PANDEMIC BOUNCE BACK FOR FORKLIFTS

Global Events Such As The Ukraine Conflict And Supply Chain Disruptions Expected To Have A Continuing Impact On The Global Forklift Market

The global forklift market is expected to experience consistent growth of 4%-5% over the 10 years out to 2032. But new research shows that worldwide economic turbulence and inflation continued to curtail growth in 2022. According to Interact Analysis’ Global Forklift Market – Dec 2022 report, although growth was lower in 2022 than previously forecast (4% versus 8% in the previous edition), the overall forecast remains robust and consistent over the ten-year period. Growth in forklift shipments plateaued in 2019, having been at a low level for several years. The Covid-19 pandemic, supply chain constraints and delays in project completion caused a widening gap between order intake and shipments. Shipment growth is set to continue in 2022 and 2023, as most suppliers are still processing 2021 orders. However, there is a 10% decline in orders forecast for 2022. In addition, prices are being driven up by rising materials, energy and logistics costs, as well as by the war in Ukraine and Covid lockdowns in Asian countries.

The impact of COVID-19 continues to affect shipments of forklifts – not only economic turbulence and government policies to tackle spending and inflation – but also, the control measures in APAC have led to a low production rate which in turn worsens delivery efficiency. The ongoing war in Ukraine is also negatively affecting sales globally, particularly within the European region. All these factors have weakened investment in large-scale factory and warehouse automation projects and made investors more cautious. This cautiousness continues among both manufacturing and warehousing automation customers throughout 2022 and is expected to carry into 2023.

However, the core driver for forklift market growth has not changed: the continuing rise in labor costs is placing pressure on companies to push ahead with their automation plans and reduce demand on manual labour. As a result, demand for automation equipment is set to continue rising steadily over the long term. Electrification will continue to be a key trend in the global forklift industry.

Within the EMEA region, automation investment in Eastern Europe has increased sharply in recent years, but the war in Ukraine is expected to constrain growth in the short to mid-term (2022 and 2023). Within the Americas, rising inflation and interest rates have led to caution among investors when it comes to large-scale automation projects. And in the APAC region, repeated Covid-19 waves and lockdowns in Asian countries, have caused a sharp decline in forklift shipments following two years of growth. This decline is expected to continue into the first half of 2023. From 2023, shipments in APAC will grow with a CAGR of 5.3% to 2027. Investment in all regions is expected to resume as inflation eases and global uncertainty subsides.

The material handling market overall is expected to show strong growth out to 2026. Shipments of forklifts with traditional engines will decline over the decade.

Maya Xiao, Senior Analyst at Interact Analysis, comments, “After 2021’s sharp recovery, 2022 was a ‘cold’ year for the global forklift market, with problems in all regions. APAC registered the lowest growth accounting for 50.4% of total shipments.

By 2029 global shipments of forklifts are predicted to exceed 3 million a year, with APAC expected to account for 52% of the total.”

“Electrification, particularly Li-ion battery technology, is a growing trend that is showing no signs of slowing down as markets for new energy vehicles continue to boom. This is expected to continue within the global forklift industry, as shipments of forklifts with traditional engines decline over the next 10 years and electrified vehicles take their place.”

` In 2020, the sector accounted for 25% of the market, this will increase to 28.8% by the end of the forecast period. At a CAGR of 8%, material handling will outpace growth of the overall market which will show a CAGR of 5.3%. Ongoing supply chain issues caused knock-on effects for mobile hydraulics last year.

For example, the average selling price of hydraulics increased between 2020 and 2022 after a period of erosion. This is due to volatility in material prices, such as aluminum, which is now forcing the average selling price of hydraulic components up, which out to 2026 will increase between 1.6% and 2.1% annually.

Brianna Jackson, Research Analyst at Interact Analysis comments, “One thing that came as a surprise when conducting this research was that vehicle electrification is not driving the increased demand for hydraulic substitutes at the rate we expected. Many OEMs are still prioritizing cost over efficiency. Even in applications where replacing hydraulics with an electro-mechanical counterpart seems most feasible, uptake has been slow as vehicle OEMs are reluctant to make changes to vehicle architectures.

Improvements to hydraulic architecture are being overlooked by vehicle OEMs, yet, without these improvements, full electrification for off-highway vehicles will be virtually impossible. Despite this, by the end of the forecast period we expect that the average selling price of hydraulic components will increase slightly as a result of an increase in demand, when OEMs finally begin to attach more importance to efficiency.”

