by Peter Kusnic
March 9, 2020
A new Freedonia Group analysis projects global demand for off-road equipment to hit $485 billion by the end of 2020, and increase 4.2% per year through 2024. A number of trends will drive sales at the global level – particularly gains in construction, farming, and manufacturing, applications where off-road machinery sees intensive use. But in order to identify where the best opportunities (and biggest challenges) lie, it’s important to take a closer look at what’s going on in key markets. Below, we highlight four key trends that are expected to drive global market growth through 2024.
After two years of tit-for-tat tariffs causing uncertainty throughout global supply chains, some experts anticipate an imminent end to the US-China trade war, while others more cautiously predict a reduction in trade barriers between the two countries, rather than a full resolution.
Reducing tariffs on Chinese-imported machinery and steel and aluminum will benefit off-road equipment suppliers in the US, where demand growth is forecast to accelerate through 2024:
Off-highway equipment sales growth in China are expected to accelerate through 2024 and account for 37% of global demand gains as construction activity continues to rise and related machinery demand rebounds from the declines seen in 2019 and 2020:
Other major trends affecting the Chinese market include improving conditions in agricultural equipment export markets – including Australia, Thailand, and other Asia/Pacific and Africa/Mideast countries – as well as increasing mechanization among Chinese farmers.
Rapid mechanization of industries in developing parts of the Africa/Mideast and Asia/Pacific regions is leading to strong growth opportunities for off-road equipment suppliers, particularly in the agricultural and mining sectors, where the presence of foreign multinationals with significant capital to invest in equipment continues to expand:
Among national markets, fast growth is expected for India, where increasing population size, construction activity, and mechanization rates are driving increasing foreign investment in national industries and demand for related equipment. For example, Japan-based Kubota is increasing its R&D activity in India to better meet local customer needs.
Sales of smart equipment are expected to more than double through 2024, with especially fast adoption rates expected in high-income markets such as the US, Japan, and Germany, where high production costs and labor shortages make such investments more valuable.
Hence, off-road equipment OEMs are increasingly focused on equipping machinery with smart capabilities, such as obstacle detection, self-navigation, and Industrial Internet of Things (IIoT) interoperability. In particular, demand for tractors, excavators, haulers, harvesters, and other equipment will benefit from their wide use in mining and agricultural applications, where smart capabilities can have a major impact on operational efficiencies.
While advanced technologies will remain more limited in most industries in lower- and middle-income countries, the mining sector represents a notable exception, as many of the world’s largest mines – operated by multinational companies with the finances to afford advanced machinery – are located in lower-income countries.
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