeuchi
• Toyota Material Handling
• Manitou
• CNH Industrial
• Wacker Neuson
• Jining Maxpower Machinery Co., Ltd.
• XGMA
• Sunward Equipment Group
• Anhui Forklift Group (HELI)
• Hyster
• BYD

Distributor Profiles

• PT Indotruck Utama
• United Tractors
• Multicrane Perkasa
• PT. Airindo Sakti
• PT. Badak Prima Lestari
• PT. United Equipment
• ALTRAK 1978
• Traktor Nusantara
• PT DSL Indonesia

KEY QUESTIONS ANSWERED:

1. How big is the Indonesia compact construction equipment market?

2. What is the growth rate of the Indonesia compact construction equipment market?

3. Who are the key players in the Indonesia compact construction equipment market?

4. What are the trends in the Indonesia compact construction equipment market?

5. Which are the primary distributor companies in the Indonesia compact construction equipment market?