Global Machinery

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Global - Machinery

0199 - 2099 - 2010

INDUSTRY PROFILE

Global Machinery

Reference Code: 0199-2099 Publication Date: March 2011

EXECUTIVE SUMMARY

Global - Machinery

0199 - 2099 - 2010

EXECUTIVE SUMMARY

Market value

The global machinery market grew by 10.2% in 2010 to reach a value of $182.4 billion.

Market value forecast

In 2015, the global machinery market is forecast to have a value of $269.3 billion, an increase of 47.6% since 2010.

Market segmentation I

Construction Machinery is the largest segment of the global machinery market, accounting for 46.3% of the market's total value.

Market segmentation II

Asia-Pacific accounts for 37.7% of the global machinery market value.

Market rivalry

The machinery market is characterized by intense competition due in part to high establishment and fixed costs and barriers to exit from the market.

TABLE OF CONTENTS

EXECUTIVE SUMMARY 2 MARKET OVERVIEW 7 Market definition 7

Research highlights 8

Market analysis 9 MARKET VALUE 10 MARKET SEGMENTATION I 11 MARKET SEGMENTATION II 12

FIVE FORCES ANALYSIS 13 Summary 13

Buyer power 14

Supplier power 15

New entrants 16

Substitutes 17

Rivalry 18 LEADING COMPANIES 19 Caterpillar, Inc. 19

Deere & Company 24

Hyundai Heavy Industries Co., Ltd. 27

AB Volvo 31 MARKET FORECASTS 36 Market value forecast 36 APPENDIX 37 Methodology 37

Industry associations 38

Disclaimer 39 ABOUT DATAMONITOR 40 Premium Reports 40

Global - Machinery0199 - 2099 - 2010

Summary Reports 40

Datamonitor consulting 40

Global - Machinery0199 - 2099 - 2010

LIST OF TABLES

Table 1:Global machinery market value: $ billion, 2006–10 10 Table 2:Global machinery market segmentation I:% share, by value, 2010 11 Table 3:Global machinery market segmentation II: % share, by value, 2010 12 Table 4:Caterpillar, Inc.: key facts 19 Table 5:Caterpillar, Inc.: key financials ($) 21 Table 6:Caterpillar, Inc.: key financial ratios 22 Table 7:Deere & Company: key facts 24 Table 8:Deere & Company: key financials ($) 25 Table 9:Deere & Company: key financial ratios 25 Table 10:Hyundai Heavy Industries Co., Ltd.: key facts 27 Table 11:Hyundai Heavy Industries Co., Ltd.: key financials ($) 29 Table 12:Hyundai Heavy Industries Co., Ltd.: key financials (KRW) 29 Table 13:Hyundai Heavy Industries Co., Ltd.: key financial ratios 29 Table 14:AB Volvo: key facts 31 Table 15:AB Volvo: key financials ($) 33 Table 16:AB Volvo: key financials (SEK) 34 Table 17:AB Volvo: key financial ratios 34 Table 18:Global machinery market value forecast: $ billion, 2010–15 36

Global - Machinery0199 - 2099 - 2010

LIST OF FIGURES

Figure 1:Global machinery market value: $ billion, 2006–10 10 Figure 2:Global machinery market segmentation I:% share, by value, 2010 11 Figure 3:Global machinery market segmentation II: % share, by value, 2010 12 Figure 4:Forces driving competition in the global machinery market, 2010 13 Figure 5:Drivers of buyer power in the global machinery market, 2010 14 Figure 6:Drivers of supplier power in the global machinery market, 2010 15 Figure 7:Factors influencing the likelihood of new entrants in the global machinery market, 2010 16 Figure 8:Factors influencing the threat of substitutes in the global machinery market, 2010 17 Figure 9:Drivers of degree of rivalry in the global machinery market, 2010 18 Figure 10:Caterpillar, Inc.: revenues & profitability 22 Figure 11:Caterpillar, Inc.: assets & liabilities 23 Figure 12:Deere & Company: revenues & profitability 26 Figure 13:Deere & Company: assets & liabilities 26 Figure 14:Hyundai Heavy Industries Co., Ltd.: revenues & profitability 30 Figure 15:Hyundai Heavy Industries Co., Ltd.: assets & liabilities 30 Figure 16:AB Volvo: revenues & profitability 35 Figure 17:AB Volvo: assets & liabilities 35 Figure 18:Global machinery market value forecast: $ billion, 2010–15 36

