Construction Equipment Snapshot: France
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Construction Equipment Snapshot: France

06 Apr 2011

Damaged by the global economic crisis, the French construction equipment market is only now showing signs of recovery. Demand for equipment is on the rise, with analysts predicting better days ahead for what is still the fourth-largest construction equipment market in the world.

Over the last decade, the turnover of the French construction equipment market recorded a compound annual rate of change (CARC) of -8.39%, with an annual decline of nearly 50% in 2009 alone. The market is largely dependent on the success of the construction industry, which suffered in 2009 due to the effects of the global financial crisis.

According to a study conducted by World Market Intelligence, the French construction industry grew rapidly during 2005-07 as a result of low interest rates and relaxed credit restrictions. However, in 2008, the global economic crisis reduced business confidence and the availability of credit for new and existing projects, which resulted in the cancellation or postponement of several major undertakings.

This had a knock-on effect on the order books of French construction equipment companies, many of which faced delays or cancellations of orders. In addition, the sale of used equipment rose due to construction companies offering inventory stock at competitive prices in order to remain solvent. Furthermore, after actively increasing equipment stock during 2006-07 in anticipation of rapid growth in the construction industry, rental companies began to downsize fleets in 2009.

However, as the country recovers from the financial crisis and the positive, long-term effects of government stimulus packages begin to take hold, the French construction industry is expected to increase in value by 2015. As a result, the French construction equipment market is expected to improve, reaching a value of almost $4bn by the same year.

Stimulus packages

Investment in construction, which had been a strong factor in economic growth in previous years, significantly declined in 2008. To counter this, President Nicolas Sarkozy announced a stimulus plan worth $32.9bn designed to stimulate the economy.

“The French construction equipment market is the fourth-largest in the world after the US, Japan and Germany.”

The stimulus plan allocated $15.4bn for investment in infrastructure, research and the support of local authorities, and $5.8bn for state-owned rail and energy, which included plans to accelerate projects such as the new fast train link in western France.

In addition, in February 2009, French Prime Minister François Fillon announced a series of financial packages totalling $34.0bn that were designed to support the country’s economy. While $15.8bn was allocated for the improvement of liquidity and investment opportunities in businesses, and $15.4bn for direct state investment, the remainder was allocated to large state-run companies to improve rail and energy infrastructure.

The packages also included special measures to stimulate recovery in the residential construction market, including the construction of 100,000 public housing units over a two-year period and a salary supplement of $279.0 to assist low-income families that satisfied government criteria. As a result of such packages, the French construction industry grew by over 5% in 2009, which had a positive knock-on effect on the equipment market.

In comparison with the UK and Germany, public works in France have a higher portion of construction output due to the country’s large landmass and subsequent infrastructure requirements. In the public works sector, roadwork has the largest budget allocation, followed by water supply, sanitation, pipelines and general earthworks. However, following the completion of these stimulus projects, public works contracts recorded a 0.6% decline in the first seven months of 2010. In the absence of government support, construction activity remained weak throughout the remaining months of 2010.

Competitive domestic market

The French construction equipment market is the fourth-largest in the world after the US, Japan and Germany. While domestic construction contractors such as Vinci, Bouygues, and Eiffage lead the buyer sector, foreign equipment manufacturers have a greater presence in the supplier market. Major global construction equipment suppliers to have established manufacturing facilities in France include Caterpillar, Liebherr and Case-New Holland. In addition, large foreign heavy construction equipment exporters to France include Komatsu of Japan, JCB of the UK and Volvo of Sweden, while prominent domestic suppliers include Manitou, Haulotte Group, NFM Technologies and Potain SAS.

In addition to the presence of these leading companies, France’s construction industry is also highly fragmented, with over 250,000 active contractors. The country’s strict regulations and labour laws can inhibit the growth of the French construction industry, as they discourage new entrants into the market. Therefore, in recent years, French construction contractors have increased their focus on the Middle Eastern markets as a result of the continued growth of the construction industries in such countries. Increased focus on the Middle Eastern markets can also be attributed to the declining market conditions in France, due to increased tax rates and the negative effects of the global economic crisis on credit availability.

“The French construction industry grew by over 5% in 2009.”

Trend shift in types of equipment used

Earth-moving equipment recorded the highest sales of any equipment type during the review period, reaching a value of almost $1bn in 2009. Public works, supported by government schemes, are expected to continue to drive sales of this equipment throughout the forecast period. While all major equipment categories experienced a decline in value over the review period, companies that leasing haulers, tippers and dumpers were the worst affected by the recession.

Increasingly, smaller machines are being used for urban public works projects. Advances in product design have increased the productivity of small machines under 16t to reach the level of 20t machines ten years ago. Another major trend has been the increasing use of subcontractors for earthmoving. Other construction equipment in demand in the country includes compact shovels, hydraulic wheeled loaders, backhoe loaders, skid-steer loaders, compact excavators and tower cranes. Furthermore, machines with higher levels of operational versatility have become more attractive to contractors and the used construction equipment rental markets.

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