The Indonesian Heavy Equipment Distributors Association (PAABI) forecasts an expansion in construction machinery demand in 2026, with a potential total of 23,000 to 25,000 units. This represents an estimated growth of 5% to 8% compared to 2025, with a projected total market size of around US$3.62 billion.
According to the PAABI Chairman, the increase in demand in 2026 will be driven by the nation’s Strategic Infrastructure Projects (PSN), the ongoing construction of the new capital, IKN, and mining activities at major nickel and coal sites. These projects are expected to increase demand for heavy machinery, such as hydraulic excavators, wheel loaders, and bulldozers.
PAABI also noted that the mining sector is expected to contribute significantly to these demand forecasts, accounting for about 45% to 50% of the total. The construction and infrastructure sector is expected to follow, accounting for about 35% to 40%. Other industries, such as plantations and forestry, are expected to account for a smaller share.
PAABI notes that factors supporting medium- to long-term growth rates include nationwide infrastructure development, demand for disaster recovery and reconstruction, expansion of mining-related resource development, and anticipated adoption of next-generation technologies, such as telematics and electric/hybrid heavy machinery. These factors could drive a shift in demand toward high-value machinery and services, such as after-sales service and leasing.
Against this backdrop, PAABI projects that “the construction machinery market will remain robust in 2026, with annual demand potentially reaching 23,000 to 25,000 units.” However, PAABI also warns that risks persist, including competition across the entire value chain, technology adoption costs, and uncertainties in mining production plans.
Source: Indonesian Mining Association
PSR Analysis: The figure of 25,000 units is overly optimistic and does not reflect actual demand. Taking it at face value is dangerous. However, it is not so far-fetched as to be dismissed as completely unrealistic.
In Southeast Asia, including Indonesia, it is common practice for governments, industry associations, and major dealers to announce targets based on expectations. In messages intended to stimulate the economy for national projects, such as the IKN new capital and mining/energy projects, figures based on maximum cases or ideal progress are often used. Actual results often converge to around 60-80% of the announced targets.
From the perspective of actual demand, recent Indonesian construction equipment sales have realistically ranged from 15,000 to 20,000 units per year. Even during boom years when high resource prices and public investment coincided, sales rarely exceeded 25,000 units. Therefore, 25,000 units can be considered “close to a historical peak.”
So, why did this figure emerge? It’s based on the assumption that multiple drivers will materialize simultaneously. Specifically, it’s a scenario in which the following occurs without a hitch: the full-scale launch of construction related to IKN (New Capital), the re-acceleration of mining investments in nickel, copper, etc., the recovery of public investment after the elections, and the demand to replace aging equipment. This can be described as a conditional figure. “Strong if it happens, but it will fall short if even one factor is delayed.”
A more realistic assessment would be:
- Conservative scenario: 18,000–20,000 units
- Base case: 20,000–22,000 units
- Bullish scenario (reported 25,000 units): If all conditions align.
This seems like a reasonable assessment. That said, there is no doubt that the demand for construction machinery in Indonesia is strong. It is expected to continue growing, but the actual number of units will depend significantly on whether all the drivers align. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, at Power Systems Research
