Mini-excavator sales growing like microwave popcorn

Diesel Progress North American Edition, Oct, 2003 by Charles R. Yengst

There is one product in North America that has had had ,unprecedented sales since the early '90s, even with a recession and a slowing in sales for almost every product in the machinery industry during the past three years. That product is the miniexcavator. Since 1993, North American sales of these machines have grown from just over 1100 units annually to more than 11,000 units. In 2002, sales of mini-ex's for all companies climbed to 11,600 units, up more than 900 percent since from the 1993 number.

In the late 1980s, Japanese companies that I work with were always asking when the American market was going to start growing for these machines. I had a hard time in those days being upbeat about the prospects because everyone here wanted to use backhoe loaders and standard excavators for their major excavation work. Hardly anyone would buy a mini excavator and sales limped along year after year at about 1000 units for a country more than twice the population of Japan. In those days, the Japanese were consuming tens of thousands of these machines mad one could find a mini-ex on almost every Tokyo street corner. Even the Europeans were using mini-ex's long before we took them up.

The European market for miniexcavators is still light years ahead of North America--more than 40,000 units were sold in Europe in 2002--and even a weak Japanese market saw more that 20,000 units sold. But the market here is growing and I expect that someday we will see annual sales approaching 20,000 units.

Typical of the American marketplace, there are now 27 players trying to get a piece of the action. Five years ago, only about 14 companies bothered to sell these machines. Since 1998, 13 new entries have come into the marketplace and some of the newcomers are not small players in the construction equipment market. Case, Gehl, New Holland, Deere and Thomas Equipment are a few of the names. And we have lost a few players during the past few years, including Compact Technologies (OmniQuip--recently acquired by JLG), Nagano, Terramite and Hokuetsu.

Bobcat is the leading OEM operating in North America, head and shoulders above the rest. Ingersoll-Rand's diamond in North Dakota holds down more than 30 percent of the market and has held that position since 1996. Kubota, the leader in the market in the 1980s and through 1995, is second to Bobcat. Another Japanese supplier, Takeuchi, is also very close to Kubota and actually has been stronger than Kubota during three of the past four years. Others in the top 10 include Caterpillar, Komatsu, IHI, Deere, Yahmar, Volvo and Terex. Each of these latter companies accounted for 3 to 7 percent of the market in 2002.

Looking at it from another direction, it is interesting to note that the top five companies accounted for 70 percent of total sales in North America last year. That left 22 companies to share the remaining 30 percent. Going one step further, the top 10 companies grabbed 91 percent of sales, which means that 17 companies held 9 percent of the overall market.

Interestingly, only Bobcat produces its mini-excavators in North America and it makes enough to sell a lot here and lot in Europe and elsewhere too. In fact, Bobcat is second only to Kubota, the market leader in Europe and has higher unit sales in Europe than it does in North America.

All of the others make their machines overseas. About 8000 mini-ex's were imported in 2002, the majority of those coming from Japan, with other major source countries being the U.K., Germany, Korea and France. We also have mini-ex's coming from Austria, Italy and China, which makes the mini excavator one of the most international products sold in North America.

Rental houses and dealer rental operations make tip the largest portion of sales. We estimate that about 60 percent of all sales move toward rental. Construction contractors are another major segment, accounting for at least 20 percent of the machines sold.

It's taken years for the mini-excavator to catch on in North America, but it has arrived. And while I don't expect 900 percent sales growth over the next five years, I will stick my neck out and .say that sales will surpass 15,000 units by 2005, which exceeds 30 percent improvement in a few years. Just like watching popcorn in the microwave.

HARLES R. YENGST IS PRESIDENT OF YENGST ASSOCIATES, WILTON, CONN.