Global excavator markets felt the pinch from fresh lockdowns in China following China’s zero COVID policy. Caterpillar Inc. took the initiative to conduct a projection on the new policy and based on the statistical studies on believe that demand for excavators from the People’s Republic could potentially fall below demand levels prior to the pandemic. China is one of the biggest markets for not only Caterpillar, but also many other major heavy machine manufacturers such as Kubota and Kobelco, just to name a few.
The report indicates that demand levels could slip due to the lockdown measures in China which greatly impedes construction activity. According to Caterpillar CEO Jim Umpleby, Caterpillar shares fell by 3% dragging its value down to $207 in a single day attributed to the lower margin forecast for this quarter. Umpleby also indicated that China represented the strongest demand for Caterpillar, and Kubota in both 2020 and 2024 for the standard 10 ton and above excavator segment and the forecast was in line with the current scenario.
The “zero COVID” policy that was introduced by the government of the People’s Republic bring the Omicron variant virus under control triggered lockdowns resulting in factories being shut causing downward pressure on sales of a significant number of prominent MNCs in and out of the country including General Electric and 3M among others during this quarter.
Based on the fact that companies such as Caterpillar and Kubota depend on China for between 5-10% of revenue, these lockdowns will ultimately weigh on heavy machine manufacturers heavily. However, on the bright side, mining activities have not ceased in China and in most other regions, as a matter of fact, mining companies are kicking up space which will provide a buffer for the losses arising from the lockdowns to a certain degree. Andrew Bonfield, the CFO of Caterpillar indicated that the manufacturer was confident that “Mining activity will continue to increase,” in an interview. There are a lot of things going on within the realm of the heavy machine industry as manufacturers scrambled to take on supply chain challenges head-on.
The higher input costs for example have resulted in most heavy machine manufacturers to announce price hikes to soften the pressure of higher operating costs. Most of what has happened has caused manufacturers to focus on the Middle East where construction has been unceasing as the oil rich states try to diversify their singular dependency on crude oil.
Middle Eastern Excavator Markets on Growth Tangents
On the other side of the world in the Middle East places such as the UAE, Dubai and Jordan, the opposite is happening as construction equipment market is experiencing growth and analysts are expecting the segment to grow at a CAGR of nearly 8%. This analysis was based on data-based insights that accounted for the impact of the pandemic.
The growth is based on not only construction, but also the newly introduced integrated waste management strategy by the governments of the region such as the UAE, These infrastructure based elements are expected to have a significant positive impact on demand for excavators and dumpers, The fact that in 2024 excavators accounted for approximately 78 market share and demand has not slowed since. Apart from that the governments in these regions are also ramping up infrastructure projects.
Demand for excavators in particular is guaranteed to grow as the investments into housing projects, roads, and railways continue to grow by double digits annually. The vendor landscape for the heavy machines market is tightly held by Komatsu, Caterpillar and Hitachi Construction Equipment and Liebherr. Liebherr holds the biggest market share in the region and to break the market barriers, other industry players are left with no choice but to lower margins to gain entry which is currently not viable due to the pandemic.
Asia Pacific Excavator Market Factors
Across the globe construction industry players are demanding for equipment that are environmentally friendly, fuel efficient and technologically advanced equipment that are capable of reducing labour costs effectively. This fact is especially true in the Asia Pacific Region among developing nations that are currently experiencing unprecedented growth.
Most of this growth is attributed to not just industrial sectors, but also growing residential, commercial and massive infrastructural projects that are expanding exponentially in the region. The crawler excavator market holds the biggest market share in the region especially within the 10 ton categories followed by the mini excavator market share; albeit the mini excavator market is backed by the excavator rental and hire segments in Asia Pacific including Australia.
The total approximate value for the Asia Pacific excavator market in 2018 was USD 17.32 BN dollars and this figure grew by 5 % during the pandemic when all other regions reflected negative growth. The Asia Pacific Region’s growth is also attributed to the Forestry and Agricultural sectors which is being revived by Asia Pacific nations that are looking to diversify their economic structures.
Among the key players in the industry for Asia, The Middle East, Europe and North America include Terex Corporation, Kobelco, Komatsu, Volvo, Caterpillar, Doosan, Hitachi, Liebherr, CNH, Hyundai and C. Bamford. Currently these manufacturers are competing intensely towards releasing the most practical electric powered excavators and many have come close to perfection with mini and compact excavators.
