Construction equipment domestic sale trend
South Korean domestic sales of fully built vehicle in construction equipment industry would fall by 9% in 2016 due to reduction in SOC budget & base effect of previous year’s imaginary demand.
In 2015, Korean domestic supply and selling price of construction equipment has been declined for last three years consecutively due to the stagnant domestic sales and decrease in exportation.
Subtotal of fully built vehicles production and sales unit in 2015 was 79,117 units and 77,886 units indicating 8.6% decrease in production and 9.7% decrease in sales. Total sales of 77,866 units were made up of domestic sales of 25,314 units indicating 2.1% fall and exportation units of 52,572 units indicating 12.9% fall compared to the previous year.
In 2016, fully built vehicles in Korean construction equipment industry will show inevitable decreasing trend because of the continual international and domestic economic slump. Total units of production and sales have been predicted to decline by 5.0% of each. Particularly is sales, total domestic sales and exportation will be reduced by 8.8% and 3.4%.
Although there was a shrinking demand due to the progress payment based SOC budgeting and construction industry’s slow growth trend, domestic sales of fully built vehicle in 2015 did not experience the sharp decline. Thanks to occurrence of the imaginary demand after strengthening regulation, it maintained relatively similar reduction level of 2.8% compared to the previous year.
Due to introduction of strengthening gas emission regulation in 2015, there has been an imaginary demand for 15,303 units (60%) out of 25,314 units during the first half and then the rest during the second half in 2015.
Korean construction equipment industry will experience rapid decline in domestic sales in 2016 as a result of SOC budget reduction, decrease in the civil engineering and construction investment, and base effect of imaginary demand.
Domestic sales of fully built vehicles in 2016 will be decreased down to (approx.) 23,000 units which is a 8.8% less from the previous year. By item, despite the excavators and concrete pump trucks were drawing outstanding interest from the imaginary demand in 2015, they would experience relatively big decreasing trend.
Korean construction industry condition seems that it would not to have sympathetic relationship with demand for construction equipment in 2016. While the housing construction sector’s property increment tax policy since 2015 is still contributing positive effect for the construction industry, there will be sharp decrease in civil engineering and construction investment predicted due to SOC budget reduction and less of large government project orders.
According to the status of SOC budget in 2016, the SOC budget for 2016 is 23.3 trillion won which is 1.5 trillion won (6%) less from SOC budget in 2015. Taking the revised supplementary budget into account, the actual SOC budget reduction between 2016 and 2015 is 11%.
For the budget of the road construction, continuing road construction projects’ completion, road and safety construction are mainly focused whereas minimal budget is considered for new projects. As a result, 8.4 trillion won budget compilation took a place for 2016 which is 7.8% less than the budget compilation in 2015 in road construction. In addition, for the budget of railway construction, 7.2 trillion won has been considered for 2016 which is 3.0% reduction from 2015.
In the case of earthwork and road construction work which are closely related to the equipment demand in particular, the budget will be populated for continuing projects such as highway construction and national road construction focusing on the project completion. On the other hand, for the new projects, since the budget is smaller, scale of the project is small. For this reason, there will not be much demand for middle or large sized construction equipment.[/vc_column_text][/vc_column][/vc_row]