TRENDLINES
CHARLES YENGST
www.yengstassociates.com — cyengst@yengstassociates.com
Mini Excavators Wounded
By Housing Market
CHARLES R. YENGST IS
PRESIDENT OF
YENGST ASSOCIATES,
WILTON, CONN.
Everyone has heard of the housing
construction implosion. It has
caught up with the machinery
market, and one of the first victims has
been mini excavators. For the first time in
more than 10 years, sales of mini excavators are going down.
Years ago, I can remember when the
Japanese would ask me when we were
going to see mini-excavator demand
reach levels commensurate with the size
of the North American machinery market.
In those days, sales of mini excavators
were less than a few thousand units annually and it looked like the machines would
never catch on.
Then in the mid-1990s, things changed.
Maybe it was the rental equipment industry that kick-started the trend or perhaps
just good old persistence, but sales of mini
excavators started growing. They broke
the 3500-unit level for the first time in 1997,
hit 9700 units in 2000 and finally peaked
last year in excess of 29,000 units. In 10
years, demand jumped over 700% and the
Japanese suppliers were all smiles.
Unfortunately, what goes up can come
down and this year, for the first time in
many, we are experiencing a slowing in
sales of construction machinery, particularly machines typically used in housing
construction. If housing contractors use
the machine, demand for that product is
down this year. Dealers and rental houses
are also seeing the slowdown and know it
won’t change soon.
There is some good news about mini
excavators, however. They are used in a
slew of different applications, which makes
them useful to more than just housing contractors. The machines are being used in
landscaping, commercial building construction, demolition and recycling, industrial applications, municipal, county and
state government yards, highway construction, and on and on. The mini excavator has become a universal work tool for
many, most definitely by contractors needing to work in confined spaces.
As a result of the broad spectrum of
uses, mini excavator sales are not being
completely blitzed by a downturn in housing construction, just hurt. Sales would be
off more than 30% if housing was the sole
or largest industry for the machines.
For years, Bobcat has been the domestic leader in mini-excavator sales. The company took its successful recipe for producing and selling skid-steer loaders and used
it again with mini excavators, and it worked.
Not only did Bobcat do well in the U.S. and
Canada, but it has sold mini excavators in
Europe very successfully just as it has
done with skid-steer loaders. Last year,
however, was the first time that Bobcat was
overtaken in the mini excavator race.
Kubota, of compact tractor fame, nudged
past Bobcat as the leader in the business.
Behind these two strong compact
machine suppliers come Caterpillar,
Takeuchi, John Deere, Komatsu, Yanmar,
IHI and then a large number of other companies all slugging it out for a few percent
of the market. In all, there are roughly 23
manufacturers offering mini excavators in
North America, the largest portion of them
competing for about 10% of the market.
Of all the companies at the top end of
the business, most are of Japanese origin
with the exception of Bobcat, Caterpillar
and John Deere. Caterpillar, however, has
most of its mini excavator product line
manufactured in Japan, while John
Deere’s machines are made by Hitachi in
Japan and Bobcat sources its smallest
model from a supplier in Japan. Last year,
over 75% of all mini excavators sold in
North America were produced in Japan.
The only volume manufacturer making
the machines in North America is Bobcat,
although in recent years, a small supplier
named Boxer Equipment, owned by
Compact Power Inc., has produced a few
handfuls of machines (one model) that fall
into the mini excavator product category.
It is hard to say just how far down sales
for mini excavators will drop and for how
long. I am expecting demand in 2007 to
decline between 10 and 15% from the
peak sales attained last year, but the
bleeding will not stop until late in 2008 or
perhaps 2009. Sales in 2008 could be off
another 10 to 15% depending on how the
economy in North America goes. If the
economy slides along without recession,
yet very slow growth of 1 to 2%, we could
see that scenario, with improving sales
coming in 2009 and 2010. This is what I
am anticipating.
If we actually dip into recession or drop
below 1% growth in GDP, all bets are off,
and we could see sales of mini excavators
dropping 20 to 25% percent from the 2007
level. That’s the worst case, which I think
has a very low possibility of happening.
Will housing and mini excavators come
back? Sure they will. By 2011, sales could
be up in the 33,000-unit range and going
strong, and the hit we’re taking now will be
a bad memory. dp
