The Germany compact construction equipment market was valued at 40,817 units in 2022 and is expected to reach 55,917 units by 2029, growing at a CAGR of 4.60%. The government has increased its focus on upgrading the public infrastructure, resulting in the demolition of old infrastructure. For instance, the government planned to replace the Salzbach Valley bridge as it could not cope with the current traffic demand because the structure had grown old. A budget of USD 578 million was allocated to improve bridges across the country in 2022. Moreover, the German government has approved the planning application for a new USD 292 million computing center in Bavaria. Another project is coming up, the development of three ships, each with a capacity of 4,500 cubic meters, which will be constructed by shipbuilder Flensburger Schiffbau-Gesellschaft (FSG). Regions across Germany are heavily investing in infrastructure development projects, including repairing and renovating airports, railway lines, roadways, and highways. A surge in infrastructure development projects is expected to drive the German compact construction equipment market during the forecast period.
Increased Investment in Public Infrastructure Projects
- The German government invested in house renovation projects across the country in 2022. The government also plans to build 400,000 new apartments yearly, with 100,000 being publicly subsidized. Hence, the rise in construction projects is expected to drive the demand for compact construction equipment during the forecast period.
- As the country becomes carbon neutral by 2045, the government is liquidating subsidies for renovation to make buildings more energy efficient. In 2021, the government offered renovation subsidies of approximately USD 9 billion and further increased the amount in 2022.
- In 2022, the government planned to restart operations in coal-fired power plants, generating 10 gigawatts (GW). These plants have been out of operation for the last two years. They cover nearly 5% of the total German power production capacity. Verbundwerk Hattorf Wintershall Mine in Hessen, Unterbreizbach Mine, Zielitz Mine, Neuhof Ellers Mine and Bernburg Salt Mine are one of the largest underground mines in Germany.
- The German government allocated USD 372.42 million for road construction projects in 2022 for the Brandenburg region, which is around USD 5 million higher than in 2021, significantly contributing to the Germany compact construction equipment market growth.
- The German Transport Ministry has planned to expand highways across the country. Several road work projects will be carried out in Germany in the Rhine-Main, Saarland, and Rhineland-Palatinate, which will include widening works as well as improvement of roads. The government liquidated USD 189 million for highway works, and Rhine Hesse received around USD 140 million for highway renovation.
- Compact excavators accounted for the largest share of the Germany compact construction equipment market in 2022. Application of compact construction equipment in the material handling segment accounted for the largest share in 2022. Rising investment in housing, warehouse expansion, and public infrastructure projects is expected to drive the demand for excavators in the German compact construction equipment market.
- The country has planned to spend USD 220 billion by 2026 to assist the industrial transformation, including climate protection, hydrogen technology, and electric vehicle charging station expansion. The construction equipment and building experienced a 22% growth in 2021 compared to the previous year due to the infrastructure push with highways, dams, and green cities.
- The German contractor, Hochtief, won a public-private partnership (PPP) deal to renovate and build new offices for the Institute for Federal Real Estate in Berlin. Construction is scheduled to commence in October 2023. The project involves refurbishing four existing properties, which will be linked with new buildings and extensions. These improvement projects across the region expect to propel the demand for compact telehandlers in the Germany compact construction equipment market.
- In Feb 2023, construction on the new Weyburn General Hospital started. The new facility will include an Emergency Medical Services garage and an adjacent heliport to support safer and more efficient patient transport. The new hospital will replace the existing Weyburn General Hospital and include a 35-bed new facility with an approximate building area of 9,730 square meters.
- In the Germany compact construction equipment market, compact electric forklifts are growing among logistics companies due to their zero emissions, which support carbon-neutral warehouses. In 2022, DHL, a global contract logistics leader, planned to build a 400,000 sqm carbon-neutral warehouse in major European markets, including Germany.
- Housing renovation in Berlin and Baden-Wurttemberg states, under the government housing program, expects to drive the sales of compact aerial platforms. In June 2023, the European Union launched ten pilot projects to improve cross-rail links. Cross-border rail connections have been given a major priority. For instance, the new cross-border rail link between Italy and Germany will be established in 2026. This includes the development of two new routes from Rome to Munich and Milan to Munich.
- In 2022, the German government invested USD 14.5 billion to modernize the nationwide railways network. The government planned to renew 1,800 kilometers of tracks, 140 bridges, and 800 railway stations. Digitalization projects are underway in the Stuttgart & Scandinavian-Mediterranean corridor and Munich to the Austrian border. A fund of USD 879.4 million is allocated for smart city projects. The projects are directed toward digitalizing municipalities across the country in 2022.
MARKET TRENDS & DRIVERS
Surge in Renovation & Repair Projects for Public Infrastructure Supports Demand for Compact Construction Equipment
- In 2022, the German government planned for the rehabilitation & repair of roads across the country. The government aims to launch over 200 construction projects across the country. Major federal and state road network projects for rehabilitation are underway in Baden Wurttemberg. The government allocated USD 429.2 million for road network maintenance in Baden Wurttemberg State in 2022. Current rehabilitation programs focus on existing roads, bridges, and cycle paths.
- In addition, USD 265.4 million was allocated to renovate federal highways. The 2022 rehabilitation program includes 50 bridge maintenance projects, 250 km of highways, and 190 km of state roadways repairs and maintenance. Several road repair works were planned for various states, such as Saarland, Hesse, and Rhineland-Palatinate, in 2022. The government allocated USD 408.3 million budget for repair projects across the country.
