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NON-ROAD MOBILE ENGINE

AND AFTERTREATMENT
FORECAST
NRMM Market Update

www.kgpauto.com Briefing 2
Non-Road Mobile Machinery and Engine and Aftermarket Forecast Service

Briefing Paper # 2-
NRMM Market Update 2017/2018
Paris Kiernan, Analyst

After the effects of the Chinese stock market ment sales of 7% and 6% forecasted respec- See our website
crash in 2015 forecasts for 2017 are looking tively. Although the German market will be ex- for information on:
brighter with a 3.5% rise in global GDP predict- pected to see sales decline of 12% this year,
the market will fall to sustainable levels after a Regular Services
ed. This will have positive impacts on the
NRMM market with consumer and investor sen- record volume of 37,000 units sold in 2016 due CV Engine and
timent starting to improve. Already we have to the booming residential construction market. Aftertreatment
seen global construction equipment (CE) sales After a 6% drop in sales for the UK, the region Forecast
up more than expected while agricultural equip- is expected to hit a sales volume high post-
ment (AG) sales remain relatively flat in North crisis with an 8% rise this year. These four
America and Europe but up in developing mar- economies are the main drivers of the construc- Non-Road Engine and
kets. tion equipment market for Western Europe ac- Aftertreatment
counting for just under 75% of total sales. Forecast
NRMM Forecast North America*
China
Latin America 10%
15%
2017’s overall NRMM production is set to in- 1% New Services
crease year-on-year with substantial improve-
ments in the construction equipment market in EU & EFTA Non-Road Mobile
14%
Asia Pacific (including China, Japan, India) Machinery Driveline
Japan
and C&E Europe albeit at volumes significantly 14%
Non-Road Mobile
C & E Europe
below 2014’s level. While in EU & EFTA, the 1% Machinery
construction equipment market is to remain flat Electrification
for the near future whereas the agricultural India
6%
equipment market is expected to expand with
production volumes back to 2014’s pre-crisis Asia Pacific
levels by 2020. In North America, all segments (Other)
39%
are increasing in production volumes, but the
Figure 2 CE 2016 Production Split by Region
construction equipment market is closer to
2014’s level and the agricultural equipment In C&E Europe the construction market is gen-
market fared worse in terms of production vol- erated mainly from Russia, Turkey and Bela-
umes declining from low commodity prices. Lat- rus. Russia’s construction equipment market
in America’s NRMM markets are slowly recov- has continued to recover with the market up
ering from very low levels with production vol- 101% in August in comparison to the same peri-
umes not expected to hit pre-crisis levels until od in 2016. Full year production is set to rise
after 2023. 5% for all three countries in comparison to 2016
with further improvements of 5% in Russia and
Construction Equipment 10% in Turkey and Belarus in 2018.

Western Europe’s construction equipment The Chinese construction equipment market

market is forecast to grow 2% in 2017 after has seen rapid growth with a 70% rise in sales
strong growth of 11% in 2016 and forecasted to for the first half of 2017 in comparison to the
rise 3% in 2018. Strong sales in major econo- same period in 2016 after a recovery in the
mies of France and Italy are expected to con- market in the latter half of 2016. The govern-
tinue with an increase in construction equip- ment’s economic stimulus policies included the
increase of infrastructure investment which be-
Figure 1 NRMM Production Outlook came apparent in 2016 and has resulted in the
2017 2020
Production Units ('000) CE AG MH CE AG MH Control: 2016
China      
Japan        > 5%
India        > 1%
Asia Pacific (Other)        Flat
C & E Europe   -   -  < 1%
EU & EFTA        < 5%
Latin America      
North America*      
*Includes Mexico

