Equipment Type

Manufacturers Soften Sticker Shock

Equipment manufacturers recognize the realities facing them as demand for replacement machines starts to heighten: End-users will not readily accept price increases.
March 09, 2015

Rod Sutton is editorial director of Construction Equipment magazine. He is in charge of editorial strategy and writes a monthly column for the magazine, The Sutton Report. He has more than 30 years in construction journalism, and has been with Construction Equipment since 2001.

Equipment manufacturers recognize the realities facing them as demand for replacement machines starts to heighten: End-users will not readily accept price increases. The re-engineering and research-and-development costs associated with producing machines that meet EPA-mandated emissions standards must be recouped, so manufacturers know they have to raise equipment prices. Equipment professionals, however, have some options.

Rental and used equipment allow managers to field the machines necessary to produce work currently contracted, even to accomplish work awaiting in backlog. The Rental Show this year was vibrant, with several machine introductions highlighting manufacturers’ attempts to meet rental needs. Terex Construction and Case Construction Equipment introduced backhoe loaders specifically designed for rental users, and Terex Construction president George Ellis said Terex will expand the strategy to other equipment such as skid steers and wheel loaders.

Although Terex and Case promoted their backhoe loaders for the rental market, neither denied that they would also target buyers who face sticker shock as they re-enter the new-equipment market after years of economic uncertainty. Each company has engineered a bit out of the design of its machine without sacrificing the performance that their potential customers expect.

Terex and Case are the latest in a string of manufacturers who are out ahead of the sticker-shock syndrome. In February, Gradall introduced an excavator in which it reduced cost by 20 percent. Instead of the familiar Gradall undercarriage, the Discovery Series is mounted on a Freightliner M2 chassis.

The first out of the gate, however, was Volvo and its SDLG brand. The SDLG wheel loader is an alternative to “premium” loaders, and SDLG goes to market through its own distribution channel. Terex’s Ellis, when asked about his plans, said unlike Volvo’s China relationship, Terex is manufacturing their own machines. It varying its distribution strategy, too, with plans to piggyback the strong Genie rental-distribution channel.

Given Volvo’s decision to exit the backhoe loader market and instead bring a SDLG-branded machine to North America, the first category to watch is this versatile workhorse.
For equipment managers, these products signal some concession by manufacturers that market demand will not automatically accept price increases. The important metric to monitor in evaluating equipment purchases in coming months remains the cost of operation. The organization still expects the fleet manager to deliver machines that do the work in a timely fashion. The fleet manager must acquire the machine that can perform the task at a cost acceptable to the organization.

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