Increasing Demand for Compact Construction Equipment in Response to Focus On Sustainability and Smart Cities Development
- “Green building,” being one of the key investment strategies of the German government, is expected to boost the demand for compact-powered construction equipment in the Germany compact construction equipment market. Germany has invested approximately USD 12.5 billion in developing green buildings in compliance with ESG norms.
- The growing demand for compact excavators is attributable to the improvements in the underground mining and construction sectors and a few government projects like the smart city project. The market for compact excavators is evolving into a more innovative sector due to the intelligent systems driven by IoT and data analysis for service, networking, and sustainability.
A Surge in Investments in Residential Construction Across the Country to Boost the German Compact Construction Equipment Market
- The government actively promotes energy-efficient homes since approximately 16% of Germany's greenhouse gas emissions come from the building sector. The move to green housing could be accelerated by recent initiatives to lessen reliance on Russian gas and oil.
- The global construction output fell by 4% in 2022. However, according to VDMA, construction growth was not much affected in Germany, the U.K., and France in 2022 due to the energy crisis, inflation, and supply chain disruptions.
- According to Federal Statistics Office, prices for residential real estate in Germany fell by an average of 6.8% year-on-year in the first quarter of 2023, the biggest decline since the start of data collection in the year 2000. The government has highlighted the supply gap of 23,177 houses in Berlin, 13,632 in Hamburg, and 10,577 in Munich, the cities experiencing high rents.
Adoption of Building Information Modeling (BIM) To Enhance Remote Monitoring & Digitization
- The Federal Ministry of Transport and Digital Infrastructure (BMVI) will aid medium and small-sized companies in integrating BIM to increase the productivity of construction processes and improve the quality of buildings constructed.
- Some of the compact construction equipment firms have integrated the technology of BIM into their system. The upcoming new compact excavators can now input 3D models into a computer. In addition, it gives information about fuel consumption and productivity. Companies like Caterpillar, Volvo, and JCB are at the forefront of integrating BIM.
Investment in Green Infrastructure Strategy to Boost the Germany Compact Construction Equipment Market
- Germany has targeted to invest USD 220 billion by 2026 to support the industrial transformation, including climate protection, hydrogen technology, and expansion of electric vehicle charging stations.
- The Green Infrastructure Strategy was developed by the European Commission in 2020, which aimed to develop organic systems, both natural and engineered, that act as living infrastructure in rural and urban set up to promote social, economic, and ecological growth, focusing on sustainable growth.
Rise in the Adoption of Compact Construction Equipment in Response to New Technology Attachments
- Construction companies nowadays are more attracted to purchasing compact construction equipment as they can operate in varied areas equipped with different technological attachments. Moreover, the traditional pedal operation in compact equipment is being taken over by using joysticks to operate the equipment.
- The growth of the Germany compact construction equipment market will be supported by Germany’s plan to lay out a state fund worth USD 546 million to USD 1.1 billion to support the mining of raw materials in response to the country’s transition to the green economy.
- Construction manufacturing companies such as CNH Industrial, Terex, and others focus on delivering compact construction equipment. Recently, in 2023, CNH launched its first E15X electric power mini excavator.
Increasing Construction Costs May Harm the Sales of Compact Construction Equipment
According to the recent Feb 2023 data, cement prices reached their peak with growth of 51.7%. Gas supply issues in 2022 forced steel producers to increase their product prices. Other building materials such as concrete, cricks, and iron are also increasing significantly.
Housing prices are rising, too, so Germany is witnessing a fall in housing demand. In December 2022, the mortgage rates soared with a 10-year fixed rate from 1% to 3.9%. The prices for new residential buildings in Germany rose 17.6% in May 2022 compared to last year. The prices are easing but are still high to be categorized under affordable housing.
Skilled Labour Shortage in the Country Hampers the Pace of Construction Projects
Germany is also facing a shortage of 40 thousand truck drivers due to the high costs of training and obtaining relevant licenses and many other formalities to surpass the eligibility criteria. This is adding to the issue of the existing labor shortage in the country. Additionally, Germany's aging population has recorded a shortage of young people. According to the Federal Statistics Office, in July 2022, only 10% of the population was aged between 15 and 24, compared to 20% over 65. As a result, the country depends on foreign laborers whose supply is impacted post-pandemic.
Scarcity of Logistics Space in the Country to Negatively Impacts the Germany Compact Construction Equipment Market
In Berlin, the prime rent for storage space for approximately 5,000 m² or more rose due to the increasing shortage of space from $7.03/m²/month to $8.40/m²/month. Furthermore, the demand for space remains high. Many companies are increasing their production, storage, and distribution capacities in Germany to be less dependent on global developments. The scarcity of space continues to be a challenge.
- Caterpillar, Volvo CE, Komatsu, Liebherr, Hitachi Construction Equipment, and JCB are front runners in the Germany compact construction equipment market. These companies have a strong market share and offer diverse sets of compact equipment.
- Caterpillar, Komatsu, Volvo CE, and JCB account for the highest revenue in the German compact construction equipment market.
- Zoomlion, Kobelco, Liugong, and HD Hyundai Construction Equipment are niche market players. These companies offer low product diversification and have a strong presence in the Germany compact construction equipment market.
- SANY, XCMG Manitou, Terex, and CNH Industrial are emerging in Germany. These companies are introducing new technologically advanced products to challenge the market share of market leaders in Germany.
- Kubota, Doosan, and Yanmar have low product diversification; these companies are lagging in adopting new technologies used in construction equipment.