Global - Machinery0199 - 2099 - 2010

MARKET OVERVIEW

Market definition

The machinery market includes agricultural machinery, mining equipment, and construction equipment.

The agricultural equipment market is defined as the sale in each country of compact tractors (rated up to

50 metric horsepower), other tractors (over 50 HP), and combine harvesters. Tractors include two-wheel

and four-wheel drive tractors, as well as crawlers. The market is valued at average manufacturer list prices multiplied by units sold.

The mining equipment market includes the consumption of underground mining equipment (except parts), crushing, pulverizing and screening (except portable) machinery, portable drilling rigs and parts, portable crushing, screening, washing, and combination plants and drills and other machineries (except parts).

Surface mining equipment is not included.

The construction machinery segment includes earthmoving equipment, road equipment and concrete equipment, as well as other construction machinery. The segment includes items such as loaders, cranes, draglines, excavators, mixers and pavers, among others. Machinery which can be used in both the mining and construction industries is included in the construction equipment segment.

Values measure the consumption of machinery within a country. All currency conversions used in the creation of this report have been calculated using constant 2010 average annual exchange rates.

For the purposes of this report, the global market consists of North America, South America, Western Europe, Eastern Europe, MEA, and Asia-Pacific.

North America consists of Canada, Mexico, and the United States.

South America comprises Argentina, Brazil, Chile, Colombia, and Venezuela.

Western Europe comprises Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

Eastern Europe comprises the Czech Republic, Hungary, Poland, Romania, Russia, and Ukraine.

Asia-Pacific comprises Australia, China, India, Indonesia, Japan, New Zealand, Singapore, South Korea, Taiwan, and Thailand.

Middle East-Africa (MEA) comprises Egypt, Israel, Nigeria, Saudi Arabia, South Africa, and United Arab Emirates.

Global - Machinery0199 - 2099 - 2010

Research highlights

The global machinery market had total revenue of $182.4 billion in 2010, representing a compound annual growth rate (CAGR) of 2.4% for the period spanning 2006-2010.

Construction machinery sales proved the most lucrative for the global machinery market in 2010, with total revenues of $84.5 billion, equivalent to 46.3% of the market's overall value.

The performance of the market is forecast to accelerate, with an anticipated CAGR of 8.1% for the five-year period 2010-2015, which is expected to drive the market to a value of $269.3 billion by the end of 2015.

Global - Machinery0199 - 2099 - 2010

Market analysis

Following a period of strong growth, the global machinery market went into decline in 2009. The market recovered in 2010 and is expected to grow at a strong rate through to 2015.

The global machinery market had total revenue of $182.4 billion in 2010, representing a compound annual growth rate (CAGR) of 2.4% for the period spanning 2006-2010. In comparison, the European market declined with a compound annual rate of change (CARC) of -0.4%, and the Asia-Pacific market increased with a CAGR of 8.8%, over the same period, to reach respective values of $45.5 billion and $68.7 billion in 2010.

Construction machinery sales proved the most lucrative for the global machinery market in 2010, with total revenues of $84.5 billion, equivalent to 46.3% of the market's overall value. In comparison, sales of agricultural machinery generated revenues of $56.1 billion in 2010, equating to 30.8% of the market's aggregate revenues.

