The Heavy Equipment Industry Strategies in Indonesian Market

by | Nov 30, 2022 | Market Research | 0 comments

How is the growth of the heavy equipment industry globally? How potential is the Indonesian market and how to optimize it?

Heavy Equipment Industry
Source: Unsplash

The value of the heavy equipment market globally is predicted to continue to grow. Market conditions show high demand and make heavy equipment a popular product due to rapid urbanization, industrialization, and the growing population. The construction of smart city trend buildings, skylights, bridges, highways, railways, and mining boosted the growth of the heavy equipment industry.

Based on data from ResearchDive.com, the market value of heavy equipment and construction globally in 2020 managed to reach USD 176.8 billion. The market is also predicted to continue to grow with revenues reaching USD 228 billion in 2026 and USD 257.2 billion in 2028 with a CAGR value of 4.8%. This is because heavy equipment is an important factor to meet project targets on time and in high-quality work.

What is the potential of the heavy equipment industry in Indonesia? What kind of innovation that industries do to compete and follow the high demand?

The Growth of the Heavy Equipment Industry in Indonesia and Its Market Potential

According to Bisnis.com, the good performance of heavy equipment sales in Indonesia will continue due to high market demand, especially for the coal mining and construction sectors. Based on data from the Association of Heavy Equipment Manufacturers of Indonesia (HINABI), the ratio of the number of heavy equipment for the mining sector is 40% of total production, while for the forestry sector is 25%, followed by construction by 20% and agriculture by 15%.

From January to August 2021 the largest increase in heavy equipment sales occurred in the mining sector, namely by 206%, from 1,001 units in the same period in 2020 to 3,062 units. While the second increase in sales of heavy equipment was followed by the forestry sector which increased by 84% to 1,487 units, the construction sector increased by 64% to 3,449 units, and the agriculture sector increased by 54.7% to 832 units.

The production capacity of heavy equipment in Indonesia this year increased by 40% compared to the previous year’s capacity, namely from 6,000 units to 10,000 units. Based on data from Kompas.com, after Covid-19, the number of requests per June 2022 was recorded as reaching 25,000 units. Heavy equipment demand in 2021 has increased due to the significant increase in coal prices.

Apart from the private sector, Indonesia’s market potential is also supported by the Indonesian government which is currently carrying out massive infrastructure development starting from the construction of airports, ports, toll roads, dams, and special economic zones. The Indonesian government also aggressively developing integrated smelters for several sectors such as energy to gain value added to the National Strategic Project (PSN) program, for which the government has included 13 projects on the PSN list.

Strategy and Innovation for the Heavy Equipment Industry in Indonesia

Players in the heavy equipment industry are also willing to invest in innovation and new technology to be able to continue to meet the ever-increasing demand for the latest construction equipment. All the materials needed must use heavy equipment so that construction can be carried out optimally. Three strategies can grow continuously in the heavy equipment industry and meet high demand.

1. Market Diversification and Increase in Sales Portion in Other Sectors

According to BisnisIndonesia.id the mining sector’s demand for heavy equipment is still making a positive contribution. Although the mining sector provides excellent potential in driving the heavy equipment industry. One of the heavy equipment supply companies in Indonesia, Intraco, is implementing a market diversification strategy where the company also penetrates other sectors such as construction, forestry, plantations, and agriculture. Because the growth boost came from the rising of mining commodity prices. It might be changed if the prices decline which potentially affects the heavy equipment industry negatively. So support from other sectors is needed when this happens.

2. Technology Innovation Especially in Sales

In today’s digital era, innovation is needed to compete in increasingly fierce market competition. One of them is what has been done by SCAN, which since 2018 has been running the business of buying and selling, and renting heavy equipment. According to Detik.com, SCAN has captured the potential for increasing demand by building a marketplace web for buying, selling, and renting heavy equipment under the name scanina.com as a digital transformation strategy and market expansion. This innovation will reach a wider audience and enable buyers to make quicker decisions because buyers can easily make transactions digitally anytime and anywhere.

3. Government Support in the Form of Super-Deduction Tax and Human Resource Development

According to PasarDana.id, the Indonesian Ministry of Industry supports the development of the heavy equipment sector to be able to innovate. The government provides rewards in the form of a super-deductible tax for companies that innovate. This is a form of implementation of Making Indonesia 4.0 by prioritizing the implementation of the industrial revolution in the form of developing an innovation ecosystem and improving the quality of human resources. The government also supports vocational education to create a competent workforce according to industry needs and push the use of local components in the production of domestic heavy equipment.

With the high demand for and use of heavy equipment in Indonesia, many international heavy equipment companies have entered the Indonesian market to support the needs of various industries and development. Three international heavy equipment companies operating in Indonesia.

1. Caterpillar

Caterpillar Inc, based in Deerfield, Illinois was founded in 1925. Caterpillar has a market share in several industries including construction, natural resources, energy, and transportation segments. Their market segment includes machinery in infrastructure construction applications, mining products, power generation, rail, sea transportation, also oil and gas. It is recorded that as of 2022 Caterpillar has 107,700 employees globally, with total assets of USD 82.8 billion, revenues of USD 51 billion, and total profits of USD 6.5 billion.

2. Sany

Sany Heavy Industry Co., Ltd is a company originating from Changsha, China, which was founded in November 1994. Sany’s business is to manufacture and sell heavy lifting machinery as well as construction engineering machinery, mechanical, and electrical equipment as well as general equipment. Sany produces several heavy equipment products such as crawler cranes, truck cranes, asphalt pavers, motor graders, asphalt batching plants, concrete batching plants, concrete pumps, and truck-mounted concrete pumps. Based on data from Forbes, in 2022 the number of Sany employees in all its operating areas is 24,568 people with total assets of USD 21.1 billion. And in the same year, Sany generated revenue of USD 17.5 billion and a profit of USD 2.48 billion in 2022.

3. Komatsu

Komatsu Ltd. was founded in 1921 and is based in Tokyo, Japan. Komatsu was a manufacturing company that sells heavy equipment for mining, construction, forestry, and industry. For the construction and vehicle segments, Komatsu serves mining equipment, transportation, cargo, underground construction, leveling of roads or foundations, foundry, and even recycling.

Komatsu provides metal forming, temperature control, prefabricated housing, and even semiconductor exposure equipment for excimer lasers. Forbes recorded that as of 2022 Komatsu has 61,564 employees globally with total assets of USD 35 billion. The company’s revenue in 2022 reached USD 24.5 billion, with a total profit of USD 1.8 billion.

Enter The Indonesian Heavy Equipment Market with BRIGHT Indonesia

Because of the huge impact of the heavy equipment industry in Indonesia, of course, it takes a lot of in-depth research about the heavy equipment market in Indonesia. So, to enter the Indonesian market, you need the right local partner to assist you.

BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

  1. Provide assistance for you in expanding and developing your business by identification of potential partners.
  2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arranging business meetings, and acting as a liaison.
  3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
  4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net

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