BackSales recovery is two years away: JCB India
The demand for construction machinery fell by 37% y-o-y in H1 of 2020, said the company’s MD Subir Chowdhury
PremiumMUMBAI : A revival in demand for construction equipment is still two years from its peak in 2018, said Subir Chowdhury, managing director and chief executive, JCB India Ltd, as he highlighted issues such as the coronavirus outbreak and lockdowns impacting fresh investments.
“CY2022 will be the year when we may match the CY2018 levels, assuming that the geopolitical instability is sorted, the pandemic is over, and the vaccines are made," he said.
JCB, India’s largest maker of construction equipment such as backhoe loaders, excavators and compactors, sold more than 43,000 machines in 2018, its best-ever year.
According to CMIE data, new projects announced in the December and March quarters stood at ₹5.24 trillion and ₹3.49 trillion, respectively, but plunged to ₹0.59 trillion in the June quarter, indicating a sharp drop in investments in infrastructure projects amid the pandemic.
Demand for construction equipment is a measure of construction and infrastructure activity in an economy.
“The demand for such machines had grown 40% year-on-year (y-o-y) in 2018 on the back of robust government spending on infrastructure projects. In 2019, the volumes declined 15% and H1CY20 has seen 37% y-o-y drop in demand," said Chowdhury.
Demand has begun to recover with the lifting of the prolonged lockdown driven by flagship government programmes. “We are seeing significant recovery. This is being driven by increased government spending in construction activities under the Pradhan Mantri Gram Sadak Yojna (PMGSY) and Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGA)," Chowdhury said, adding availability of labour in villages is also a contributor to the revival. After losing April and May, the use of JCB machines deployed on the field saw a V-shaped recovery during June-July. “We have about 90,000 machines on the field pan-India. In July, machine utilization level was the same as last year," Chowdhury said.
Chowdhury therefore expects demand for backhoe loaders to recover ahead of other more expensive machines such as excavators.
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