As with any industry dealing with tight budgets, construction companies and public transportation agencies have to do more with less. One of the largest expenditures for these companies and agencies is the heavy equipment that’s needed to complete their projects. Three heavy equipment trends have come forth to meet today’s financial realities: Multi-functionality, rentals and telematics.
Multi-Functionality is a Desirable Design Feature
Multi-functional equipment has become important in that crews can adapt the machinery to a variety of tasks. Based on 2015 sales from January to June, backhoes, skid steers and compact track loaders have been the top selling pieces of equipment across the 50 states, Equipment World reported.
State and local government agencies love the idea of buying equipment that can serve multiple purposes and backhoes appear to be their favorite type of equipment, outpacing both skid steers and compact track loaders. Onvia’s Project Center found 2,246 solicitations to buy or rent backhoes from January to August 2015 and 282 contract awards. California and Michigan released 22% of the solicitations.
So far in 2015, state and local government agencies released 1,133 solicitations for skid steers while announcing 166 awarded contracts. Michigan and Wisconsin issued 29% of the solicitations.
For compact track loaders, state and local government agencies have issued 51 solicitations so far this year while announcing 44 awarded contracts. Wisconsin and California released 19% of the solicitations.
Top Heavy Equipment Manufacturers
Agencies are Increasingly Renting Heavy Equipment
Both the private and public sector hunt for savings everywhere except under the operator’s seat and one cost saving trend that is growing in popularity is to rent the equipment for a period of time rather than purchase it. Renting helps to ensure that equipment isn’t gathering dust and taking up space in a garage as well as saves on maintenance and storage costs associated with ownership.
A recent survey by Purchasing.com reported that renting and leasing were notable shifts in thinking for the construction and industrial industry. It reported that “rental preference soared in popularity across the board.” The survey pinpointed that rentals for compact track loaders have increased dramatically and explains that these rentals are “advantageous for jobsite and fleet managers who are either not ready to commit long-term or lack the necessary budget to buy one or more pieces of equipment. For these individuals, renting is even more cost-effective as typically 100% of the rental rate is applied to the purchase price. This enables them to recoup most or all of their rental fees if they intend to purchase the machine.”
While the private sector may go for the track loader, the public sector opts for backhoes and skid steers rentals. Solicitations for each piece of equipment reached more than 4,000 in 2014.
Using Telematics to Track Heavy Equipment
Just as state and local government fleet managers are using technology to keep tabs on their cars and trucks, Forester & Sullivan expects the construction and industrial markets to put more telematic tracking devices in their off-highway vehicles. In 2013, telematics devices were installed in 107,000 vehicles. This year and into 2016, it’s expected to increase by 28% based on the North American Off-Highway Vehicle Telematics Market. The spike could be attributed to more rental equipment companies entering into the telematics market.
Still, telematics isn’t fully understood by companies and there’s a lack of training on telematics’ benefits. To help educate their buyers, heavy equipment vendors that sell to state and local government agencies can take some valuable advice from Gokulnath Raghavan, an industry analyst at Forester & Sullivan. He suggests that venders provide “easy access to data and support heavy equipment fleet owners by advocating specific telematics solutions depending on the application segment, adoption rates will strengthen.”
“Once heavy equipment fleet owners fully understand the real-time benefits of telematics, they will consider installing advanced solutions,” he said.
Onvia’s Project Center found that state and local agencies have issued 52 solicitations and announced 14 contract awards for heavy equipment purchases that include telematics since 2013.
The Future Market for Heavy Equipment
In the five years since the economic recession, construction has been generally stagnant, but people never stopped driving on public highways, roads and bridges. As such they are in need of repair, rebuilding and expansion in some places. IBISWorld expects industry revenue to recover, and the public sector will have to begin investing in their state and local infrastructures; with that comes parallel investment in heavy construction equipment. As important, Congress is discussing transportation funding, which would support states’ efforts in infrastructure rehabilitation.
Construction builders and suppliers, as well as transportation vehicle vendors, will have opportunities as cities and states invest in construction and road projects. Meanwhile, information technology software and telecommunications companies could find a relatively new market expanding as telematics technologies are becoming an increasingly desired part of heavy equipment purchases.