Indonesia Construction Equipment Rental Market - Strategic Assessment & Forecast 2023-2029

INDUSTRY OUTLOOK

The Indonesia construction equipment rental market is expected to reach USD 618.5 million by 2029, growing at a CAGR of 5.33%. The Indonesian government aims to invest USD 430 billion in infrastructure development projects from 2021 to 2024. There is a 20% rise in infrastructure investments from the last investment plan in 2015–2020. The country’s infrastructure development projects are mostly in the transport sector. Investment projects are divided into three sectors – road, rail, and port development, accounting for 29%, 22%, and 23%, respectively. The Trans-Sumatra toll road project is one of the largest projects worth USD 33.7 billion and is in progress. China supports a key project - Jakarta-Bandung high-speed railways. The surge in mining projects due to rising commodity prices in the global market prompts the government to invest in mining sectors. Growth in the mining industry is expected to drive the demand for renting large excavators in the Indonesia construction equipment rental market in 2023.

KEY HIGHLIGHTS

• Earthmoving equipment accounted for the largest share of the Indonesia construction equipment rental market, around 45% in 2022. The excavator in the earthmoving segment accounted for the largest share of 71.8% in 2022. Rising investment in infrastructures, development of expressways, & mining projects in 2022 is expected to drive the demand for renting excavators.
• In 2022, the Indonesian government increased the infrastructure development projects, including constructing airports, railways lines, roadways, highways & bridges across the country. The government invested USD 407 billion under Nation Strategic Plan; the fund was directed to 200 different PPP projects in 2022.
• The demand for hydraulic excavators in the Indonesia construction equipment rental market is growing due to the rise in public infrastructure projects which include an extension of railways tracks, airports & renovation of bridges & highways across Indonesia in 2022. Several road construction & housing projects are progressing in different countries in the region in 2023.
• Renting large excavators and dump trucks witnessed a sharp rise post-pandemic in 2021 due to rising mining activities nationwide. The growth in the mining industry is due to an increase in coal prices & surge in nickel extraction projects in Indonesia. The government's focus on increasing nickel production to fulfill local demand will positively impact the mining industry.
• Japanese rental companies have a strong presence in the Indonesia construction equipment rental market. These companies are introducing digital transformation to enhance customer experience. Chinese construction equipment manufacturers like SANY, XCMG & others are popular with customers due to their low cost and equipment financing facilities. The demand for electric and automated equipment witnessed growth in the year 2022.

MARKET TRENDS & DRIVER

Rise in Infrastructure Investment
In 2022, the government invested in 83 PPP (Public Private Partnership) projects for infrastructure developments, which include 50 projects in the transportation sector, including 13 ports and 15 railways projects. Asian Development Bank provided a loan of USD 100 million to the Indonesian government to support these projects. In 2023, the Indonesian government planned 49 projects, 33 PPP projects, and 16 non-PPP projects. The 33 PPP projects include 18 Road Sector Projects, 4 Telecommunication Sector Projects, 1 Electricity Sector Project, 6 Water Supply Sector Projects, 3 Transportation Sector Projects, and 1 Energy Conservation Sector Project. A total investment value of more than USD 38.0 billion is planned to direct these infrastructure projects.

Government Investment Under National Strategic Projects
In 2022, the government introduced National Strategic Projects in Indonesia. The projects focus on increasing Indonesia's economic growth, improving community welfare, and increasing regional development. There are over 200 projects in National Strategic Projects ranging from toll road development and new airport construction to broadband enhancement coverage, worth nearly USD 500 billion. In 2022, the government planned to invest in the construction of 200 projects and ten programs of National Strategic Projects with an investment value of USD 407 billion, targeted for completion in the third quarter of 2024.

Japanese Rental Companies Focus on Digital Transformation
The level of competition among manufacturers in the Indonesian market is increasing due to the surge in Chinese heavy equipment, which is cheaper and has easy financing facilities. Chinese companies such as SANY, XCMG & Zoomlion partner with local distributors to provide rental services in the Indonesia construction equipment rental market at a lower price. Japanese rental companies such as AKTIO, Nikken, Kanamoto, and Nishio Rent All strongly influence Indonesia's construction equipment rental market. These rental companies have established operations across the region. These companies offer a wide range of products, from standard construction equipment rental and aerial platform forklifts, cranes, and other rental equipment.

INDUSTRY RESTRAINTS

Rising Building Material Prices Can Hamper the Construction Industry
Indonesia faces the challenge of a shortage of skilled labor force in 2023. The country needs ~113 million skilled workers by 2030 to achieve manufacturing, infrastructure, and agribusiness economic growth. The country depends on foreign & cheap laborers from Bangladesh, Nepal & India. These cheap foreign laborers employed in the Indonesian construction industry are known for taking little care of construction equipment when using them. According to Caterpillar Indonesia, improper handling of construction machinery is one of the major challenges for the Indonesia construction equipment rental market.

VENDOR LANDSCAPE

• Prominent vendors in the Indonesia construction equipment rental market are Caterpillar, Volvo Construction Equipment, JCB, Komatsu, Hitachi Construction Machinery, Zoomlion, Kobelco, SANY, XCMG & Kubota.
• Komatsu, SANY, Hitachi Construction Machinery, and Caterpillar & Volvo Construction Equipment are market leaders. They have a strong industry share, and these vendors offer diverse products in the Indonesia construction equipment rental market.
• JCB and Kubota have low product diversification in the Indonesian region, with two products (excavators and cranes), and these companies focus on the Southeast Asian market.
• Other prominent vendors in the Indonesia construction equipment rental industry are Hyundai Construction Equipment, Liebherr, Yanmar, & LiuGong.
• In 2021, XCMG launched a different range of cranes, varying from 50 to 260 tons, in the regional market to cater to the need for high-construction and nickel mining projects.