Construction equipment manufacturers are currently at an economic crossroads. Orders from the past ensured that they were well utilized in the first three quarters of 2023 and, according to VDMA, they are expecting record sales for the year 2023. However, fewer and fewer orders are coming in.
From January to May of this year, orders for excavators, bulldozers, wheel loaders, and other equipment declined by 19 percent. Especially in residential construction, the rising interest rates and cost increases of recent months have had an impact and are making it impossible to finance projects.
As a result, the ifo Institute reported in September 2023 that one fifth of the companies in the German residential construction sector had to cancel projects. This trend is affecting machinery suppliers as well. Also contributing to the tense situation are
- the pressure from China,
- competitiveness limited by bureaucracy and overregulation,
- increased construction and material prices,
- efforts to increase sustainability,
- the shortage of skilled workers, and
The German Association of Construction Machinery, Construction Equipment and Industrial Machinery Companies (Bundesverband der Baumaschinen-, Baugeräte- und Industriemaschinen-Firmen bbi) estimates that economic uncertainty, particularly in the real estate market, will dampen demand for new machinery and instead fuel the rental machinery business. The rental of construction and industrial machinery in Germany already accounts for 20 percent of the industry's total sales, which stand at 12 billion euros.
Rental or leasing models enable construction companies to save on expensive acquisition costs, respond flexibly to changes in the project schedule, and leave the responsibility for maintenance and repair to the lessor.
To keep pace with all these developments, construction equipment manufacturers need to rethink their current business models and processes.