CRRC’s locomotive is part of Vale’s strategy to electrify its mine and rail equipment. The two areas account for 25% of the company’s direct carbon emissions, the so-called scope 1. In 2019, Vale announced the goal of zeroing its net emissions of scopes 1 and 2 (relative to electricity consumption) by 2050. To this end, it is investing between US$ 4 billion and US$ 6 billion.

Currently, Vale’s fleet totals 490 diesel-powered locomotives dedicated to the transportation of iron ore. The company’s first fully electric machine, manufactured by Progress Rail, was received in July 2020 at the Vitória-Minas Railroad (EFVM).

The two 100% electric locomotives are part of Powershift, a program created by Vale to meet the company’s challenge of zeroing carbon emissions from scopes 1 and 2. In addition to locomotives, the program has also been conducting tests with electrical equipment at underground mines in Canada – there are currently about 40 in operation.

Vale’s operations equipment electrification strategy also includes a partnership with its peers BHP and Rio Tinto. Last year, the three companies, along with 17 other mining companies, launched the “Charge On Challenge.” It is a global call for innovation aimed at entrepreneurs capable of developing electrification solutions for large trucks used in mines.

Source: Vale Press Release     Read The Article

PSR Analysis: Vale is one of the most important users of Locomotives in Brazil with full its logistic model and railroad operation in addition to its mining business. The success of using new technologies and alternative power propulsion may impact the business significantly. In addition, the program for new technology opens opportunities for Billion Dollar Supply in the next years for this business segment for companies all around the world.     PSR

Fabio Ferraresi is Director, Business Development South America, for Power Systems Research

The development of urban railroads in Vietnam has been significantly delayed. The opening of the second line in the capital Hanoi is expected to be delayed to 2027, and the first line in the southern city of Ho Chi Minh City may not open until the end of 2023.

In addition to financial difficulties, there are cases where administrative authorities are not proactively resolving problems, leading to further delays.

In mid-September, Hanoi City abandoned the planned Hanoi Urban Railway Line 3 (Nhon Hanoi Station), which was planned to run through the center of the city, to open by the end of the year. The line is 12.5 kilometers long. Construction of the line began in 2010, and although it was originally planned to open in 2015, it is believed that the plan has already been changed about five times.

The total project cost was originally expected to be $1.2 billion, but due to repeated delays, it is now likely to exceed $1.5 billion. Hanoi City has cited delays in land acquisition, lack of competence of builders and consultants, differences between international contracts and Vietnamese law, and the outbreak of the new coronavirus as reasons for the delay in the opening of the line. However, it is an unusual situation for it to take nearly 20 years from the start of construction to the start of operation, despite the general development of urban railroads.

Even in Ho Chi Minh City, the largest city, the opening of the urban railroad supported by the Japan International Cooperation Agency (JICA) has been significantly delayed. Originally scheduled to open in 2018, the project has been repeatedly revised, and the current plan of opening the line in 2023 is becoming increasingly unlikely. The city has frequently had to provide payment support to consultants and operators, and the Japanese government is also concerned about the situation.

The main reason for the slow infrastructure development in Vietnam is the country’s laws and regulations. In Vietnam, the Criminal Code stipulates that “acts that cause damage to national property due to lack of responsibility” are criminal acts, and there is a risk of being charged with a crime. When procedural errors are discovered, such as in accidents, or when costs are higher than originally planned, those responsible can be held criminally liable for past crimes.

The Communist Party, which is ruled by a single party, is committed to eradicating corruption and is increasingly exposing those involved. In the case of infrastructure projects, a series of investigations may lead to the discovery of bribery, etc., of those involved. The operation of the criminal law is unclear, and the situation is becoming increasingly difficult for those in charge with authority to avoid making decisions.

Vietnam, with a population of approximately 100 million, is facing a major challenge in infrastructure development in line with its economic growth. However, for the same reason that the opening of urban railroads has been delayed, the construction of power plants, airports, and other facilities is also generally behind schedule.

Source: The Nikkei

PSR Analysis: With a growing population, chronic traffic congestion in urban areas has become a social problem in Vietnam. To solve this problem, it is necessary to improve public transportation systems such as railroads, but many such projects are financed by foreign ODA and technical cooperation. However, delays such as those reported this time are hampering growth, and if these infrastructure projects, which are being carried out with foreign cooperation, continue to be delayed, it could spur further declines in investment at a time when foreign investment has slowed due to COVID-19 and friction between the U.S. and China. PSR

Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research

The government is considering cancelling construction of the high-speed railway between Moscow and St. Petersburg.

