The mid-term outlook for the construction and mining industry presents a promising scenario. With inflation-adjusted growth projected at 4% and 1% respectively, various factors are driving this positive development. Let's explore these in detail.

Unveiling the Future of Construction and Mining

Lower Interest Rates and Their Impact

Cooling inflation enabling lower interest rates is set to have a positive influence on commercial and residential construction. In the U.S., for instance, this is supporting the sales of compact construction equipment. It shows how economic factors can shape specific sectors within the industry.Another aspect is the role of government spending. In the U.S., through initiatives like the Jobs Act, Chips Act, and Inflation Reduction Act, as well as in the EU with the new Green Deal, re-investment in infrastructure is driving growth. In countries like China with the One Belt, One Road initiative and India with the National Infrastructure Pipeline, infrastructure investments are not only ensuring domestic economic expansion but also increasing global leverage.

Electrification in Construction Equipment

By 2030, electrification in construction equipment is not expected to have significant penetration. Cities requiring zero-emission vehicle (ZEV)-based construction projects within city limits will drive low to mid-single-digit penetration rates. For ZEV penetration to become more prevalent, the solution's versatility needs to evolve in line with battery performance and cost.

Autonomous Solutions and Connected Services

There is a significant focus on autonomous solutions to optimize worksite performance. These solutions often experience customer pull as they improve efficiency and reduce labor dependency at construction sites. For example, collision awareness and avoidance systems are a case in point.Connected services also play a crucial role. A better understanding of machine problems and a proactive, maybe even predictive maintenance approach improves fleet uptime while increasing parts sales for original equipment manufacturers. Connectivity opens the door for fixed-rate maintenance contracts, enabling new business models.

The Agriculture Market and Its Trends

While construction equipment has significant applications in agriculture, the market will likely be subdued in the next few years. The COVID-19 pandemic and the Ukraine war-induced commodity boom led to a robust market where farmers bought what they needed. But now, most farmers are being cautious due to a more challenging market environment and are postponing purchases.

Mining Business Trends and Regional Variations

The main driver for growth in the mining business is a combination of global GDP growth and declining ore grades, requiring more equipment to move more material of lesser value. Regional trends vary, with a decline in coal globally offset by growth in metals and minerals, especially battery materials, copper, and iron ore.Autonomy and autonomous hauling solutions are well established in the mining industry and will continue to drive work site productivity gains by 2030. However, electrification's overall impact on equipment volumes remains moderate with less than 2% penetration.

Considerations for Western OEMs

Given the industry's moderate growth prospects and increasing global Chinese competition, Western OEMs and suppliers should watch their costs while taking advantage of global growth opportunities. They need to prepare for stronger Chinese competition by understanding Chinese cost structures, strategies, and ambitions, as well as customer needs in emerging markets. Developing product and service offerings for these use cases and investing in service solutions to bind customers beyond product performance is crucial. Monitoring Chinese technological progress and customer value solutions is also essential.Continuing to invest in worksite optimization solutions both standalone and with partners is vital. The Chinese challenge is similar to the entry of Japanese and Korean players, but China's scale is significant. Western OEMs and suppliers have no time to lose in preparing for this competition.