Latest outlook

Global construction equipment sales this year will be a little lower than previously expected, but this is due entirely to the woes of the Chinese market. Elsewhere in the world demand is still good.

Global construction equipment sales hit a record high in 2021 with 1.3 million machines sold. This was across mainstream categories of compact and earthmoving equipment categories, combined with some machine types in the roadbuilding and off-highway materials handling space.

That record volume was driven by the stimulus measures put in place around the world to combat the economic effects of the Covid pandemic. Indeed, it is generally agreed that sales could have been significantly higher were it not for the supply chain constraints and shipping bottlenecks caused by the pandemic.

China was at the forefront of growth in 2021, having put huge stimulus spending in place very quickly in 2020 – an echo of the action it took in

2009 in response to the global financial crisis. For most other countries there was growth – mainly in housebuilding thanks to low interest rates – but it was a slower burn.

The drivers of the previous two years led to a contrasting picture in 2022. In almost all countries of the world apart from China, demand remained red-hot. Sales in the world excluding China grew 7 per cent in 2022, following on from a 19 per cent increase in 2021 in the same territories.

That picture is being repeated this year, with sales in China plummeting, while the rest of the world remains fairly strong. Most markets are turning down, but as they are coming off record highs, the volumes of machines being sold are still good.

Global construction equipment sales will total 1.1 million units this year, a 13% decline on 2022. However, the world excluding China will only be down 6%

China

After two years of abnormally high sales in 2020 and 2021 thanks to stimulus spending, the Chinese market collapsed in 2022 with a 39 per cent decline. This was not only due to the stimulus money running out, but the impact was compounded by turbulence in the Chinese real estate sector coupled with the country’s difficulties in getting to grips with Covid. The only bright spot in China over the last year or two has been mining, which has invested in dump trucks and large excavators to take advantage of high global commodity prices.

Sales have continued to fall just as steeply this year with around 144,000 construction machines now expected to be sold in 2023. Compare that to the peak in 2020 when almost 413,000 machines were sold in China, and you see just how brutal the collapse has been. The market has fallen to a third of its former size in just three years.

The main construction-specific problem in China is the on-going turbulence in the real estate sector. House prices are falling in the over-built major cities and debt-laden developers are having to fall on the mercy of their creditors to prevent balance sheet implosions. In addition, the equipment market is being impacted by the general headwinds of stalled economic growth, falling exports, failing consumer confidence, high local government debt and high unemployment among the young.

Grim conditions at home mean that China’s OEMs will be focusing more and more on export markets this year and over the short term. As a result, 2023 will be the first time in history that more Chinese equipment is sold outside the country than within it.

Europe

Construction equipment sales in Europe rose 4 per cent in 2022 to 216,990 units. This increase from 2021’s already high level of 208,462 machines sold maintained the market at a high level, and comparable with the previous record set in 2007.

Off-Highway Research’s forecast for Europe is essentially for the market to stabilise at a high level. The market will see some declines in the next 2-3 years, but volumes should still stay at historically high levels around the 200,000 units per year mark.

A slowdown in housebuilding due to rising interest rates represents a threat to compact equipment sales. However, Europe’s infrastructure markets are strong, which should stimulate sales of larger earthmoving equipment. That change might mean some slightly alarming falls in volume terms, and compact equipment specialists might feel more of a pinch as a result, but the overall value of the market should stay healthy thanks to increased sales of higher value equipment.

North America

North America was the pick of the major markets last year, with an 8 per cent increase in sales to take demand to a record high of 309,005 machines sold.

The surprise this year has been that house prices have remained strong despite interest rate rises, and the equipment market has been resilient as a result. The current forecast is essentially for sales to be level with the record set in 2022, but there might even be some upside to that.

Although the housing market won’t defy gravity for ever, there is a further positive in North America in that demand is pivoting to infrastructure construction. As in Europe, that is likely to mean a lower volume of sales in 2024, but still a healthy market in terms of value.

What To Look Out For

The problems in China notwithstanding, the global equipment market is still heading for a soft landing, and continued good sales volumes.

However, there are risks to the forecast and they are mostly on the downside. Inflation is not under control in Europe and interest rates have not yet peaked.

A positive is that this dynamic encourages commodity producing countries to increase their output to lessen the crisis and benefit from selling at higher prices, and that of course requires construction and mining equipment. However, the heightened inflationary pressures are a much more significant problem than the upside of this unlooked-for commodities boom.

A further threat which is specific to the construction equipment industry is the very high population of young machines which are now active around the world.

Sales have been at historically high levels in most markets of the world for more than five years now. That means that if construction activity falls-off in anyway, equipment sales are likely to drop precipitously, as there will be an ample population of machines in the market to handle the reduced workload.

On the other hand, a prolonged period of historically high volumes is not necessarily a problem. Construction equipment sales always grow worldwide over the long-term as the global population grows and with it the requirement for buildings and infrastructure. There are also demographic changes which drive the adoption of machinery such as skills shortages and higher wages for manual labour, as well as the retirement of the construction industry’s aging workforce.

Global sales of construction equipment by type, 2022 (Units)

Global sales of construction equipment by type, 2022 (US$ million)