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Q4 North American Heavy Equipment Index

10.12.20

Market Outlook and Forecast Consideration

The unexpected market dynamics which have plagued 2020 have created considerable challenges for forecasting the revenue potential within the Heavy Equipment industry.  While market conditions have been relatively stable throughout 2020, the upcoming election and declining consumer confidence has caused a negative adjustment to the Q4 forecast.

Looking back to Q3, the performance was slightly worse than Ducker’s downside market projection (-4.9% versus the -4.2% predicted).  This is largely due to continued complications from the COVID-19 pandemic.  While no additional large-scale shutdowns were ordered, restrictions on bars, restaurants and large gatherings have continued to weigh heavily on unemployment rates and have hindered general consumer spending.  Despite this trend, we anticipate some improvement in Q4 based on a rebound in manufacturing and construction hiring which increased from 16,000 to 29,000 in the month of August.

Historic Industry Performance and Quarterly Projection

It is estimated that 2020 sales will show a 4% decline in comparison to 2019.  While this is considerably lower than the performance anticipated in Q1, it is substantially better than Q2 predictions.  This is largely due to many large infrastructure projects continuing throughout the shutdown.

The fourth quarter 2020 forecast is expected to be slightly better than Q3, and most likely be around -2.5% on the index.  However, there is a wide range in the upside and downside scenarios as the election has the potential to have considerable impact on buyer confidence within this industry.

Industry Trends

The heavy equipment industry is well accustomed to cyclicality.  However, the pandemic has amplified some of the challenges that the industry was facing pre-pandemic and is prompting manufacturers to search for innovative solutions.

Focus on Innovation

Most manufacturers in the heavy equipment industry have now met the emissions regulations which underpinned much of the equipment innovation over the past decade.  The fulfillment of this need has allowed heavy equipment manufacturers to shift to innovations that are designed to directly improve the way customers experience the equipment.  Several innovation themes are trending…

The market has been experimenting with fully autonomous machinery for years.  However, the price tag associated with this technology is prohibitive for many end users.  Therefore, many of the innovations currently in play use a hybrid approach in which many repetitive functions are automated, placing less physical and mental strain on the operator, and increasing the effectiveness of less experienced workers.  It is believed that this will eventually pave the way for fully autonomous vehicles as equipment becomes smarter and is trusted in all environments.

The equipment cab is being loaded with more electronic displays.  These displays allow the operator to interact with site plans to improve accuracy.  These electronic templates are often downloaded directly from drone cameras which are used to survey and map the plan.  These tools are allowing operators to work more quickly and avoid costly rework.

Like the Automotive industry, Heavy Equipment is moving toward electrification.  The electric vehicles available today typically combine electric drive with hydraulic functionality.  However, fully electric will soon be available within some equipment sectors.  Fully electric equipment will currently cost as much as 3x more than their diesel counterparts, but for roughly 5% of the market (typically, indoor applications), clean operation is worth the extra up-front cost.

How Can We Help?

Ducker has a global team that is dedicated to the Heavy Equipment industry.  This team has a long and consistent history of work within the industry.  This has allowed for the development of a solid network of heavy equipment end users and dealers who are engaged and willing to provide feedback on industry trends and product perceptions.  Ducker is a custom research provider with the capability of providing a wide variety of information to heavy equipment industry participants.

 

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