Worldwide machine sales growing

Steady growth in machine sales reflects global demand for construction equipment - Mike Woof reports

Keynote speakers at the UK’s 3418 Construction Equipment Association (CEA) recent annual general meeting revealed steady demand for new machines worldwide. Although Europe’s economy remains troubled, worldwide machine sales are strong and exports are providing huge turnover for manufacturers.

Colin Timms of 2444 Off-Highway Research said that global equipment sales last peaked in 2007 at $98 billion, falling to $55 billion in 2009 as the recession bit. His company’s research reveals how market recovery began in 2010, with sales reaching $77 billion and continued in 2011 with sales of $109 billion. Should growth levels meet the expectations of Off-Highway Research, Timms believes that machine sales could hit $137 billion by 2016. He said, “If you look at the overall market we are seeing some improvement.”

The construction equipment market is an important business area for the European economy and strong exports are crucial at a time when many home markets remain weak.

According to Timms, certain segments of the construction equipment industry are particularly active at present and he commented, “Some people say, ‘What recession?’”

China is leading demand for machines and he said, “Some of the figures seen in China are unbelievable.”

But for manufacturers some traditional markets such as Europe will offer only limited opportunities. Timms said, “We have to look further afield. We have to look to the Far East and Latin America.”

At its peak in 2007, the European market saw sales of 120,000 machines and this crashed during the recession. Timms said that the steady recovery will continue and said he expects European machine sales to reach some 120,000 units during 2013. He added, “Europe will recover and we will see an improvement in sales but the real growth will be in China.”

Looking at the market figures for the last few years it is easy to see how demand has grown in China. Back in 2007, annual construction machine sales in China stood at some $11.2 billion, growing to an impressive $38.9 billion in 2011 and possibly reach as high as $48.1 billion in 2016 for some 475,000 units according to projections from Off-Highway Research. These figures contrast sharply with the traditional markets for construction machines of the US and Europe. But with regard to China’s future needs Timms commented, “The growth rate we’ve seen will not continue.”

Timms explained that the Chinese Government’s moves to reduce investment and avoid the market overheating have trimmed the rate of growth. However, despite the reduce rate of expansion the Chinese market is still vast and still offers huge potential for manufacturers.

Market demand in China is also changing and the wheeled loader is not the staple that it once was. Chinese customers are increasingly switching over to using crawler excavators and the country’s own suppliers have developed an enormous manufacturing capability to produce anything from 500,000-600,000 excavators/year were all their plants to deliver full capacity.

He said, “Over the next five years the excavator will be an even more important machine to China.”

695 Doosan and 236 Hyundai have for some time been two of the biggest manufacturers of excavators in China for some time. This is an important shift as in 2005 around 85% of all construction machines sold in China were wheeled loaders. And figures from Off-Highway Research suggest that close to 500,000 construction machines of all types were manufactured in China during 2011.

Meanwhile China’s indigenous manufacturers are becoming increasingly aggressive on the world stage. He said, “They are looking to export firstly into developing markets but over the next five years you will see more of their products in Europe. “We can expect to see two to three of them manufacturing in Europe in the next five years.” And he added, “The worldwide concrete pump industry is now dominated by the Chinese. It’s true of the Far East and the Middle East that all you’ll see is Chinese machines.”

There has been a notable change in the structure of demand for machines worldwide as in 2006, 28% of construction machines sold went to the US, while 20% were for Europe and 18% for China. In 2011 the US and European markets accounted for some 12% each while the Chinese market stood at 42% of construction equipment units sold. In 2016 the US market is expected to account for 15%, Europe for 10% and China for 39% of construction equipment sales. And Timms explained how the demographic has changed over time, “If you look back 25-30 years ago the biggest market was North America.”

Timms said that there are signs of modest recover in the traditional markets and he said, “The expectation is that the US market will improve each year.” But he also explained, “We created a bubble and we will never go back to the way thing were.”

According to Timms, the US and Europe account for around 30% of machine sales compared with some 80% 25 years ago. In 2007 sales of construction machines into North America hit a peak of $28.2 billion, falling drastically during the recession and then climbing back up again to $20.3 billion in 2011. But this recovery is expected to continue and in 2016 machine sales to North America could reach $30.3 billion.

Machine sales in Europe climbed to some 210,000 machines worth a total value of $19.6 billion in 2007 and following the plummeting demand in 2009 due to recession, recovered to some $12 billion in 2011. Off-Highway Research anticipates a European market for around 120,000 units in 2013, with sales of $12.3 billion expected for 2016.

“There are good growth opportunities in China, India and Brazil.” He added that Russia will eventually become a growth market also, while he explained that there are other territories with considerable sales potential including Mongolia and Indonesia.

Timms said that certain machines are popular in certain territories, “What’s interesting about India is that it relies on a few types of equipment, backhoe loaders, crawler excavators, compaction machines and cranes. India is now the biggest market worldwide for the backhoe loader.” But he said that the situation is changing and there are growing sales for crawler excavators.

In 2007 India’s construction machinery market was worth some $1.9 billion, which grew to $3.1 billion in 2011 and could reach $5.6 billion by 2016. Meanwhile the Japanese market peaked at $4.6 billion in 2007 before the recession bit, and recovered to some $3.2 billion in 2011 but is expected to fall again slightly to around $3 billion in 2016.

Looking more broadly, the rest of the world market for construction machines was $32.3 billion in 2007, $31.8 billion in 2011 and could hit $37.8 billion in 2016. Overall this accounts for a world market for construction machines of $98.1 billion in 2007, $109.3 billion on unit sales of over 1 million in 2011 and an anticipated $137.1 billion from 1.2 million unit sales in 2016.