It's musical chairs in the telehandler industry - trend lines

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

Nothing ever seems to stay the same. I guess that's progress. In the telehandler industry, we now have 23 suppliers operating in North America, many of them still looking for sales to develop beyond the 100 to 200 unit level. For some that may not happen; for others, it has been a real amusement park ride for the past three years. Even the top players are shaking their heads wondering when the ride will get moving in a positive direction again like the '90s and not remain upside down like the past three years.

In the 1990s, telehandler sales were growing out of sight. Growth was unprecedented after 1992, climbing from annual sales in the range of 1700 units to a peak level of 15,500-plus units in 1999. Back in those days, there were eight or 10 players who knew what they were doing and a few others who thought it might be a good idea to join in the club. Then, everything hit the fan. Sales had been going so well--it was "the big bubble" of the machinery world. Like dot-coms, sales of telehandlers dropped like a rock until nearly 50 percent of those peak sales had been shaved away

The low point came in 2001 when the market tilt 8500 units. Sales in 2002 were not much to talk about, but were aided by a U.S. government purchase of a number of machines that helped push industry sales slightly higher.

What happened is not rocket science. Telehandlers became very popular during the '90s because the few suppliers out there that knew what they were doing were able to capitalize on the versatility of the machines and show the rental equipment industry that every builder had to have at least one of these machines sitting at the jobsite ready to lift bricks, mortar, sheet rock and lumber to the floors above the ground level. And every rental equipment company jumped on the bandwagon and bought five or six telehandlers for every rental location. All of that happened over a few years time and those were the years when the rental companies had plenty of cash.

Along came the slowdown of the economy and that's when the market turned radically. Telehandlers are not the cheapest item in the market basket and they do not wear out very fast, so when the money spigot got shut down by the bean counters, telehandler sales went into the tank. Production levels had to change rapidly and could not be shut down quickly enough. Some companies were just getting started and didn't know what to do with the production coming on line.

Telehandler sales have been dominated for the most part during the past five years by five companies. Leading the pack is OmniQuip, which combines the Trak International and Lull lines of machines. Gradall, part of JLG, is a major player in the top three. These three companies are followed by Caterpillar and JCB. This group accounted for more than 50 percent of the market in 2002. A sixth player, Terex, got a nifty boost in 2002 sales because of that government contract mentioned earlier to produce a bunch of machines for the military. Other than that, everyone else held less than 5 percent of the industry's sales.

There is likely to be more consolidation in this product area. We have not seen the end to the switches and phase-outs that become typical when a product is available from so many OEMs. Just not enough return on investment for the smaller players over time. Unless this market jumps by 50 or 60 percent in the next couple of years--which I doubt--there will be more musical chairs, with one or maybe two fewer chairs in the circle each time the music stops. I am sure we will not have 23 players making telehandlers for the North American market in two or three years. On the positive side, the telehandler market will grow 20 to 30 percent above current levels over the next five years and those still having a chair to sit in will be doing much better than they are now.

CHARLES R. YENGST IS PRESIDENT OF

YENGST ASSOCIATES,

WILTON, CONN.