The performance of the market is forecast to accelerate, with an anticipated CAGR of 8.1% for the five-year period 2010-2015, which is expected to drive the market to a value of $269.3 billion by the end of 2015. Comparatively, the European and Asia-Pacific markets will grow with CAGRs of 5.4% and 8.7% respectively, over the same period, to reach respective values of $59.2 billion and $104.4 billion in 2015.

Global - Machinery0199 - 2099 - 2010

MARKET VALUE

Global - Machinery

0199 - 2099 - 2010

MARKET VALUE

The global machinery market grew by 10.2% in 2010 to reach a value of $182.4 billion. The compound annual growth rate of the market in the period 2006–10 was 2.4%. Table 1: Global machinery market value: $ billion, 2006–10

Year

$ billion

€ billion

% Growth

2006 165.7124.8 2007 187.6141.3 13.2%

2008 198.8149.7 6.0%

2009 165.5124.7 (16.7%)

2010 182.4

137.4

10.2%

CAGR: 2006–10

2.4%

Source: Datamonitor D A T A M O N I T O R

Figure 1: Global machinery market value: $ billion, 2006–10

Source: Datamonitor

D A T A M O N I T O R

MARKET SEGMENTATION I

Construction Machinery is the largest segment of the global machinery market, accounting for 46.3% of the market's total value.

The agricultural machinery segment accounts for a further 30.8% of the market.

Table 2: Global machinery market segmentation I:% share, by value, 2010

Category % Share Construction Machinery 46.3% Agricultural Machinery 30.8% Mining Equipment 22.9%

Total 100% Source: Datamonitor D A T A M O N I T O R Figure 2: Global machinery market segmentation I:% share, by value, 2010

Source: Datamonitor D A T A M O N I T O R

Global - Machinery0199 - 2099 - 2010

MARKET SEGMENTATION II

Asia-Pacific accounts for 37.7% of the global machinery market value.

Americas accounts for a further 34.8% of the global market.

Table 3: Global machinery market segmentation II: % share, by value, 2010

Category % Share Asia-Pacific 37.7% Americas 34.8% Europe 25.0% Middle East & Africa 2.5%

Total 100% Source: Datamonitor D A T A M O N I T O R Figure 3: Global machinery market segmentation II: % share, by value, 2010

Source: Datamonitor D A T A M O N I T O R

Global - Machinery0199 - 2099 - 2010

FIVE FORCES ANALYSIS

The machinery market will be analyzed taking manufacturers of machinery as players. The key buyers will be taken as end-users, and providers of raw materials and production equipment as the key suppliers. Summary

Figure 4: Forces driving competition in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

The machinery market is characterized by intense competition due in part to high establishment and fixed costs and barriers to exit from the market.

Buyers are fragmented with a number of companies of varying size having a demand for products.

Suppliers have fairly low differentiation of raw materials and there is often little to distinguish between suppliers, and so manufacturers have relatively low supplier switching costs. Entry to the market is possible on a small scale through specialized manufacture, although this is likely to be on a local rather than an international scale.

Global - Machinery0199 - 2099 - 2010

Buyer power

Figure 5: Drivers of buyer power in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

Due to the diversified nature of this market, buyers are fragmented and include mining companies, agribusiness companies and construction companies. There are generally a large number of medium and large businesses requiring products from this market. The loss of business from larger buyers would adversely affect market players' revenues.

The varied requirements of different buyers allow manufacturers to differentiate themselves by offering products answering to specific customer needs.

A number of leading market players have established globally recognized brands. For example, John

Deere manufactures all its machinery, from tractors to lawnmowers, under the same name, creating a high level of brand identification and loyalty; while CNH Global trade a number of products under the 'New Holland' brand. A strong brand reputation can influence buyers in this market, thus weakening their power. On the other hand, following recent economic difficulties many companies (particularly small/medium) are increasingly likely to shop around before making a purchase.

