It’s been several years since I discussed wheel loaders, but that doesn’t mean that it is not an important product in today’s machinery marketplace. In fact, it is one of the most used machines in the business and very commonly found at job sites and a standard part of most construction company fleets.  

In dollars and cents, wheel loaders represented just over $2.5 billion in annual sales in North America based on 2016 industry demand. The market for the machines has been expanding since the recession in 2008 - 2009, although 2016 sales were slightly below those achieved in 2015 which was the most recent industry peak in sales since the last peak in 2006.

What kind of volumes are we talking about? Well, in 2006, the market exceeded 22,000 units overall (all sizes), and suppliers just topped 22,000 units again in 2015.  Demand in 2016, like I said earlier, was slightly lower than in 2015, actually down about 12 percentage points coming from a number of various reasons ranging from uncertainties in the market during an election year and a lot of unknowns surrounding domestic issues, lower investment in the non-residential construction market, and continued “zero growth” in the mining sector.

Looking forward, I am projecting that 2017 is going to be a better year for wheel loaders than we saw in 2016. And, there is a brighter future ahead after this year is over.  Why? Well, the economics are starting to get better for one thing.  We are looking at an economy that finally hit 3 percent growth during the second quarter and we are soon to find out how the third quarter growth has done.  (Personally, I believe we are going to be doing well through the third quarter and I’m looking at more growth in the fourth quarter as well.) There is a lot of pent up work to be done and both the U.S. and Canada are in need of infrastructure improvements. (Canada has already established plans for its work to be done and the U.S. is gearing up slowly to doing the same thing.) 

The economy means everything in the machinery business and it needs to be stronger than 2 percent plus or minus for real advancement to take place. I think we are on the cusp of hitting a better longer-term environment, some of which is being helped by de-regulation by the Trump administration and, of course, anticipation of higher growth following changes to our antique tax code and possibly a stimulus infrastructure program to get our country back on track. Investment will be the result if either of these issues gets addressed properly in the next year or two.

Getting back to wheel loaders—let’s talk about the major players. It probably comes as no surprise that Caterpillar and John Deere are the two leading suppliers in the U.S. and Canadian wheel loader markets. Together these two companies accountd for over half of all loaders being sold annually in recent years. Then comes Komatsu, CNH (Case and New Holland), and Volvo. These top five companies accounted for over 80 percent of total industry sales in 2016, leaving less than 20 percent for the remaining ten-to-fifteen companies in the field. These stats have not changed very much in recent years and I don’t look for any major shifts in the business during the next five years.

Some of you are probably wondering who the many suppliers in this market are. The names of many are quite familiar, but I’ll list the ones I remember just off hand: Kawasaki, JCB, Yanmar, Waldon, Wacker Neuson, Liebherr, Swinger, Laymor, Manitou, Schaeff (now part of Yanmar), Coyote, LeTourneau (now part of Komatsu), SDLG, LiuGong, Sany, XCMG, and Avant Tecno. All of these companies work hard to bring good products to our domestic market and none are second tier by any measure.  

The wheel loader market is very mature and very competitive.

The market dynamics, in my opinion, are not going to change much short of a major bankruptcy of one of the key suppliers, or a massive takeover of one company by another, something I don’t see happening any time soon.  All of the suppliers have their dealer networks – some obviously much stronger than others. I am often asked about the Chinese suppliers and whether or not they are going to be a threat to industry leaders.  The primary Chinese suppliers include LiuGong, SDLG, XCMG, and Sany (a newcomer).  They are doing their best to make a dent in the business, but none are doing much yet, collectively accounting for less than one percent of the overall market. I can say that LiuGong and SDLG are the two best suppliers and together they sold just over 100 units in 2016, which shows the level of penetration these companies are getting. It’s tough, and it’s very competitive. 

Moving on—I should note for those who know little about wheel loaders that these machines have an extensive spectrum from a size standpoint – the littlest machines have engine outputs of 20 - 30 hp, while the biggest loader available today is diesel powered at 1,739 hp, Caterpillar’s Model 994K gets the honors. Weight-wise the smallest is about 0.7 metric tons dripping wet and the largest loader excluding a bucket and counterweights has an operating weight of 240 metric tons (527,000 lbs).  The big boys in this product area are used primarily in mining and the little guys are seen in landscaping and small construction cleanup activities.  Everything in between can have a gazillion end markets ranging from various types of construction to rental to utilities to quarrying.  On the rental side – I figure the rental market including independent rental houses and dealers selling the machines with rental fleets are about 20 percent of the total. The many facets of construction account for the largest portion of machines sold – more likely between 35 and 45 percent of the total.  

Now for the good stuff – demand for wheel loaders is going to be better in 2017, as I said earlier.  I’m looking for industry sales to be at least 6 percent higher than what were seen in 2016. This is just the starting point — it’s going to get better.  Sales over the next five years will hit record highs exceeding 26,000 units by 2020, about 35 percent higher than 2016 levels.  I know I am going out on a limb on this one, but I firmly believe that demand will grow stronger each for the next four years and possibly even the fifth year out once the economy hits a good stride and mining returns to a more normal level of activity.   Obviously, we’re going to have to wait and see how it pans out, aren’t we?  I hope I’m right on the call.

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