One alternative being considered is the replacement of the high-speed railway for selected cargo between the two cities. This option is lobbied by Russian Railways.

The plans to build a high-speed railway between Moscow and St. Petersburg were announced last August. The project was included in the federal budget for 2022-2024. Completion of construction work was expected in 2027.

Read The Article

PSR Analysis: The most obvious reason for uncertainty of a mega-project like this, is a shortage in the budget. However, the Russian budget now is healthy and has a growing surplus. So, the Russian government may be considering a scenario where this money is required somewhere else. If this assumption is correct, it’s a crisis scenario.   PSR

Maxim Sakov is Market Consultant-Russia Operations for Power Systems Research

Based on Russian kits, there will be made rail padding and straightening machines, which are used during railway construction, repair, and maintenance. Also, the machines are working with wooden and concrete rail ties. Assembly is based on the production plant of San Engineering & Locomotives Co. Ltd, located in Bangalore which is acting as STM partner in the project.

The Indian Railway market is one of key export directions for STM, according to a company representative. Today, the company supplies machines to its Indian partners for €20 million. These contracts were signed while competing with world leaders in the railway machinery market, including companies from Austria and USA. STM said it plans to participate in further competitions for machines for about €200 million.

The OEM also supplies 19 kits to India for ballast handlers. This project is part of the “Made in India” program.

Read The Article

PSR Analysis: The Indian market is attractive for Russian and Belorussian machine building OEMs. Despite low margins, there were high volumes and a tolerance for technical decisions.   PSR

Maxim Sakov is Market Consultant-Russia Operations for Power Systems Research

SUMMARY.  After the GDP declined 3.5% last year, the worst performance in almost 75 years, the US economy is set for a strong comeback.  There are many reasons to be optimistic about the economy for the next few years, including strong readings of macro-economic factors combined with the economic cycle reset backed by government initiatives and policies.

Our positive outlook is based on the reviews of key economic indicators, including GDP, unemployment, and inflation. 

During H1 2021, we witnessed a strong level of activities and a rebound for many industries.  As local governments eased lockdown restrictions, service-oriented industries gained traction and that translated to an overall increase of economic activities across many industries. 

We expect this level of rebound to continue and we now expect even stronger overall growth for 2021.  The US economy is on track to reach or even surpass the growth level of 1984 – the highest one since 1950s.  In the near term, consumer spending will help drive demand and support the strong growth trend.

Many factors contribute to such upbeat projections.  Strong macro-economic data provided a solid basis for future growth.  Government stimulus to consumers as well as businesses combined with investments into a sustainable economy, and technology development will continue to drive demand in the near term.  A future infrastructure bill will also serve as a catalyst to generate new demand and continue the economic expansion for several years.

We have mentioned the electrification trend of vehicles and equipment in the past.  We expect these developments and trends to accelerate in the near future.  In particular, we expect new developments in battery technology, and also with hydrogen power.  The impact of this electrification will touch a majority of the applications/products that we track in our databases.  We already see viable alternatives to ICE powered products entering the market during the next 12-36 months, and this trend will accelerate in the mid-term.

We continue to see a favorable fiscal policy and a stable economic situation in the US.  At this time, we expect it will take at least until 2022-2023 before GDP surpasses its Q4 2019 peak.   Fiscal policy with near zero interest rates, which government has promised to keep in place for the next 12 months, will provide a good platform for the economic recovery and allow us to look optimistically into 2022.  We believe this is a critical factor as it re-assures both consumers and businesses of low interest rates and it helps drive demand for goods and services.  Even then, once the interest rates are lifted from the flat zero levels, we believe they will still provide favorable conditions to continue economic expansion.

The key factor and the foundation to the economic recovery is strong fiscal policy.  With extra cash in the hands of US consumers, combined with low interest rates, and strong growth expectations, inflation concerns have re-surfaced in H1 2021. As of June 2021, annual inflation for the 12 months ending in May was at 4.99%.  In just one month the inflation rate increased by 0.83% from 4.16% as of April 2021.

