The construction machinery industry is shifting focus towards agriculture to fuel growth amidst rising interest rates and limited credit availability.
In 2024, a 6% rise in sales is forecast, despite machinery prices soaring to R$ 2 million.
Known for its yellow-colored equipment, this sector is thriving from infrastructure, real estate, and increased agricultural mechanization.
“Grains and iron ore are crucial for our economy.
Agriculture’s boom ensures steady machinery demand,” states Eurimilson João Daniel from the Brazilian Association for Construction and Mining Technology (Sobratema).
Brazil is home to nine manufacturers, including Caterpillar (CAT) and Volvo Construction Equipment, plus 12 global brands importing to the local market.
Sales dipped to 31,000 units in 2023, down 21% due to component shortages, yet it was among the industry’s best years.
“Despite 2023’s drop, we’re optimistic about 2024, despite economic challenges,” Daniel shares, hopeful for positive macroeconomic policies.
Gilson Capato from Volvo Construction Equipment mentions credit challenges in 2023 but sees opportunities.
Construction and rentals have driven demand, with 17% of Volvo’s sales aimed at agriculture, growing with grain production.
He predicts the “yellow line” market could expand by up to 10% in 2024, propelled by agriculture and construction, despite potential climate-related setbacks.
Rising Machine Costs Drive Rental Growth
Rising machine costs have made rentals more attractive. After a market downturn post-2014, investment funds have ventured into rentals, enriching the sector.
Post-Operation Car Wash, the industry diversified. With investment funds entering since 2018, rental firms are now well capitalized, and ready for any demand.
Armac and Ouro Verde (now Unidas) show investment trends, with Randon and Gerdau’s 2022 venture highlighting rental market growth.
Capato observes a growing rental trend, with Volvo Bank introducing a tailored product.
Although Brazil’s rental demand is 30% compared to the U.S.’s 60%, growth is anticipated as infrastructure projects increase.
The industry’s appeal to financial markets is evident, with manufacturers poised to meet demand, signaling a robust future for the construction machinery sector, especially within agriculture.