Most buyers are unlikely to integrate backwards into the manufacture of machinery, which strengthens the incumbents. On the other hand, buyer power is strengthened by relatively low switching costs, and the lack of differentiation of a number of these products. Overall, buyer power is moderate.

Global - Machinery0199 - 2099 - 2010

Supplier power

Figure 6: Drivers of supplier power in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

With fairly low differentiation of raw materials such as steel and aluminum in this market, there is often little to distinguish different suppliers, and machinery manufacturers tend to incur low switching costs if they change their suppliers of these materials, except if there are long-term obligations to meet. The price of raw materials can be volatile, with substantial variations being evident from year to year. For example, aluminum prices rose to very high levels from 2005 to 2008, crashing at the end of 2008 and then starting to recover fairly continuously. By the beginning of 2011, aluminum prices were around 10% higher than for the same period in 2010, in line with last years forecasts; however, further forecasting suggest these prices will continue to increase through the year. Market players may attempt to overcome price fluctuations through the adoption of hedging strategies and by entering into long-term contracts with suppliers where possible. Where value-added inputs, such as engineered components, are concerned, supplier power is stronger because they are offering more highly-differentiated goods. A number of market players are highly reliant on single suppliers. CNH Global, for instance, relies upon single suppliers for certain components, primarily those that require joint development between the company and supplier. This again strengthens supplier power. Overall, supplier power is assessed as moderate in the market.

Global - Machinery0199 - 2099 - 2010

New entrants

Figure 7: Factors influencing the likelihood of new entrants in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

The global market is dominated by a small number of large international players. Entry to the market as a direct competitor to companies such as Caterpillar would require considerable capital outlay to set up production plants, involving high fixed costs offset by scale economies. However, small-scale entry is possible by short-line and specialty manufacturers. Entrants on a small scale would generally operate on

a local rather than a global level, and operate in individual markets. Large market players possess

significant intellectual property assets in terms of patents, licenses, and trademarks. Furthermore, leading manufacturers have established strong brands that are recognized globally. Regulations exist in this market, such as international environmental laws governing the use, transport and disposal of substances and control of emissions. In addition to governing manufacturing and other operations, these laws often impact the development of products, adding to costs. The likelihood of new entrants is moderate overall.

Global - Machinery0199 - 2099 - 2010

Substitutes

Figure 8: Factors influencing the threat of substitutes in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

Substitutes as such do not exist in this market; however, they may be considered in terms of used products being sold privately. Such equipment is cheaper than the equivalent bought new, although it is unlikely to be under any kind of warranty if sold privately which may be of great significance when it comes to heavy duty machinery. The availability of parts may be an issue for older vehicles, and they are also likely to have higher levels of engine emission. New vehicles meeting emission standards may qualify for tax incentives, which would reduce the threat of substitutes. Overall, the threat of substitutes is moderate.

Global - Machinery0199 - 2099 - 2010

Rivalry

Figure 9: Drivers of degree of rivalry in the global machinery market, 2010

Source: Datamonitor D A T A M O N I T O R

The machinery market is dominated by a small number of large multinational players. Competition between large players is intense due to a number of factors, such as high fixed costs for players, and low switching costs for buyers. The revenues accrued by market players are highly dependent upon end-user industry conditions. For example, the sale of farm machinery is affected by economic conditions - farmers tend to postpone the purchase of equipment when the farm economy is depressed. Seasonality is also a factor for a number of end-user industries. However, market players tend to produce products for a number of industries, including agriculture, mining, and construction. Consequently players are unlikely to be highly dependent on the sales to one industry, but are dependent on the market overall. Rivalry is further alleviated by product differentiation through both specific functionality and brand reputation. Rivalry in this market is strong.

Global - Machinery0199 - 2099 - 2010

LEADING COMPANIES

Caterpillar, Inc.

