The state of the heavy equipment industry and its impact on equipment auctions

New challenges and new customer needs are facing the heavy equipment industry, as the market for construction equipment globally shifts in the coming years. In 2019, the U.S. market is projected to be the second largest in the world, behind only China, at almost 168,000 units.[1] According to new data from Off-Highway Research, a specialist forecasting company, the market for construction equipment in the U.S. was $88 billion in 2017, up 25 percent from 2016, when it totaled $70.6 billion.[2] Despite this positive news, there are challenges ahead, as manufacturers work to quickly meet changing consumer needs for products, as well as increasing globalization.

Industry challenges

The wealth of data available to equipment manufacturers have enabled them to not only learn what their customers need in their equipment (and how these customers actually utilize their products), but also to address these requested improvements in a shorter period of time. Now, manufacturers are challenged to more quickly analyze the wealth of data they have, requiring an increase in their data processing power.

Another area savvy manufacturers need to address to stay ahead is rising customer expectations. As manufacturers work harder to address the customer’s changing needs, these operators come to expect more from the products in a shorter time frame. This is even starting to happen in the after-market segment.

Positive outlook

The Bureau of Labor statistics reports, “Overall employment of construction equipment operators is projected to grow 12 percent from 2016 to 2026, faster than the average for all occupations.”[3] As a result, there is an expected increase in infrastructure spending, which will lead to new job openings over the next 10 years. What’s more, an increase in infrastructure spending will lead to an increased need for contractors to grow their equipment fleets.

Farm Equipment’s survey of more than 200 agriculture machinery dealers across North America found that 46.5 percent believe revenues will increase by 2 percent or more in 2019.[4] Some of the optimism can be attributed to the better than anticipated sales numbers in 2017. The survey found that revenues were up in that year by 2 percent, but that only 17.5 percent of respondents in 2016 thought such an increase was likely.

Effect on auctions

Cutting costs is on everyone’s mind, and the heavy equipment industry is no different. That is one reason behind the increase in rental equipment. Technavio, a global technology research and advisory company, reported that the rental market for heavy equipment in the U.S. is expected to surpass $110 billion in 2019.[5] The advantage is two-fold: less expense for the purchase of the equipment and less costs in terms of maintenance of the machinery.

Even with this, the demand for new equipment is expected to continue to increase in the months to come. What effect will this have on the equipment auctions? Will it be a sellers’ market or a buyers’ market? Off-Highway Research looked at the latest sales data through 2018 and offered estimates through 2022.[6] They found that globally sales rose 27 percent, with North America experiencing an increase of more than 20,000 units from 2017 to 2018. The group expects sales to continue to climb, reaching 267,350 units in North America by 2022, up from 193,250 units in 2018. The higher demand for new equipment would indicate that interest in purchasing used heavy equipment should also increase in the coming years.