Election Impact: Mining Equipment Sales to Decline

23 Apr 2024 CW Team

"The sales volumes of the domestic mining and construction equipment (MCE) industry are projected to experience a downturn in FY2025, following two consecutive years of robust growth. According to ICRA, after achieving a remarkable 26 percent growth in FY23 and 24 percent in FY2024, a decline of 12 to 15 percent in sales is anticipated for FY25, translating into volumes of 1.14-1.18 lakh units.

The anticipated reversal in this growth trajectory is primarily attributed to a slowdown in new project award activity during Q4 FY2024 and Q1 FY2025. The Model Code of Conduct, enforced during the Parliamentary Elections scheduled for April-May 2024, is expected to hamper project awarding activity, impacting the MCE industry.

The disruption in project awarding activity over the past two quarters has been noted. Ritu Goswami, Sector Head of corporate Ratings at ICRA, stated, ?Pre-election acceleration in project execution by the Government generated significant demand momentum for the MCE industry in the past two years. However, with the likely disruption in project award activity for two consecutive quarters during Q4 FY2024 and Q1 FY2025 amidst the Parliamentary Elections, and the monsoon-related effects on construction activities in Q2, the first half of FY2025 is anticipated to witness a moderation in sales.?

Despite the near-term challenges in the domestic MCE demand environment, the industry's long-term prospects remain promising. This is attributed to the sustained government focus on infrastructure development. Furthermore, a rebound in volumes is anticipated in H2, driven by a resurgence in new project awards starting Q3 and partially supported by pre-buying due to the CEV-V emission norm transition scheduled for January 2025."

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