The COVID-19 pandemic shook the mobile hydraulics market in EMEA and the Americas. In 2020, these regional markets contracted by -9.7% and -3.2% respectively. EMEA’s share in the agricultural machinery production market (a dominant user of hydraulic equipment) has since eroded. However, a boom in the material handling sector in the region will boost the hydraulics market significantly. Both EMEA and the Americas rebounded in 2021, and this is expected to continue into 2022 as order backlogs are met.

APAC showed impressive growth throughout the past two decades and accounted for 50% of the market in 2020. Despite this, growth in Asia will stabilise as the regional market matures.

Whilst 2022 was positive for the APAC regions, growth is likely to decelerate as a result of a slowdown in the construction sector. Towards the end of the forecast period, the research shows that growth in the Americas will pick up exponentially because of the major infrastructure overhaul scheduled for 2026.

While the electrification of the materials handling market has been a phenomena decades in the making, hydrogen is also being seen as a viable alternative.

In fact the off-highway market is currently led by forklifts, but Interact Analysis is beginning to see some traction from larger vehicles, including haul and dump trucks, and excavators.

North America is the largest market for hydrogen forklifts, with retail companies such as Walmart and Amazon the main

A BOUNCE BACK OFF THE HIGHWAY FEELING BULLISH ABOUT THE OFF-HIGHWAY SECTOR

As the world emerges from the aftermath of the COVID-19 pandemic, updated research by Interact Analysis reveals that the off-highway vehicle market has experienced strong growth. In part, this has been driven by a pandemic ‘bounce-back’.

However, a huge uptake in electrified forklifts and material handling equipment, and a strong construction industry are also fueling growth. Despite this, global events such as the Ukraine-Russia conflict and ongoing supply chain disruptions are expected to have a continuing impact on the off-highway vehicle market.

In particular, the Chinese offhighway machinery market suffered a difficult year in 2022.

In the long term, market growth for the off-highway vehicle sector looks set to remain positive due to strong investment in warehousing solutions, India’s pledge to mechanize agriculture and the US’s investment in infrastructure.

In the short term, the extended lockdown period in China has had an unprecedented downward impact on market growth within the APAC region, while ongoing freight delays and component shortages have impacted the ability of manufacturers to meet demand.

In 2022, OEMs experienced very strong order intakes, but due to supply chain disruption were unable to fully meet market customers. Europe, Japan and China are also developing demonstration projects for hydrogen forklifts but on a much smaller scale compared with North America. Government policies in China will increase China’s share in this market over the coming years.

By 2030, over 20,000 hydrogen forklifts are forecast to be shipped in China, double the figure for the US. Early developments are also being made in the hydrogen rail, maritime and aerospace markets but developments will be limited this side of 2030.

Marco Wang, Research Analyst at Interact Analysis says, “Although the hydrogen vehicle market is very much in its infancy some significant developments are being made. By 2030 the global market will look very different and much more consolidated.

“The TCO of hydrogen vehicles currently makes them unfavorable compared with traditional diesel alternatives,” adds Wang. “But the cost competitiveness of fuel cell powertrains will improve substantially when the demand scales up. Hydrogen availability is also an issue. But the commitment and ongoing actions of government authorities dedicated to hydrogen infrastructure provides a positive look on the future. More importantly, we really need to decarbonize vehicles where a full battery has proven unfeasible and fuel cell technology is the exclusive zero emission solution for them.” demand, restricting growth.

The Chinese market performed worse than Interact Analysis forecast back in 2021 due to the country’s strict covid policies. Nevertheless, as the country represents the largest market for off-highway machinery it is expected to bounce back well in the coming years. This has led Interact Analysis to be more bullish with their forecasts for global electrification.

Electrification – and other alternative fuels - within the off-highway market is now well established. Almost all machine manufacturers have at least one - often several - battery electric or hydrogen models available to purchase or in the pipeline. Although hydrogen powertrains are becoming established in some material handling applications and in larger equipment, it is battery electric powertrains that are forecast to dominate in the long term when it comes to alternative powertrains.

Alastair Hayfield, Senior Research Director at Interact Analysis, comments, “It’s promising to see that even some of the larger machinery types such as excavators and haul trucks are being electrified. Smaller machinery electrification has paved the way for this, enabling OEMs to experiment before moving on to larger, more complex machinery.