Mini-Excavators Now A Big Deal In North American Market

Diesel Progress North American Edition, April, 2001 by Charles R. Yengst

For more than a decade, manufacturers of mini-excavators have wondered how long it would take for the North American market to become a significant market for their machines, like Japan or Europe. Well, the news is out -- the market for mini-excavators has exploded during the past two years and these small machines are now a big deal here in North America.

Three years ago, the industry sold about 4500 units in the marketplace. This past year, sales topped 10,000 units, higher than our most radical forecasters ever dreamed possible. The increase caught everyone by surprise -- even those who kept the faith during the leaner years and maintained that someday, North America would hold mini-excavators in the same regard as the European or Japanese markets. Those two markets for mini-excavators are good for approximately 30,000 to 35,000 units annually, respectively.

Why have these machines become so popular? The big push has come from the rental industry where dealers with rental fleets and independent rental houses have been buying mini-excavators like there is no tomorrow Contractors are finally beginning to use the machines because they are less expensive than a backhoe loader and they are very easy to transport around, much like a skid-steer loader. Furthermore, the machines have a high productivity level for their size, which is what the contractor wants.

Rental yards throughout North America are getting more of these machines into their fleet inventories. Rental houses and dealer rental fleets accounted for about 50 percent of all sales last year. Other significant end markets include building and construction applications, which accounted for over 30 percent of the total. A variety of other end uses -- forestry agriculture, landscaping, municipal and governmental, utilities, etc. -- make up the rest.

In unit terms, rental has ballooned from several hundred units per year in the early 1990s to more than 5000 units in 2000, which if you look at the math, puts the increase at over 3000 percent. That is a big change, but for some it probably has been a long time or too long coming.

Is there more growth? Yes and no. For the near term, the outlook is not so good. Near-term growth is likely to slow or even reverse somewhat from the high sales numbers seen in 2000. But looking out over the next five years, things should be pretty good, with mini-excavator sales to climb past 15,000 units during that period, another 40 to '50 percent increase from the demand level of 2000 and double the sales of 1999.

The cause of this rise is that these machines do a lot of things that other machines do and they do them at a cheaper rate. In a way they are out-hustling the traditional loader backhoe, which has been the backbone of many contractor fleets. Furthermore, like skid--steer loaders, mini--excavators have come of age and no one is looking at the machine like it is some toy anymore. It is one of the regular tools that contractors need and use daily It has earned its place in the excavation business.

While sales were dominated in the early '90s by Kubota, Bobcat, the leader in skid--steer loaders, has the honor of being number one in mini-excavators as well, and it has held that distinction for over five years. Bobcat now accounts for close to 40 percent of the market in North America, followed by Takeuchi, Kubota and IHI in that order. The latter three companies ring up another 35 percent of the market between them. Twenty two other companies, including such names as Komatsu, Caterpillar, Deere, Kobelco, JCB, Gehl, Volvo, Daewoo and Hyundai, share the balance of the market. One small company Pine Brook Construction Equipment, located in Toronto, Canada, has been around for several years and imports machines from a Chinese supplier. There just isn't enough room for all of these companies, but each supplier insists on having a mini-excavator in its stable of products. It should be noted that only one company produces miniexcavators in North America -- that's Bobcat. All of the rest of the machines are imp orted, either from Europe or Asia. For the most part, Japanese companies are the leading producer, accounting for about half of the machines sold domestically in 2000. European-made miniexcavators represented about 10 percent of the total. BesidesJapan, machines are imported from China, Korea, the United Kingdom, Germany, France, Italy and Austria.

The biggest problem facing the OEMs in the next five years will be stiff competition. How will all of these companies be able to compete with each other in a market that is dominated by a few? The answer is not well. The margins on these machines are small and sales volumes have to be pretty good to cover the costs involved. A company selling 50 to 100 units is going to have a hard time making much money A few of the players may back out after a while, but most companies will probably hang on until we either have a resounding recession or they get gobbled up by someone looking to buy some market share.