Increased inflation concerns have put a break on stock market growth, especially to growth-oriented companies such as the technology sector. However, given the current macroeconomic levels, we do not expect any significant change to fiscal policy (such as interest rate increases) this year.  Current conditions provide a solid outlook and reassurance for future recovery and growth at least for another 12-18 months.

We have mentioned significant improvements on the employment market during last 6-9 months, however the trend experienced a slowdown in early Spring 2021.  The latest readings from June 4, 2021, showed the unemployment rate at 5.8%.  While the rate improved from Q1 2021, (April 2021) at 6.2%, it is still significantly higher than the pre-pandemic rating in February 2020 of 3.5%.

The number of unemployed persons as of June 2020 was at 9.3 million vs. 10 million in March 2021 and 5.7 million in February 2020.  We expect the employment market to continue to improve in the H2 2021; it may take at least another year and a favorable economic situation to fully recover employment to the rate of 3.5%-4.5%.  The labor force participation rate was little changed at 61.6 %in May 2021.

Housing starts statistics experienced a slowdown in Q1 2021, however they rebounded during Q2 2021 at 1.572 million in May of 2021.   The building materials market continued to experience pricing pressure as well as supply chain issues which slowed growth.  We expect this trend to continue in the near future.  Another factor that contributed to the slowdown was rising mortgage rates, primarily driven by a rise in Treasuries.  However, given the strong outlook for the economy, we expect the housing market to remain strong, which will directly help drive growth in segments like Construction, Industrial and L&G.

Across all market segments, we expect overall total OEM equipment production numbers to rebound in 2021 from 2020 losses.  Cumulatively, OEM production in the US experienced a decline of 13.1% in 2020 vs. 2019.  We expect growth in 2021 of 8.0% vs 2019.  This estimate is slightly lower by 0.1% than the previous estimates in Q1 2021 at 8.1%, mainly due to the slower recover pace in the Spring of 2021.  The key driver of the growth in 2021 will be strong fiscal policy and accelerated growth in H2 2021.  At the same time, the recovery and growth will vary considerably among segments. 

As expected long before the pandemic, the Medium and Heavy Vehicles Segment was due for a slowdown and a reset.  This segment in 2020 suffered the worst performance among all industry segments; however, it will also lead the recovery in 2021 and will post the highest growth rate at 30.5% vs significant loses in 2020.  We continue to see significant improvements in this segment with sustainable demand over the next 18-24 months.  Furthermore, we estimate an additional gain of 6% in 2022 vs 2021.

Consumer-oriented segments experienced significant market deterioration with the Passenger Car segment leading the decline at -25.1% in 2020 vs 2019.  The next leading segment was Minivan/SUVs at -16.3% in 2020 vs 2019.  We expect passenger car production to remain flat in North America while Minivan/SUVs to regain ground in 2021 at 10.1%.

As economic conditions improved during the last three months, we expect a rapid increase in demand for products to follow in most markets, starting in H2 2021. At this time, we forecast year 2021 growth to be in the low single digit vs 2020 at 8.0%, and we see an 9.7% additional gain in 2022 vs 2021.  Overall, for all OEM equipment sectors, we expect it will be 2023 or 2024 before the total volume units produced in North America reaches pre-pandemic levels of Q4 2019.

Here are our views on several key industrial segments.

AGRICULTURAL.  As the post-pandemic recovery continues, we expect the Ag segment to follow other industrial and heavy equipment industries.  In 2021, we project the growth of agricultural equipment and machinery in North America to be at 9.8% vs 2020. Additional growth is projected for 2022 at 13%.  The recovery will be steady, and we expect levels of production in 2022 to reach those of 2016-2017. 

CONSTRUCTION EQUIPMENT. We expect the Construction machinery segment to follow strong economic recovery patterns.  Our most recent overall projection on construction equipment and machinery production is positive at 8.9% in 2021 vs 2020, which is slightly higher than Q1 2021 estimates.  Furthermore, we expect additional growth of 9.7% in 2022. 

INDUSTRIAL. This segment typically follows the general economy, and the construction industry trends, with some minor equipment exceptions, such as forklifts.  Currently, we expect an overall growth in production numbers at 9.6% in 2021 vs 2020 with additional growth of 12.4% in 2022. 

The main drivers for the segment are small industrial equipment, material handling and forklift applications, where the demand remains strong.   Furthermore, material handling is supported by stronger levels of freight, and we expect this trend to continue in 2021-2022.

