HDMA-PSR COVID Webinar Presentation
COVID-19 continues to batter production of off-highway equipment as we continue to move through 2020. The effects of the virus on Agricultural and Construction equipment production in North America were analyzed in a June 17 webinar presented by the Heavy Duty Manufacturers Association (HDMA) and Power Systems Research (PSR). The webinar updated information presented in PSR’s webinar in April.
The PSR webinar team was Jim Downey, PSR vice president-global data products , and Yosyf Sherementa, PhD, PSR director-product management and customer experience.
PSR projects AG to be down 9.4% and CN to be down 11.3% when comparing global production for this year (2020) to last year (2019).
China and India which have the largest volumes for ag machinery are the lower side for production percentage drops this year. China which is also the largest producer of construction equipment is not expecting a decline this year.
A slight recovery for Construction equipment is expected in 2021, but not until 2022 for Agricultural machinery. Ag sector recovery will ultimately depend on overall economic recovery from the COVID-19 pandemic.
The construction segment will not return to pre-virus production volumes for another few years, at best. We’re looking out to 2024 or possibly 2025 to get back to 1.48 million units.
We don’t see a V-shaped type scenario on the horizon in North America, but rather recovery will look like something between a “U” and an “L.” Somewhat of a swoosh shape or upward sloping L. Economic activity will slowly return to a sense of normalcy as the curve of new COVID-19 cases flattens.
Government support and intervention will be needed, and stimulus will provide an economic backstop. We expect modest growth in 2021. Pent-up demand and continued economic stimulus should also help with rebound.
In North America, AG Machinery production is going to decline by 12.5% in 2020. This segment has had a couple of rough few years, and farming has been a challenging business recently. Prior to COVID-19 (before March 2020), we had thought this market was set to recover.
Moving over now to North American Construction Equipment, we see a similar story to the Ag segment. Construction equipment production is going to be down 14.2% in 2020.
Within our Construction segment we track 20 product applications. The range for the declines on those applications is from Scrapers at -20% and Motor Graders at only -4%.
Demand for new agricultural machinery is low based on many current factors. These factors include a dairy farm crisis, and a shortage of processing plants because of the outbreaks at meat processing facilities. Other demand drivers include low commodity prices, global trade/tariffs, interest rates, weather conditions and subsidies.
Within our AG Segment we track seven product applications. The range for the declines on those applications is from a low for Ag Tractors at -13% to Windrowers at -6%. We’re projecting next year to be flat.
Government spending may put some infrastructure investments on hold, like water system and sewer project (bigger investment projects). However, we hope those will be included in a future infrastructure bill. New projects have already been added such as hospitals, highways and surface transportation.
Supply chain disruptions are making it more difficult to get building materials and creating shortages. Construction projects are moving forward but at a slower pace.
In the housing market, despite low inventory, new starts will be lower than normal for 2020 and into 2021, for the same reasons we have discussed previously.
Smaller equipment OEMs and rental companies have suffered the most in the short term. Smaller OEMs have dealt with lack of workers, PPE shortages, virus outbreaks and lower demand. Rental companies are stuck with higher inventories.
We are expecting a slight 2% increase for Construction in 2021. PSR
