Korean equipment makers target booming infrastructure markets

South Korea’s construction equipment trio -- HD Hyundai Construction Equipment, HD Hyundai Infracore and Doosan Bobcat -- are ramping up their efforts to penetrate emerging markets. While North America and Europe continue to be major revenue sources, they are investing more in local production and distribution networks of high-growth countries such as India, Brazil and Mexico, where infrastructure development is booming and demand for relatively larger construction machinery is surging.

Booming demand for larger equipment

HD Hyundai Construction Equipment, ranked No. 21 by global sales in 2023 according to the Yellow Table -- an annual ranking by International Construction Magazine -- has significantly increased its market share in India. From 13.9 percent in 2019, the company’s share rose to 17.4 percent in the first quarter of this year. During the same period, Japan’s Hitachi, the market leader in India, saw its share decline from 30.2 to 20.8 percent. HD Hyundai aims to capture 30 percent of the Indian market by 2030.

“We will start selling 52-ton supersized excavators in India this year. This will help us increase sales of high-value-added products, aiming for operating margins in the 10 percent range," the company’s CEO Choi Cheol-gon said during a visit to the company’s Indian subsidiary last year.

“In Europe, the primary demand is for compact machines to be used for urban redevelopment projects in tight spaces. In contrast, emerging markets like India are focusing on major infrastructure projects, leading to a higher demand for medium and large-sized equipment,” a company official added.

HD Hyundai Construction Equipment is also targeting the Brazilian market. The company accounted for 9.1 percent of the total market there in the first quarter of this year and plans to increase its presence.

HD Hyundai Infracore, ranked 20th globally on Yellow Table's 2023 chart, is concentrating on expanding in Mexico. The company plans to open a sales office there in September, marking the start of a broader push into the Latin American market. By shifting its sales focus from small and medium-sized excavators and wheel loaders to larger excavators, HD Hyundai Infracore aims to cater to resource extraction companies and local governments.

“We plan to grow our market share in Mexico from 8.5 percent in 2020 to 13 percent this year and reach 16 percent by 2028,” an HD Hyundai Infracore official said.

Doosan Bobcat, which ranked 10th in global construction equipment sales last year, has been primarily focused on North America, which accounts for 70 percent of its revenue. However, the company is now also expanding its footprint in emerging markets, including the United Arab Emirates and Brazil. A Doosan Bobcat official said the company plans to significantly increase sales of excavators, backhoe loaders and other construction equipment in these regions by expanding it sales network.

China’s slow post-pandemic recovery

The Korean construction equipment industry used to have its eye on China, the largest emerging market, due to its rapidly growing construction demand. However, industry analysts now view the Chinese market as less promising.

The Chinese construction industry has been slow to recover since the pandemic, and the rise of protectionist movements has led Chinese contractors to purchase domestically produced equipment.

HD Hyundai Infracore and HD Hyundai Construction Equipment were highly dependent on China until the 2010s, with China accounting for about 30 percent of their sales. This reliance has significantly decreased.

For HD Hyundai Construction Equipment, China’s share of total revenue fell from 22.1 percent in 2021 to 4.2 percent in 2023, while HD Hyundai Infracore also saw China’s contribution to total sales drop from 24 percent in 2021 to 5.6 percent in 2023.

During the January-May period this year, HD Hyundai Infracore sold 982 excavators in China, a 17.1 percent decrease year-on-year.

"We've seen the average monthly operating time for excavators in China fall to 74.4 hours from January to April this year, down 7.5 percent year-on-year. To drive new sales, the current fleet needs to be working more. This decline in usage indicates that the Chinese construction equipment market is still in a slow recovery phase," said Jeong Dong-ik, an analyst at KB Securities.