Consumer sectors, including LAWN AND GARDEN, PASSENGER CARS, MINIVANS AND SUVs as well as RECREATIONAL PRODUCTS look very promising for the next few years.  Not only have these segments entered a new cyclical uptrend, but they will also benefit from favorable fiscal policy and increased demand driven by the economy re-opening.

LAWN AND GARDEN. This segment typically follows a similar pattern to other consumer products; however, given the circumstances related to lockdown, the L&G sector performed very well in 2020 (production was flat in comparison to 2019).  We estimate L&G to continue strong performance, driven by healthy demand at 6.8% in 2021 vs. 2020 with additional growth of 9.9% in 2022. During the past year, the segment has suffered supply chain issues. 

During the past few quarters, we have been gathering intelligence on new electric models, and we will be completing data and releasing them to our client databases over the next few quarters.   Given current market circumstances and the trend in the industry, we believe electric models will follow similar growth rates to its ICE units and will greatly gain market share at the expense of ICE-powered equipment.

PASSENGER CARS and MINIVAN/SUVS. Strong demand supported by low interest rates and a re-opening of the economy will help these segments regain ground in 2021.  At the moment, we expect the segment to show healthy growth in 2021, mainly due to a low base in 2020.

However, given the current trend, specifically the market transitioning to SUVs, the production volumes of passenger cars may never fully come back to the levels of 2016-2017.  We estimate production for passenger cars to be flat in 2021.  Additional growth of 10.7% and 7.8% is expected in 2022 and 2023, respectively.

Over the past few years, the Minivans/SUVs segment has been enjoying growth and taking share from passenger cars. Nevertheless, the overall production has declined at 16.3% in 2020 vs 2019.  We estimate the rebound in 2021 to be at 10.1% vs 2020.  Steady recovery next year is estimated to continue in the following years at 10.9 and 6% in 2022 and 2023, respectively.

We have already started to witness introduction of EV technology across all major OEMs, and we expect this trend to significantly accelerate in the next 2-4 years. 

POWER GENERATION. This segment will mainly follow other industrial segments and will gain 8.1% in 2021 after being almost flat in 2020 vs. 2019.  The recovery will mainly depend on improved economic conditions in the region and worldwide.  We expect the segment to continue to improve in 2022 at 8.9% vs. 2021.  Key demand drivers for the segment come from data centers, healthcare, and infrastructure development.

RECREATIONAL VEHICLES. Recreational Products follow similar patterns to other consumer products; however, the pandemic provided a solid growth boost for the segment.  We project a strong year at 9.8% growth in 2021 vs 2020, and 8.5% in 2022 vs 2021.  PSR 

Yosyf Sheremeta, PhD, is Director, Product Management & Customer Support, for Power Systems Research

Diversification has become the theme during the pandemic recovery, and we expect this trend to continue.  Not only are companies looking for new markets and suppliers to grow top and bottom line revenue as well as to minimize risks, but we see a shift into new industries.  Furthermore, rapid developments of new technologies create massive opportunities for OEMs and suppliers as well as posing real threats to OEMs that solely rely on traditional products that are powered by fossil fuels. 

According to a report from the Organization for Economic Development (OECD), the global economy is still expected to shrink this year, but by less than previously estimated.  Currently, the OECD expects the world economy to decline by 4.5% in 2020, which is better than the earlier estimated contraction of 6%; this is mainly driven by better-than-expected recoveries in the U.S. and China.

This is the election year in the US and the world will be closely watching the outcomes in November.  Typically, we see a lot of uncertainty during the last few quarters before the election, as it will have an impact on the global economy.  Companies preserve cash and postpone major capital investments until they understand the playing field and rules of new administration; current geo-political trends related to trade disagreements and the exposed supply chain weaknesses and challenges brought to us by the pandemic- both have a direct impact on the recovery trends and future growth.

When we look at industry developments during first three quarters of 2020, it is clear that every market segment globally was negatively impacted by the pandemic.  The only exception is China’s Construction segment, which is primarily driven by stable demand supported by government investments. 

Among all industry segments on the global scale, the On-Highway segments such as Passenger Cars, Minivan/SUVs and Commercial Vehicles segments have suffered the greatest decline, dropping 16-25%. This is mainly due to production peaking over the past couple of years; these sectors were due for a slowdown, regardless.

