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Are Excavators the Best Opportunity for Off-Highway Components?

Commercial Vehicles

June 2023

Jamie Fox

Jamie Fox

Principal Analyst

Jamie has over 15 years experience in market intelligence covering components for commercial vehicles including electric vehicles. He holds a BSc in Physics and Astronomy and an MSc in Nanoscale Science and Technology. Jamie is based in Chile.

Off-road is a very diverse market. As a component manufacturer that may already have sales for passenger cars, buses or trucks, it´s only natural to want to expand your business. Eventually, the amount of profit to be found off-road may approach that of on-road segments.

But what is the best area to focus on?

For the largest numbers of vehicles, it´s forklifts and tractors

For the total available market of all vehicles, including diesel, forklifts and tractors have the highest shipments, with both segments seeing over 2 million vehicles shipped in 2022.

Tractors have been very slow to electrify, however, due to duty cycle, cost, availability of models and a lack of charging infrastructure, amongst other things.

For electrified components, tractors are only worth investing in now if you´re willing to play a very long, patient game that pays off years or even more than a decade later. At Interact Analysis, we forecast 4% of tractors globally will be fully electrified in 2030 and it will take several years from now to reach even 1%.

For the largest number of electrified vehicles, it’s forklifts

For electric vehicles rather than total vehicles, forklifts has a much more promising market size. This will continue to grow steadily from 1.2 million electric forklifts sold in 2022 (63% of total sales).

However, forklifts are a commoditized, mature market that many suppliers are able to serve, which might lead to lower profit margins. Trying to enter the market now, when other suppliers are already established, could be tricky.

Forklifts are also small machines, with smaller, less expensive components. The powertrain value per machine is therefore low.

For $ per vehicle, it’s large excavators and other large machinery

The powertrain value per machine is much higher in large machines, such as large excavators, larger loaders and bulldozers, and underground load haul dump, among others. While the total number of electric vehicles is not very large, especially in the short term, customized designs offer an opportunity for suppliers that specialize in working closely with customers to provide just what they need, rather than churning out huge, commoditized volume. However, some markets, such as Hauler Dump Trucks and Underground Load Haul Dump, will never have a large number of shipments even with 100% electrification.

Excavators for the win?

So some machines are too commoditized, others have a low percentage electrification, and others just aren´t a large enough market. So where is the sweet spot? Could excavators be a good target?

Anyone who has visited recent major trade shows can see that electric model releases are more common for excavators than for most other off-highway machine types.

Here, a range of different machine sizes can help. Suppliers can get started with sales of components to mini excavators, which have more machines on the market already. Suppliers then have time to adapt their components, technology and software to larger excavators at a later date, progressing to the larger sizes as market demand increases and more models are developed. Over time there should be a sustainable business model where smaller machines provide a larger market, while larger machines provide a stronger contribution given the greater dollars per unit sold.

The technology used in excavators might also be, at least partially, transferable to other similar machines such as bulldozers, and backhoe and other loaders.

A final word

Clearly, the answer to the question of what vehicle should my company focus on will be different for every company. Depending on the specific components, target regions, existing customer relationships, and other factors, we’re well aware that any conclusion we draw could be different for others.

To learn more about Off-Highway Powertrain, we have a new 2023 report on this topic that is available now. Contact Jamie Fox, Principal Analyst for more information, or click here to download our brochure.

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