Local manufacturing could create ₹25,000 cr opportunity by FY2030

Rising component localisation in the Indian mining and construction equipment (MCE) industry could present a substantial annual opportunity of approximately ₹25,000 crore for construction equipment vendors by FY2030, according to a report by ICRA.

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The Indian mining and construction equipment (MCE) industry is poised for significant growth in component localisation, potentially offering an annual opportunity of approximately ₹25,000 crore for construction equipment vendors by FY2030, according to a recent report by ICRA. This opportunity is expected to be driven by increased localisation of components such as undercarriages and precision hydraulics, with overall localisation levels projected to rise from the current 50% to over 70% in the next 5-7 years.

The Indian MCE industry, the third largest globally in terms of volume, currently imports nearly half of its component requirements by value from countries like China, Japan, and South Korea. Key components such as hydraulics, undercarriages, high-tech electronics like electronic control units (ECUs), sensors, and telematics are typically sourced from abroad. Additionally, high-tonnage fully built machinery and certain steel alloy grades are also imported due to the technological intensity and economic scale required for manufacturing these components domestically.

ICRA identifies several challenges contributing to this reliance on imports, including the limited domestic demand, which affects the economic viability of local production, and the unavailability of certain raw materials like specialty steel. Moreover, India’s lagging emission standards for some equipment categories and cost disadvantages further limit export opportunities for domestic manufacturers.

However, the report highlights several factors that are expected to bolster localisation efforts. These include increasing domestic demand, which has grown at a CAGR of 12% over the last decade, the Production Linked Incentive (PLI) scheme for complementary sectors like specialty steel and auto components, and the shifting geopolitical dynamics with the China+1 strategy being adopted by global OEMs.

The Government of India’s initiatives to improve the ease of doing business and strengthen infrastructure are also expected to enhance the competitiveness of the domestic manufacturing industry. ICRA projects that as localisation levels increase, the Indian MCE industry could become a ₹2.1 lakh crore market by FY2030, creating significant growth opportunities for domestic component suppliers. Specifically, undercarriage components could be localised in the near term, hydraulic components in the medium term, while electronic components, due to their R&D intensity, might be the last to be localised.