Consumer oriented applications will suffer most, mainly due to a lack of demand caused by business shutdowns, unemployment, and short-term elimination of financial wealth.  The overall decline in these markets will be well into double digits with some suffering 25-40%, regionally.  Globally, personal transportation sectors such as Passenger Cars and Minivan/SUVs will suffer close to a 20-25% decline in 2020.  On the other hand, heavy industrial segments, such as Agricultural Equipment and Power Generation will be down in high single digits.

These are our current estimates as of today; going forward and depending on the segment we do expect these numbers to change in both directions. 

On the positive side, following a rapid deterioration of production levels in 2020, we expect demand and production to increase across the board in 2021, averaging 5.18% among all market segments, which is higher by 0.3% than our forecast from previous quarter and by 1.6% vs Q1 2020 estimates.  At this point, we believe it will take 2-3 years for the general economy to come back to pre-COVID levels and for some segments it will be even longer than that.

AGRICULTURAL. Given the current circumstances globally, we expect 2020 to finish in negative territory.  Our latest estimates of production volumes show a decline of 7.9% in 2020 vs 2019, which is an improvement from last quarter by 1.5%.  China is the largest producer of Ag equipment globally, but most of the volume falls under the 2-wheel drive tractors application.  Over the past few years this product category has been shrinking significantly, mainly due to the product replacement by larger HP machines.  

Globally, we do not expect any rapid recovery next year (2021) or high growth, mainly due to current economic conditions.  We expect 2021 growth will be at 2.7% globally, which is slightly higher (by 1.7%) than our estimates as of last quarter and 3% higher than estimates from Q1 2020.  Such trend shows better than expected recovery and we believe Ag machinery segment is nicely positioned for stronger recover and steady future growth. 

China will contribute most to the decline in overall global performance at -2.8% in 2021 (mainly driven by the decline in smaller equipment and the shift to larger HP machines); at the same time, Europe, Central/South America and India will show much stronger recovery at 9%, 11 % and 11.9% respectively.  We certainly see a steady recovery patten, however the key factor to agricultural machinery growth will depend on overall speed of economic recovery from the pandemic.

CONSTRUCTION. The global Construction sector has performed very well for the past five years, posting an overall growth rate of 9.6% in 2018 and 1.9% in 2019 globally. The latest crisis has eliminated this growth trend.  At this time, we estimate the global construction equipment market will drop 9.3% in 2020 vs 2019. This rate is higher by 2% vs. previous quarter estimates. 

At the same time, we expect a recovery and growth at 7.1% in 2021 vs 2020, which is higher by 0.7% then previous estimates.  The recovery pattern certainly seems to be improving in comparison to estimates just six months ago.  However, the markets will not recover to pre-crisis levels for another few years, at best.  India, Europe and South/Central America will contribute the most to the recovery in terms of growth in 2021 vs 2020, at +32%, 8.9% and +8.4% respectively.

Other Off-Highway segments, such as Industrial, Lawn and Garden and Power Generation, will closely follow the latest global economic conditions. Currently, we expect them to decline in 2020 vs 2019 at -10.6%, -13.9% and -7.8%, respectively.  The recovery in the following year will take place at rather slow rate.  We estimate that 2021 growth vs 2020 in these segments will be +6.7%, +4.4% and 0.1% respectively.  

Marine Auxiliary and Maine Propulsion sectors will finish the year with -11.3% and -12.2%, respectively.  Cumulatively, most decline will take place in India (-23.7%), North America (-15.1%) and Far East (-12.4%).  Promising recovery at this point is expected in 2021 at an overall rate of 5.8% vs 2020.  This is an improvement by 1.5% from the previous estimates in Q2 2020.

For the On-Highway sectors, we will see a decline in production volumes across all product classifications.  Cumulatively, across all on-highway sectors the overall decline will be at -21.6% in 2020 vs 2019.    This is an improvement by 1.8% from the previous estimates in Q2 2020.

Passenger Cars will suffer the largest decline among consumer-oriented applications, as demand rapidly collapsed with the progression of the virus crisis.  We estimate that globally passenger car production will decline 25.6%, with India, North America and South/Central America contributing the most to the decline rate at -28%, -32.6% and -43.7%, respectively.  We estimate a small recovery within the segment at 5.4% in 2021 vs 2020, where Central/South America, South East Asia and India are estimated to grow faster than other regions at 39.7%, 15.9% and 15.3%, respectively. 