Table 4: Caterpillar, Inc.: key facts

Head office: 100 North East Adams Street, Peoria, Illinois 61629 USA

Telephone: 1 309 675 1000

Website: https://www.360docs.net/doc/8217290816.html,

Financial year-end: December

Ticker: CAT

Stock exchange: New York

Source: company website D A T A M O N I T O R

Caterpillar is engaged in the manufacturing of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. Caterpillar has plants worldwide and sells its equipment globally through a network of about 178 dealers, serving 182 countries and operating 3,518 places of business, including dealer rental outlets.

Caterpillar operates through three principal lines of business: machinery, engines, and financial products.

The machinery business includes activities related to design, manufacturing, marketing, and sales of machinery equipments. These products include machinery and equipments for construction; mining and forestry; track and wheel tractors; track and wheel loaders; pipe layers; motor graders and wheel tractor-scrapers. The company also offer products which include track and wheel excavators; backhoe loaders;

log skidders; log loaders; off-highway trucks; and articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment and related parts. It also offers logistics services for other companies and the design, manufacture, remanufacture, maintenance and services of rail-related products.

The company's engines business designs, manufactures, markets and sells diesel, heavy fuel and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, locomotives, marine, petroleum, construction, industrial, agricultural and other applications. In addition, Caterpillar provides industrial turbines and turbine related services for oil and gas and power generation applications.

Reciprocating engines meet power needs ranging from 10 to 21,800 horsepower (8 to over 16,000 kilowatts); and turbines range from 1,600 to 30,000 horsepower (1,200 to 22,000 kilowatts). One of the main subsidiaries of the company, Caterpillar Remanufacturing Services, is a leading provider of

Global - Machinery0199 - 2099 - 2010

remanufacturing services to the automobile industry, processing more than two million units annually and recycling more than 140 million pounds of remanufactured products each year.

The financial products business of the company consists primarily of Caterpillar Financial Services (Cat Financial), Caterpillar Insurance Holdings (Cat Insurance), Caterpillar Life Insurance Company (Cat Life Insurance), Caterpillar Product Services Corporation and their respective subsidiaries. Cat Financial provides a range of financing alternatives to customers and dealers for Caterpillar products. These products include Caterpillar equipment, machinery and engines. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term dealer receivables from Caterpillar and its subsidiaries.

Caterpillar Insurance Company is licensed to conduct property and casualty insurance business in 49 states and the District of Columbia. Caterpillar Life Insurance Company is licensed to conduct life and accident and health insurance business in 26 states and the District of Columbia. Caterpillar Product Services conducts a machine extended service contract program in Germany by providing machine extended warranty reimbursement protection to dealers in Germany.

Caterpillar reports its revenues through 12 business segments which include building construction products, Cat Japan, earthmoving, electric power, excavation, large power systems, logistics, marine and petroleum power, mining, turbines, financing and insurance services, and other activities.

The building construction products segment is engaged in the development, manufacture, marketing, sales and product support of light construction machines, forestry machines and select work tools. The Cat Japan segment offers small, medium and large hydraulic excavators, manufacturing of select machinery and components, marketing, sales and product support of machinery, engines and components in Japan. The earthmoving business segment is engaged in the product management, development, marketing, sales and product support of medium wheel loaders, medium track-type tractors, track-type loaders, motor graders and pipelayers. It also manufactures select machines in Asia.

Caterpillar's electric power segment is primarily engaged in the manufacture, marketing, sales and product support of reciprocating engine powered generator sets as well as integrated systems used in the electric power generation industry.

The excavation segment is responsible for the development, marketing, sales and product support of small, medium and large excavators, wheeled excavators and articulated trucks. It also manufactures select machines in Asia and articulated trucks. The large power systems segment is engaged in the development, manufacture and product support of reciprocating engines supplied to Caterpillar machinery and the electric power, petroleum, marine and industrial industries. It is also responsible for engine component manufacturing. The company's logistics segment offers logistics services for Caterpillar and other companies.

Global - Machinery0199 - 2099 - 2010