A ten-year global view

Electric machines, emission regulations and market domination in the construction, agriculture and mining sectors 

With the advent of electric vehicles entering the construction, agriculture and mining sectors (CAM) what does the future hold for the industry and what effect will this have on the used machinery market globally. Peter Clarke, founder and CEO of heavy machinery auctioneers, Yoder & Frey — the founders of the now legendary Kissimmee Winter Sale — comments on the future of the industry.

The Kyoto Protocol is the objective of the United Nations Framework Convention on Climate Change (UNFCCC) to reduce the onset of global warming by reducing greenhouse gas concentrations in the atmosphere. In order to comply with this, globally, the industry is striving to cut emissions, making road transport cleaner by setting strict new carbon dioxide emissions standards for all vehicles, passing new legislation on the engine emissions on non-road mobile machinery (NRMM). 

This paved the way for new emissions standards for carbon monoxide, nitrogen oxides and particulate matter from all NRMMs ranging from hand tools to construction machinery with the aim to ensure that from 2030 onward, new vehicles will emit on average 37.5% less CO2. These initiatives have paved the way for new technologies to drive road-going and non-road going vehicles, such as cleaner fuel, hybrid fuel systems and battery power.

The on-road electric vehicle industry is heading for a vicious fight with private cars set to see a collapse in sales as more people move to cities using more shared transport, rather than running private vehicles. In contrast, off-road electric vehicle OEMs are looking ahead to prosperous growth, in particular for CAM sectors. 

Compound growth

In the next 10 years the electric vehicle market in the CAM sector is predicted to burgeon. The sector has already been employing robots, drones, hybrid and pure electric vehicles, with approximately 15% of CAM vehicles rolling off the production line being electric. Over the next 10 years that number is expected to increase, when in 2029 the numbers are predicted to be close to 100%. 

With such a huge demand for new clean electricity to power those vehicles, further demands will be put on new technology to generate that power — on and off grid — with delivery of that power requiring new infrastructure. The CAM market is projected to grow at a compound annual growth rate (CAGR) of 4.52% with a market size by 2029 of in excess of US $200 billion from $146.17 billion in 2018. 

The CAM vehicle business will grow more than six-fold in value by 2029 grabbing records for both the highest volume electric vehicles (EVs) and the highest unit value. OEMs are innovating at a frenetic pace with some of the minor players innovating faster than many of the giants, of which a few seem to be sleeping through this future proofing period. Which technologies win? Which sectors go straight to pure electric and which need the hybrid interim stage? With even 300kW mining trucks working well as pure electric what is the place for fuel cells? 

The expanding market

The earthmoving equipment category is the largest segment of the CAM market by category, with much of construction equipment used to carry, dig, spread or move earth and materials. In comparison, the material-handling equipment category is the fastest-growing segment in the market, including machines that manufacture, store, stack, distribute, deliver and recycle.

Road rollers of all size and specification are the fastest growing single item of equipment in the market, with increasing use attributed to need for highway infrastructure in developing countries such as India and China. Large road development projects such as the China–Pakistan Economic Corridor (CPEC), which aims to connect China with Central Asia creating a modern “silk route” also being a contributor to this factor. 

Upcoming infrastructural projects and increased government spending have led to an increase in construction activities globally. With the advancements in technology, CAM equipment is becoming more fuel-efficient with lower emission levels as well as enhanced safety and better-handling features.

The rise of the machines

The ‘Internet of Things’ (IoT) phenomenon will be the next factor in determining how machines best serve the industries. The definition of IoT, is the interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data. This emerging technology will mean that machines will become “self managing” and reshape the CAM machinery sectors, in as much as they will be potentially capable of driving autonomously, self-driving in such a way to be highly fuel efficient, using GPS to navigate, out-put more efficiently, record operating data to produce delivery invoices in the haulage sector, be more secure and in time will be able to self-order spare parts for routine services and then telling the operator that they need fitting.

Robot farming and mining 

The industry is currently moving from the old electric drive designs to full hybrid and pure electric. Electrification is also crossing over with the journey toward automation and ultra-precision agriculture. With issues such as demographic pressures and aging populations, farmer’s may be driven toward “robot farming.” These factors, along with increasing environmental concerns over the use of herbicides may mean that in 10 years, the best-selling EVs in numbers are likely to be robot weeding machines. Meanwhile, the most expensive EVs will be in the mining sector where monster autonomous load-haul-dump machines with the electricity to power these vehicles also becoming cleaner and massive renewable generation sites set up off grid right next to the locations where these monster EVs operate.

Emissions regulations

Engines conforming to Tier-5 emission regulation are projected to have the largest market share of all current construction equipment in use by 2029. North America, Canada and Mexico are speculated to have enforced these regulations by 2025. Additionally, it is speculated that Japan will also follow these regulations once they are in place. Selective Catalytic Reduction (SCR) is projected to be the largest segment of the construction equipment market by aftertreatment devices due to the stringent emission regulations that are speculated to be implemented in the Asia Pacific region.

Construction equipment with 200–400 hp power output are projected to be the fastest-growing segment, with the market in Asia Oceania expected to grow at a faster rate as the requirement for infrastructure development in China and India are growing steadily. 

Infrastructure is not only the largest, but also the fastest-growing segment of the construction equipment market by application. Equipment categories such as crawler excavator, wheeled loader, motor grader, crawler dozer, asphalt finisher and road roller are used to develop bridges, roads and tunnels. Due to the increase in infrastructure projects, the demand for this equipment will also increase.

Market domination

Asia Pacific is the largest market for rental construction equipment, with increasing population and urbanization, the demand for infrastructure development, housing, and office space in this region is projected to increase significantly over the next few years. 

The Asia Pacific region is estimated to dominate the OEM construction equipment market and is projected to remain the largest market for construction equipment in 2029. This growth can be attributed to the improving socioeconomic conditions in emerging economies such as China and India. The Middle East region is expected to grow at the fastest compound annual growth rate during this period because of the large infrastructure projects planned in Qatar, the UAE, and Saudi Arabia.

The construction equipment market is dominated by a few global players and is comprised of several regional players. Some of the key manufacturers operating in the market are Caterpillar (US), Komatsu (Japan), Terex (US), Volvo Construction Equipment (Sweden) and Hitachi Construction Machinery (Japan), XCMG (China), Zoomlion (China).

Caterpillar has been the dominant global player in the construction equipment market for a long time with a wide portfolio of products that are innovative and technologically advanced. During the next ten years, it is expected to remain the largest player in the markets. Asian players such as XCMG and Zoomlion are expanding into developed markets to diversify their revenue streams. Due to their operational efficiency, these regional players are expected to challenge the established players globally.

What next

With the advent of cleaner fuels and regulated reduction in emissions, where do machines that no longer comply, go to die? The quick answer is possibly Africa, India and parts of the Far East. However large numbers will end up being owned by owner-operators for small contracting uses and possibly on private land. However, one thing is true of the used machinery market and the auction community. Regardless of machine, year, hours, condition or legislation compliance, there will always be a buyer for that lot, somewhere in the world.