Executive Hire News › Archives › November 2008 › Market Report : Slowdown sets in

Market Report : Slowdown sets in

The remarkable rise in sales of compact plant over recent years has ended abruptly. EHN assesses the current situation and considers future prospects.

Not surprisingly, the compact plant market reflects the prevailing difficulties that have affected the global economy with such unprecedented speed. Manufacturers that EHN has spoken to estimate that sales of mini excavators in the UK & Eire will have fallen to approximately 10,000 by the end of 2008, compared with a figure of more than 16,000 in 2007. This encompasses machines of up to 8 tonne operating capacity.

Ironically, sales started the year very strongly. “Manufacturers as a whole were buoyant in the first quarter, carrying over from 2007,” says Keith Hoskins, Sales Director, Compact Plant with JCB. He says that sales slowed significantly from May onwards, particularly of 3-tonne machines, as the construction slowdown worsened. “Housebuilding has obviously suffered, but smaller builders and tradesmen currently seem quite busy, constructing extensions and landscaping gardens. The situation depends how long the general downturn lasts and how it affects their forward order books.

Cyclical industry

“However, we have to remember that construction is a cyclical industry and always has been. JCB is putting in place plans regarding new products and procedures in readiness for the upturn that will inevitably come. Also, a major factor is having strong customer relationships, and we will look at ways of helping hirers manage their fleet profiles to support their long-term goals.”

Richard Harrison, Sales & Marketing Manager for Kubota (UK) - Construction Equipment, says “January, February and March were all good sales months, but then the ‘credit crunch’ and the steep rise in fuel prices led to a rapid decline. August virtually did not happen. More hirers and users are making their machines last longer before replacing them, and this will also affect second-hand values.

“More positively, machines in the 1.5-tonne segment remain our most popular. Owing to the construction slowdown there has been a slowing of sales in the category of 5 tonne and upwards, which had been rising significantly in recent years. Nevertheless, there remains a trend for many users to downsize from, say, a 13 tonne excavator or a backhoe loader to an 8-tonne mini, owing to the latter’s compactness and the enhanced power capabilities that modern machines are able to provide.

“Interestingly, we held a nationwide series of roadshow events throughout September which attracted a pleasing attendance and generated good enquiries,” says Richard Harrison. “A lot of people are waiting before they commit to purchasing, and we really need some economic stability to restore confidence.”

Strong utilities market

David Munns, Director Compact Equipment for Volvo Construction Equipment, says, “The problem essentially revolves around banks not currently being prepared to lend to the construction industry and other markets. No-one can know how long this might last, and you have to put procedures in place to manage the situation effectively. However, the utilities market has remained strong, creating demand for 1.5-tonne machines; 3-tonne models remain popular, while the decline in the housebuilding industry has led to a reduction in sales of 5-8 tonne minis.

“There will be more positive times ahead, and there are many pro-active hirers out there. We have a loyal and established customer base and we can work with them to ensure their fleets have the right balance to meet future demands.”

Tony Tite, Sales Director of Takeuchi Mfg UK, agrees that “the strength of the utilities market has ensured continued demand for 1.5-tonne minis.
The market generally will pick up again, given the substantial number of new homes that are still needed to be built, projects relating to the 2012 London Olympic Games, and infrastructure works throughout the country such as motorway widening and tram extensions. The world cannot stand still forever.”

He adds that demand continues to grow steadily for Takeuchi’s reduced tail swing machines, “both for on-site Health & Safety reasons and because people want benefit from the latest innovations.” JCB’s Keith Hoskins, as well as Kubota’s Richard Harrison, also told EHN that their zero tail swing models represent an increasing proportion of the machines sold.

Retaining machines for longer

The trend for hirers to retain machines for longer periods before replacing them is providing an opportunity for Seddons (Plant & Engineers), the machinery supplier and dealer for equipment such as Volvo minis. “Our recently published Parts Handbook provides hire workshop staff with essential information they need for servicing and obtaining spares for equipment such as minis, Honda engines and tracked dumpers,” says Sales & Marketing Director, Phil Winnington. “The beauty of machines like the dumper from a hirer’s perspective is its appeal to several different markets, like landscaping, railway maintenance and grounds care, besides construction. Overall, the market is currently cautious, but it has not completely disappeared.”

Ian Brown, Sales Director of Thwaites, says that overall “we enjoyed another positive 12 months during our financial year 2008. The strength of the utilities market has led to demand for our smaller Powerswivel dumpers for work on tasks such as cable installation and laying pipes. Looking to the future, we have recently purchased a further robotic welder worth £200,000 for our factory near Leamington Spa, and consideration is being given to new, smaller products in our range suitable for repair and maintenance work.”

Adrian Hyde, Global Product Manager for Site Dumpers with Terex Construction Equipment, believes that demand for smaller machines may prove more resilient than for their larger counterparts. “Bigger construction projects might be delayed, but demographic statistics continue to project growth in single-person households and a corresponding need for properties such as flats. With falling property prices, developers could see an opportunity to buy and convert larger buildings. And if private individuals are not able to move house, many will improve and extend the homes they already have. Often work on such projects can be undertaken more efficiently through the use of machines such as compact dumpers that offer the capability of tipping directly into skips.”

Promoting loaders’ versatility

The market for skid steer and tracked loaders remains at approximately 900-1,000 machine sales annually. “It continues to be a struggle to overcome the traditional resistance to such machines in the UK, compared with their huge popularity in the US,” says Takeuchi’s Tony Tite. “Nevertheless, our sales are up on last year. Hirers can win business by promoting the great versatility of machines like tracked loaders, and the diversity of attachments they can accept for a wide variety of tasks.”

Terex sees considerable potential for its recently launched PT series of compact tracked loaders. “They appeal to users in many markets, and our 1500kg PT30 can be towed legally behind a typical four-wheel drive vehicle or pickup, making it more appealing to hirers,” says Mark Raymond, Global Product Manager for Compact Tracked Loaders and Skid Steer Loaders. “These machines are also ideal for soft, wet ground conditions.”

Also in optimistic mood is Jukka Vaatovaara, Managing Director of Avant Tecno UK, the supplier of articulated multi-tool carriers. “We are really busy and sales to hirers are up on last year. Smaller and medium sized independents are, in many cases, more flexible in being able to add new machines to their fleets. These machines can be used for many tasks, and represent a profitable niche opportunity.” •