5 construction equipment trends shaping 2023

CONEXPO-CON/AGG 2023is less than one week away, and if you’re attending, it pays to get up to speed on the latest equipment trends so you can strategically plan your time at the show.

To assist in that effort, theAssociation of Equipment Manufacturers (AEM), organizers of the show, have spoken to industry experts who have highlighted five equipment trends that will shape 2023. Here’s what they said:

1. Increasing importance of online sales and online rentals

In 2021, online sales of automobiles reached 30% of the market, their highest level. In July 2022, Ford announced it would move sales of its electric vehicles online at a fixed price, following Volvo and Tesla.

”Whatever happens in the auto industry, is coming to construction equipment dealerships,” saysGarry Bartecki, CFO of Illini High Reach and former CFO of theAssociated Equipment Distributors (AED).

In a2021 study from McKinsey & Company由AED,超过40%的非公路用dealers surveyed think it is very likely or somewhat likely that the OEM(s) they represent will implement a direct-to-consumer model within five years. They expect fully digital sales (including the actual purchase) for new equipment to increase from 7% to 29% and digital rentals to increase from 7% to 33% within five years.

”We definitely see things moving in this direction,” saysJefferson Yin, director of new business models and commercial intelligence atVolvo Construction Equipment. In 2020, the company began allowing customers to pre-order new electric equipment online, and they recently launched anonline configuration toolfor those machines, which allows customers to “build and price” their ideal model.

”There will still be transportation, delivery and service, but it will be much more efficient,” explainsSteve Clegg, managing director and owner ofWinsby Inc., a business development firm with clients in the construction equipment industry.

”Dealers are behind the curve and contractors are ahead of the curve when it comes to utilizing the Internet,” saysRon Slee, managing director ofLearning Without Scars, a training resource for dealers. The shift to e-commerce creates what he calls “the Amazon effect,” which means dealers will have to transition from selling things to selling services.

With brand differentiation waning in the heavy equipment market,Dale Hanna, CEO ofForesight Intelligence, a provider of business systems and telematics software, also believes the battle for customers will be based on customer experience.

”Dealers need to adopt more technology to be able to serve more customers with the same amount of people or to attract better people,” he says.

2. Electrification disrupts the dealer’s revenue model

Electrification of construction equipment is in its early stages, butGrand View Researchreports that the global off-highway electric vehicle market size is expected to reach $42 billion by 2030. Growth will be driven by lower operating costs as well as improved battery technology and lower costs for batteries.

”You are going to see the whole industry switch to battery-operated or hybrid machines,” says Clegg. “The amount of parts drops by about 90%, so if your operating costs for a skid steer were $20 an hour, that drops to $3 per hour.”

Dealers make their money on parts and services, and a high absorption rate (+85%) is a key focus. This metric is an indication of how well the margin from parts and services covers all the expenses of the dealership.

”电机将降低维护成本, so the dealers will make less money and the OEMs will make less money,” says Bartecki. “It’s a whole new ball game.”

To make up for the difference, dealerships will have to focus on new revenue sources. “Because they have the service expertise, I would recommend they move into supporting and servicing batteries, providing services such as recharging vehicles, tires, wear parts, and repair,” says Clegg. “They can also expand into different lines of equipment.”

According toLars Arnold, electromobility product manager for Volvo Construction Equipment, the company is working closely with dealers on sales and service training. The company has added electromobility training at itsHayward Training Centerand has plans to include it at its new training center at the Shippensburg, PA headquarters.

3. Connected machines and job sites cut owning and operating costs

Nearly all new construction equipment machinery is equipped with technology that allows equipment owners and dealers to avoid downtime through preventive maintenance and early detection of mechanical issues. The challenge has been getting equipment owners on board.

”Across the industry, adoption of telematics is definitely under 50%, and maybe only 30%,” says Henderson.

”The dealer has the trust of their customer, but they tend to be a single brand, while most customers have mixed fleets,” says Hanna.

Slee believes OEMs have tried to protect their own at the expense of the marketplace, but he’s starting to see some signs of change. “The machines need to be able to talk to each other as they do in other industries,” says Slee.

According toJim Bretz, director of service and solutions for Volvo CE, about 60% of Volvo’s connected machines use the company’s advanced telematics system,ActiveCare Direct. These machines are monitored 24/7/365 for alarms that indicate an issue. Actionable information (an ACD case) is then sent directly to the customer’s equipment manager and the local dealer within minutes. Included is information that will help the customer address the issue without the help of a dealer.

4.技术使零部件具有更高的效率nd service

Parts are the bread and butter of a dealership, but for an end-user, buying parts is anything but easy. When a machine is down, the costs are astounding and end-users and rental dealers are likely to pay a premium to get a quality part as quickly as possible. Buyers often need guidance; that may mean multiple phone calls and texts from multiple sources, including OEM and aftermarket parts dealers. Each part of the distribution chain has its own distribution, logistics, and markup.

According to Slee, OEM dealer market share for parts has dropped to 35-40%, about half of what it once was. Buyers today simply have more options, including Amazon.

Luke Powers, CEO ofGearflow, a web-based platform, believes dealers will soon be competing directly with Amazon. “MRO suppliers are the first entry point of Amazon coming into the industrial markets,” says Powers. “Amazon wants all procurement to be done on its platform regardless of the industry. Private-label brands in the construction equipment industry are the logical next step after adding MRO to their selection.”

Powers wants to take the inefficiencies out of buying OEM and aftermarket heavy equipment parts, and for that he created the Gearflow platform with Co-FounderBen Preston, to make it easier for suppliers and end-users to work with each other. The platform provides one location for end-users to request parts from their existing suppliers or discover new ones, access their past parts order history paired to their machines, as well as centralize invoicing and reporting across their mixed fleet.

”The No. 1 way dealers lose customers is through miscommunication,” says Powers. A messaging center keeps communications tied to each part’s request and order, in a central location. “We’re trying to automate as much of the process as we can,” he says, “which ultimately will allow end-users and dealers to focus more on productivity and service.

5. Rental continues to grow, equipment-as-a-service draws interest

Rental is expected to continue its upward trajectory fueled by higher prices for construction machinery and rising interest rates. According to theAmerican Rental Association, construction equipment rental revenue is expected to increase 12.5% in 2022 to surpass $41.6 billion.

The concept of equipment-as-a-service, which would transfer responsibility for equipment to the manufacturer or dealer, allowing customers to focus on their core business, is also gaining interest. Unlike equipment rental, it might involve an entire fleet to be provided for several years with the potential to tie invoicing directly to usage.

Slee believes the concept has potential. “Contractors use the machine to dig a hole. They are only interested in the hole, and they look at the equipment merely as an operating cost,” he says.

Volvo CE is currently exploring the concept. “One of the most positive aspects from a customer perspective is the payment flexibility that this model offers since it’s usually linked to machine utilization,” saysDr. Ray Gallant, vice president of product management and productivity for Volvo CE.

”It’s a very customized offer and it requires that the OEM, dealer and customer are aligned so the fleet performs accordingly and delivers the expected results.”