Minivan/SUVs will go in line with the Passenger Cars segment.  Overall decline will be 19.2% in 2020 vs 2019; where India, Eurasia and Central/South America are leading in the decline at -22.4%, -34% and 20.9% respectively.  The small recovery in 2021 will also be in line with the passenger car segment at +5.2% vs 2020.  Regionally Central/South America, India and South East Asia will be growing faster than other regions at 44.3%, 15.3% and 15.9%, respectively. 

Light Commercial Vehicles will decline 15.6% in 2020 vs 2019 globally.  Significant declines will take place in India, North America and Central/South America at -45.3%, –25.4% and -31.%, respectively.  Small recovery is expected in the following year (2021) at 5.6% overall globally.  Regions with higher recovery rates will be India, Eurasia, and Central/South America, which are expected to post gains of 44.3%, 13.9% and 21.4%, respectively. 

During the past few quarters, we have forecasted that demand and production of Medium and Heavy Vehicles were expected toslow downin 2020-2021.  Peak production volumes in previous years as well as COVID-19 impact will have a profound impact on the segment, which is forecast to suffer most among all sectors we track in our databases.

At the same time, the MHV segment has made most improvements in the forecast for 2020 and has shown faster progression in the recovery estimates from previous quarters.  Currently, we expect production volumes in 2020 to be down at -15.9% globally.  Most regions will experience double digits decline, with North America, Europe, India and Far East declining at 39.1%, 32.8%, 61.9% and 28.4%, respectively.  We do expect modest recovery in 2021 at 5.4% overall vs 2020.  Regionally, the growth rates in India, Central/South America and North America are expected to be 40.3%, 23.7% and 16.1%, respectively.

Recreational Products follows consumer-oriented segments, but globally the decline overall will not be as significant is in the Passenger Car and Minivan SUVs segments.  Currently, we expect the decline in 2020 to be at -12.1% vs 2019.  The key factors to better performance in Recreation products are affordable personal transportation (motorcycles) and significant demand for RV, driven by the pandemic and the travel restrictions. 

Most of the volume (2-wheelers) is concentrated in China, and as of now we do not forecast any major decline there for the current year.  Other regions, such as India, Europe and North America will decline at rates of -23%, -33.8% and 20.1%, respectively.  The recovery in 2021 is expected to be 5.8% globally, where India and South/Central America are leading the growth at 11.1% and 6.1%, respectively.   PSR

Yosyf Sheremeta, PhD, is Director of Product Management and Customer Experience at Power Systems Research.

SUMMARY.  The North American economy remained stable in 2019 and pure economic conditions as well as fundamentals in the region were favorable. Most industries performed very well, and the short-term outlook remains stable to flat for most market segments. However, we see many new developments that could suggest a shift in the trend.

Consumer confidence declined slightly in December, following a moderate increase in November.  The Conference Board’s Consumer Confidence Index stood at 126.5 in December, 1.4 points higher than in September 2019. 

Per Lynn Franco, Senior Director of Economic Indicators at The Conference Board: “While consumers’ assessment of current conditions improved, their expectations declined, driven primarily by a softening in their short-term outlook regarding jobs and financial prospects. While the economy hasn’t shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020.”

The U.S. economy is still healthy and growing; however, job growth has been flat to steady.  The reported number for December 2019 was 130,000.  Government reports from January 10, 2020, showed a healthy unemployment rate at 3.7%.  Employment continued to show steady numbers in several industries, including mining, manufacturing and transportation. Job growth in these industries moderated in 2019 compared with 2018.

Across all market segments, we expect overall total OEM equipment production numbers to be almost flat for 2020, which is slightly better than our estimates from Q3 2019 at 1.02%. The Medium and Heavy Vehicle segment is the only one that is significantly different among all 13 market segments that we track. We project that production for that segment will be down 15% in 2020 compared to 2019. We’ll discuss more about this later in this report. 

We see an almost flat to slightly negative level of overall activity in 2021 at -1.5%, as the overall economy performs at its peak in productivity, and as demand levels decline going into 2020-2021. 

The following segment level summaries describe some of the key drivers and factors we are we are evaluating by segment:

Note: The full report for the North America, with details on expected unit and percentage changes, is available to our subscription-based clients in our quarterly update bulletin.  

