Decoding the Global Off-Road Equipment Market: 4 Key Trends to Watch Through 2024

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.

Easing US-China trade tensions to aid acceleration in US sales growth

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:

• An ease in trade tensions will make machinery more affordable to American users of off-road equipment, supporting replacement and upgrade sales of higher-value, higher-performing equipment that can meet increasingly stringent carbon emissions standards – such as autonomous, robotic, and all-electric types.
• Prospective end users in the country are generally well positioned to invest in higher-value products that can help streamline operational efficiencies.

China to account for 37% of global demand gains 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:

• Government efforts to improve worker safety – particularly in the mining and forestry sectors – will aid sales of higher-performing (including automated) equipment.
• Increasing foreign and domestic investment in infrastructure and other projects – including those comprising the ambitious Made in China 2025 economic action plan – will present significant growth opportunities for suppliers.

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.

Fastest advances expected for Africa/Mideast and other rapidly mechanizing markets

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:

• The Africa/Mideast region is expected to see the fastest growth of any regional market through 2024, driven in part by rising demand for high-performance agricultural, construction, forestry, and mining equipment, especially as foreign-based mining companies invest in the region and cause mechanization rates to rise.
• Meanwhile, Asia/Pacific countries outside of China will account for 20% of global demand gains through 2024. In particular, an improved outlook for agriculture in many of these countries is driving farmers to adopt mechanized equipment.

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.

Smart and other value-added equipment to sustain healthy growth in high-income markets

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.

Want to learn more?

Global Off-Road Equipment Technology 2020 is now available from The Freedonia Group.