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The market must not live on telescopic alone...

The market must not live on telescopic alone...

14/03/2016

To set the road construction machinery market on the path of growth, Ukraine needs to launch an efficient road construction program. The reforms in Ukravtodor should resolve the issue of decentralization of  the roads infrastructure management, to replenish roads construction budget, to implement a system of the quality control and the domestic concession roads development. As of today, Verkhovna Rada is in the process of discussion of a dozen of draft laws prepared by the Ministry of Infrastructure, whereby reforms are launched and cardinally change the roads construction industry.

However, for the moment the road construction machinery market stands still, waiting for the reforms. The segments of telehandlers, BHL, asphalt compactors performed very well during the past year. Given the lack of adequate financing, the second hand equipment enjoyed the highest level of demand.

Telehandlers enjoyed the highest demand and was the locomotive that pulled the whole road construction industry. Their high profitability, wide range of application, and use in export-oriented (hard currency generating) industries provided significant growth: the new equipment sales grew +38%, the second hand sales grew + 132%. In 2015, market "veterans" (Manitou and JCB), reached 60% in total import volume. To take up with the leaders, the brands of the "second echelon" primarily need to resolve the issue of the distribution networks efficiency and focus at promotion.

In 2015, the road construction machinery market sales (represented by key segments) reached $84 million, whereby new equipment sales were $53 million and the second hand machinery - $31 million. While the imports of new machinery and equipment fell 9% in monetary terms, the imports of the second hand have grown by 10%. Which is quite reasonable. With no credit financing available, construction companies are likely to purchase the second hand equipment with minimal depreciation and the affordable prices. On the top of the brand new equipment, the market leaders offer "trade in" or "buy back" renovated machinery with 1-year or 1500 m/h warranty period. In order to find additional market opportunities and income, the companies are ready to sell second hand equipment, spare parts and service support to the competitors' brands and equipment. 

The new equipment import, in USD, dropped by 9%, in numbers grew by 8%. Importers are ready to "tighten their belts" and sell new equipment at lower margins, to go through the crisis, to stay on the market and keep the status of the official dealer. To purchase new machinery, Ukrainian construction companies are reluctant to come to banks or leasing companies - the tearms are quite tough: 30-50% in advance, 20-30% interest rates (5-10% in USD), residual payment for 1 to 3 years. Therefore, the main offices turn a blind eye to second hand sales by their dealers.

Telehandlers 2015 year sales grew both in money and numbers. In fact, they pulled out the whole road construction equipment market. BHL, road scrapers, compactors demonstrated positive trend. Paraphrasing the Bible, the market must not live on telescopic alone.... That gives good potential and hope for total market launch for the next years.

To get up-to-date detailed import analysis for the road construction equipment, please contact MARCOM representatives at: vb@marcom.kiev.ua or by phone: +38 050 865-42-66.