AGRICULTURAL.  The Agricultural segment suffered multiple setbacks in 2019, driven by several factors.  The weather was not cooperative – with the above average rain fall levels—and many fields in the Midwest remained too wet during planting season to be used; such conditions prevented farmers from replacing their equipment, and they postpone their capital spending and buying decisions. 

Ongoing trade uncertainties with China left US farmers with excessive inventories of key commodity items such as soy and pork.  Given the current rhetoric on the trade situation, particularly with China, we expect such conditions to be flat in 2020. According to a proposed U.S. China Phase One trade agreement slated to be signed in January 2020, China agreed it will import more U.S. wheat, rice, corn, energy, pharmaceuticals and financial services.  Such moves should help the sector regain stability and return to growth. 

CONSTRUCTION EQUIPMENT. Recent market performance has been very good, but the first signs of a slowdown appeared in declining sales during the second part of 2019, especially with larger equipment.

Major OEMs in the Construction and Industrial segments reported significant increases in orders and activities in 2018 and 2019, but demand seems to be tapering off, mainly due to overall economic and market performance, as well as uncertainty.

As in the Agricultural sector, we have started to see the introduction of new technologies and electric drive types. We project this trend will rapidly increase over the next few years, and it may start gaining significant market share within 5-10 years.

INDUSTRIAL. We see very similar trends in growth for the Industrial segment as the overall growth dynamics closely mirror the Construction segment. The main drivers for the segment are small construction equipment, material handling and forklift applications, where the demand remains strong.

Consumer sectors, including LAWN AND GARDEN, PASSENGER CARS, MINIVANS AND SUVs as well as RECREATIONAL PRODUCTS, continue to benefit from the strong economy and low Interest rates. These segments performed very well over the past few years (2016-2019).

LAWN AND GARDEN segment shows steady demand, and the growth trend will remain flat to slightly positive in 2020 and then shifting into a slight downward trend towards 2021. The key drivers for this segment are solid housing starts and a strong economy; however, lower housing starts will slow the growth in this segment.

The Lawn and Garden market is set to include one of the strongest adoption rates among all other segments in the introduction of new battery-powered models and technologies. During the past few quarters we have been gathering intelligence on these electric models, and we will be completing data and releasing them to our client databases over the next few quarters.

Passenger Cars and Minivan/SUVs segments have experienced a continuous slight slowdown in demand since late 2016.  New vehicle sales as well as profits continued to decline in 2019. 

Overall, for 2020, we expect Passenger Car segment production volumes to drop as many consumers transition into the small SUV sector or drive their current car longer in taking advantage of today’s more reliable and durable car.

The smaller size SUV market is rapidly gaining momentum vs. large SUVs with many products coming from major global OEMs. We expect this niche market to continue to develop and be solid in the next few years with many more new product offerings from major OEMs.

Another point worth mentioning is the adoption of electric vehicles, which has been gaining ground very rapidly. Most OEMs will have solid electric product offerings within a couple of years, and we expect to see a more rapid increase in sales of electric vehicles.

At this point, the overall share of electric vehicles is still insignificant, but it is growing very rapidly; we expect this trend will accelerate much faster over the next five years. While we expect electric cars to gain in popularity, they will not gain any significant share of the total market in the near term.

MEDIUM AND HEAVY VEHICLES. After very strong demand for class 8 trucks during the past few years, the market has started to cool primarily due to an overcapacity of trucks in the market.  While freight demand is expected to be relatively strong in 2020, tonnage started to slow toward the end of 2019. 

Continued uncertainty surrounding the Chinese tariffs along with an overall slowdown in global economic growth is weighing on the freight segment.  While a slowdown in the medium duty truck segment is also expected in 2020, truck demand is not expected to decline as significantly as the class 8 segment.

POWER GENERATION. Things look good for the segment but underlying weaker global economic conditions will put pressure on the power generation markets.  Overall, the segment will follow overall economic conditions in the region.

For more information, please see our detailed analysis on the segment, published in September 2019 edition of Diesel Progress magazine.

RECREATIONAL VEHICLES This sector follows consumer sector trends and posted very good growth in 2019 vs. 2018.  Furthermore, the prospects for growth in 2020 looks promising vs. 2019. The key drivers for the segment are a peak in the economic cycle, higher interest rates as well as a change in demographics.  PSR

Yosyf Sheremeta is Director of Product Management & Customer Experience at Power Systems Research