As with the rest of the off-highway sector, Covid-19 caused market contractions for earthmoving machines, with excavators and wheel loaders seeing negative growth in Europe of -22% and -16% respectively. But as we gaze into the future, the outlook looks positive particularly for the mini- and medium excavator markets, and compact wheeled loader machinery. Alastair Hayfield, senior research director with leading intelligent automation experts Interact Analysis – and speaker at a recent iVT webinar – assembles his research and puts forth his proposition.
Excavators have a higher predicted growth rate than loaders. Hydraulic excavators have become particularly popular in a range of settings, and they are replacing wheeled loaders in coal mines. Meanwhile, mini-excavators are gradually replacing backhoe loaders, an earthmoving concept which has been around since the 1950s. The mini-excavator market was the first earthmoving sector to see a post-COVID-19 recovery, which was detected in 4Q 2020. There is strong demand for these machines in North America and China and their share of the global excavator market is predicted to rise from 44.8% in 2019 to 49.3% in 2029. Medium excavators are also expected to see sustained growth, but their initial recovery will be slower and, while the mineral extraction sector continues to be badly affected by COVID-19, the large excavator market will lag behind.
China’s race to modernise and extend its infrastructure to support its burgeoning economy has made it the biggest regional market for excavators. In 2019, 35% of global excavator sales went to China, with Europe in second place on 21%. As an interesting comparator to this, during 2020 China’s market share rose to 47.6%, as China bucked the trend, being the only region where the excavator market saw year-on-year growth (37%). We expect China’s demand for excavators to remain strong going into 2021, though the growth rate is likely to flatten a little.
Predictably, demand for larger excavators is greater from emerging economies where there are more major infrastructure projects. Conversely, developed countries such as the US, Japan, Germany, and France currently account for 60% of the mini excavator market, where these machines are usually purchased by rental companies and are hired out for use in urban settings where modernisation projects are often executed in enclosed environments.
Investment in loaders: post-Covid surge, then stability
As construction activity picks up across the globe, demand for compact machinery such as skid steer loaders and compact wheeled loaders is increasing. We anticipate a surge of investment in loader equipment over the course of 2021, with a consequent dip in 2022, followed by a slight rise and overall levelling off as the market stabilizes.
As we can see in the above chart, wheeled loaders – which are used widely across all regions, but with China accounting for over 50% of the market – are predicted to consistently occupy the largest market share. And, as with excavators, it is compact machinery that will see the greatest demand, particularly in developed countries (Germany, France and Japan accounted for 75% of compact wheeled loader shipments in 2019). However, we do anticipate growing demand for compact machinery in developing markets such as South America and South Asia, as infrastructure projects grow. Skid steer loaders are forecast to see gradual growth up to 2029, their principal market being North America, which has accounted for 80% of sales of these machines. The Backhoe loader market, where India has accounted for almost a 50% share, remains consistent and significant throughout the forecast period. Low interest rates in Europe and tax subsidies encouraging the replacement of old machinery with new energy vehicles have given contractors the confidence to invest in new loader equipment in Europe. Additionally, stringent emissions standards are driving the market for electrified compact wheeled loaders.
Full electric and hybrid making inroads, but it’s a slow process
As with most vehicles, so it is with earthmoving machines: the larger they are, the more difficult it is to insert a practicable alternative energy solution owing to issues around battery capacity, range, charging infrastructure, and down-time for charging. That said, as most large machinery is used in environments where emissions controls are less strict, i.e. in out-of-town settings, the impetus to electrify is much weaker. We forecast that around only 6.2% of all large excavators (30+ tons) sold globally in 2029 will be electrified. New energy solutions for medium sized excavators (20+ tons), having centred so far around the concept of the hydraulic hybrid swing, are showing signs of extending into full electric options, with companies such as Volvo and Komatsu researching the technology. But, for excavators, the category most likely to see a real push for electrification is the mini excavator, the machine often being used in environments where noise and pollution controls are stringent. There are already thousands of these battery-electric machines in commission as we write, such as the Volvo ECR25 Electric and we forecast that the penetration rate for electrified powertrains for these smaller machines will stand at a significant 18.6% by 2029. Overall, we forecast that by 2029, 13% of global excavator sales will be of full electric machines.
Predictably, the outlook is similar for compact wheeled loaders, where there will be higher rates of electrification as compared to large machines. The Kramer 5055e is an example. The push to improve efficiency and reduce costs in larger wheeled loaders may in fact lead to a general scaling down in the average size of these machines, enabling electrification, which will in turn reduce the number of components in the machines, resulting in less wear and tear and maintenance work, which all incurs a price.
A note on Biden
Looking forward, things are likely to be more positive in the USA than our numbers currently show. And the reason for that, of course, is the much-discussed $2 trillion Biden infrastructure plan, which includes fixing 20,000 miles of roads and 10,000 bridges. Like China’s post-COVID infrastructure plan (which is baked into the numbers in this report) should the US plan come to pass, it will give an important boost to the US (and, potentially, the global) off-highway vehicle market, and this will be reflected in the third edition of our off-highway vehicle market report, due in 2022.