The market for hydraulic excavators has come of age in North America - Industry Overview

Diesel Progress North American Edition, March, 1999 by Charles R. Yengst

Hydraulic excavators are a market that many people in the machinery business are interested in, and it's not hard to see why. The market for these machines is still growing to the point where it has probably become one of the largest dollar volume markets in the machinery industry. There are 20 manufacturers offering machines in the marketplace, which has made it extremely competitive, and there are more than 300 models of machines - both wheeled and crawler types - that are available through dealers and rental houses.

When we talk about excavators, we mean machines rated over 6 metric tons in size, which excludes mini-excavators. We're also looking at both crawler excavators and wheeled excavators, since each market is getting to be very important and each is growing.

In 1998, the market for both wheeled and crawler excavators approached 18,500 units - about 95 percent of that being crawler excavators rated over 6 metric tons. This compares to nearly 17,000 units in 1997, 16,000 units in both 1995 and 1996 and 14,000 in 1994. Since 1994, the crawler excavator market has grown 32 percent; the wheeled category has grown 65 percent.

In several respects, the excavator market in North America is becoming a mature one. For example, there has been relatively little change in recent years in the breakdown of sales for different weight categories, particularly for crawler machines. Furthermore, sales of the crawler machines, which constitute the highest percentage of total annual sales, have reached a plateau in sales volume despite excellent economic growth.

If one were to look at the growth in sales of crawler machines over an extended period - longer than five years - it is more apparent that the real growth in sales of these machines came in the early 1990s following the economic recession that gripped North America from 1990 through 1992. Sales reached a level of about 9500 units in 1989, dropped to a low of 7000 units in 1992, then started a strong uphill run from that time on. From 1992 to 1994, the crawler market grew 90 percent. From 1994 to 1995, it jumped another 20 percent and from 1995 to 1998, sales grew another 10 percent.

On the wheeled side, an interesting change is taking place. In the late '80s, sales of wheeled excavators were around 600 units a year. The low point came in 1992 at 425 units. Since that time, sales have risen each year, with sales in 1998 of nearly 1000 units. A decade ago, there were only a few players in the wheeled excavator market. Now there are 13 competitors offering 49 different wheeled models.

In all, there are 23 companies selling crawler excavators in North America. Caterpillar still holds first place, followed by Komatsu and Deere in that order. However, Caterpillar has lost some of its share of the market because of competitive action taken by Asian suppliers in 1998 based on weakened currencies and the need to shift sales to North America.

Caterpillar has generally held about 25 percent of the market for the past 10 years. It has probably dropped below that level, yet still holds more than 20 percent. Komatsu and Deere have also been affected by the competitive situation. Both of these companies still hold about 10 to 15 percent of the market, but that's down from higher levels through 1997. Together, these top three suppliers still account for about 50 percent of the total market.

With so many other companies involved in the crawler excavator market, market shares for all of the other companies are spread pretty thinly from less than I percent to about 7 to 8 percent of the market. Some of the companies in the upper tier, include Samsung, Kobelco, Case, Link-Belt, Hitachi, Daewoo, Hyundai and Liebherr. Samsung, Daewoo and Hyundai have each made major inroads in the market during the past few years.

Only seven manufacturers out of the 23 companies selling crawler excavators in North America produce the machines domestically. Most import machines and imports of all excavators, both crawler and wheeled, accounted for about 45 percent of all sales in 1998.

On the wheeled side, Gradall is in first place, maintaining more than 35 percent of the market for the past five years. The runner-up is Badger Equipment, followed by Caterpillar. Only Gradall and Badger produce wheeled machines in North America. All other wheeled excavators are imported.

Where the excavator market is headed is always a tantalizing question. From my viewpoint, I believe that sales are going to continue in a very slow cyclical growth pattern for the next five years, with domestic sales of crawler and wheeled excavators approaching 20,000 to 21,000 units per year by 2003. For 1999, sales will probably be somewhat slower than they were in 1998, down perhaps 4 to 5 percent for the year. Sales should turn around in 2000 and move slowly upward for a few more years.

Charles R. Yengst is president of Yengst Associates, Inc., a market research company headquartered in Wilton, Conn. E-mail yengst@netaxis.com