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Non-Road Mobile Machinery and Engine and Aftermarket Forecast Service
sudden expansion of the construction equip-
ment market from 2016Q3 onwards. However,
the mining and agricultural equipment sectors
have not seen such improvements. Ongoing
regulation in the mining sector has resulted in
a weak market with little replacement of old
equipment fleets. Full year sales are likely to
increase by 55% in 2017, however sales for
2018-2021 are only expected to increase 4%
due to the unsustainable nature of this year’s
growth.
India’s new government put in place policies
which increased infrastructure development
resulting in strong growth of 36% in 2016.
Growth has continued into the first half of 2017
at a rate of 18% due to the goods and services
tax causing a pre-buy effect which will slow-
down in the second half of the year. Hence, the
forecast for the full year is for construction
equipment sales to rise at a slower rate of 10%
increasing to 73000 units. The Indian construc-
tion equipment market will continue to grow
over the next five years to exceed 90,000 units
in 2021. Next year sales are forecasted to in-
crease 11% followed by a slower rise in 2019
and a 5% growth in both 2020 and 2021.
Japan’s construction equipment market is set
for increased production volumes of 9% this
year with continued growth of 10 and 11% in
2018 and 2019. However the market is set to
decline from 2020-2022 with a fall in 9% in
comparison to the forecasted production in
2018.
The North American construction equipment
market is expected to see unit sales growth of
6% for 2017 and further growth of 9% in 2018.
This comes after a 3% decline last year due to
weak global economic conditions and low oil
prices dampening investment.
Latin America’s construction equipment sec-
tor recovery is taking place due to increased
consumer confidence and infrastructure invest-
ment with Brazil’s government announcing 34
infrastructure projects by 2018. Production of
construction equipment in Brazil is expected to
grow significantly in 2018 and 2019 by 8% year
on year after a recovery of 3% expected this
year from very low levels in 2016.
Agricultural Equipment
Europe’s agricultural industry has seen strong
business sentiment in 2017 hitting its highest
values since 2012 for CEMA’s general busi-
ness climate index. Turnover is expected to
continue its rise throughout the second half of
the year considering past and current order
intake. The industry differs by country with Po-
land and Germany expected to grow and so-
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lidify. Whereas Spain is anticipating a decline
due to poor weather conditions. France and
Italy have mixed reviews of expectations for
the market while belief is that many CIS coun-
tries have already reached their peak.
See our website
North America*
Latin America 6%
China
for information on:
13%
EU & EFTA
2%
6%
Japan Regular Services
C & E Europe
5%
5% CV Engine and
Aftertreatment
Forecast
India
21%
Non-Road Engine and
Aftertreatment
Asia Pacific Forecast
(Other)
42%
Figure 3 Ag 2016 Production Split by Region New Services
Russia’s agricultural production hit record vol-
Non-Road Mobile
umes in 2016 to become the region’s third larg-
Machinery Driveline
est export commodity. Factoring in the rapid
economic recovery the agricultural equipment Non-Road Mobile
market will benefit in 2017 with unit shipments Machinery
of farm tractors from Jan-July up 26% in com- Electrification
parison to the same period in 2016. Production
for the full year is set to increase roughly 5%
with growth of around 9% in 2018 and 2019. In
C&E Europe, both Belarus and Turkey are
larger than Russia in terms of agricultural pro-
duction. Turkey is the largest with production
just under 65 thousand units in 2016 and Bela-
rus with just under 44 thousand units in 2016
with both countries following the same growth
trend as Russia, rising between 4-5% this year
and then doubling to 9-10% in 2018.
China’s agricultural equipment market has not
received any stimulus like the construction
equipment market in fact it’s seen discourage-
ment with the reduction in budget size for the
subsidisation of purchasing farm machinery.
Adding to the fact new emission standards in
2016 caused a pre-buy effect, domestic sales
have suffered resulting in a fall of roughly 10%
year-on-year. The market is set to balance
back out next year with production to increase
around 10% and a further increase by 7% ex-
pected in 2019.
India’s agricultural equipment market is ex-
pected to return to 2013’s high level of 620
thousand units this year as an above normal
rainfall during the monsoon period this year will
have a positive impact on demand for agricul-
tural tractors. Other factors benefiting agricul-
tural equipment demand are the government,
non-agricultural applications and loan waivers.
The government continues its efforts to in-
crease agriculture production through various
Non-Road Mobile Machinery and Engine and Aftermarket Forecast Service
subsidies as over 58% of the Indian’s popula-
tions primary source of income is agriculture.
Growing infrastructure developments have also
increased the usage of tractors in non-
agricultural applications. Currently, famers are
struggling with debts in which some states in
India have waivered loans to farmers of around
US$12 billion. Production for the full year is set
to increase 8% with a 5% rise the year after
and a slowdown in growth forecasted in 2020
rising just 1%.
Japan is expected to see growth in terms of
production volumes in 2017 up 3% on last
year. However, production volumes are still
well below pre-crisis volumes and although
volumes are set to increase year on year they
are to remain under this volume for the fore-
seeable future. Production for 2017 is ex-
pected to rise 2-3% in comparison to last year
with a significant expansion in production in
2018 by 7%.
The North American agricultural equipment
market has seen an improvement in the first
half of 2017 in comparison to the first half of
last year with retail sales increasing 6%. April
peaks due to the cyclical nature of the market
with 2017’s level up 11% on 2016. For the sec-
ond half of the year sales will slow down slight-
ly following suit of previous years but will re-
main at a higher overall level. Production levels
are to follow an upwards trend rising between
6-8% over the next three years.
Brazil’s political tensions and crop failures due
to prolonged droughts negatively impacted Lat-
in America’s agricultural market last year. How-
ever, the agricultural equipment market is start-
ing to recover in 2017 from very low levels
thanks to improving economic conditions with
the country experiencing growth for the first
time in two years in Q1. For the first half of
2017’s unit sales increased 17% compared to
the same period last year and growth is ex-
pected to continue through into the second half
of the year. This recovery to the market has
improved business confidence with production
set to rise 2% next year and 9% in 2019 and
2020.
Material Handling (MH)
The Material handling segment consists of five
classes:
 Class 1 – Electric Rider Trucks – Counterbal-
anced
 Class 2 – Electric Warehouse Rider Trucks
 Class 3 – Electric Warehouse Pedestrian
Trucks
 Classes 4 and 5 – Internal Combustion
Trucks, Cushion and Pneumatic Tires, Coun-
terbalanced
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Class 1 to 3 are growing due to increased in-
dustrialisation and health and safety laws, but
they’re electric so are not covered in the KGP
forecast. Contact us directly for more infor-
See our website
mation.
for information on:
Figure 4 MH 2016 Production Split by Region
Regular Services
North America* CV Engine and
EU & EFTA 4%
Aftertreatment
12%
China
Forecast
31%
Non-Road Engine and
Aftertreatment
Forecast
Japan
Asia Pacific 9% New Services
(Other)
44% Non-Road Mobile
Machinery Driveline
Overall, the Material Handling market for the
first half of 2017 is seeing stronger growth than Non-Road Mobile
the previous year with global order intake up Machinery
18%. This has been driven by an economic Electrification
recovery in Eastern Europe and the govern-
ment increasing infrastructure investment in
China has increased both regions orders by
27% and 41% respectively.
Globally, class 4/5 has seen stable levels of
orders from 2015 to 2016 up 1.7% to 445 thou-
sand units driven mainly due to the Asian mar-
ket increasing 5%. All other regions stayed
relatively flat in terms of orders and shipments
except America which dropped 6% in terms of
orders. In the first three months of 2017, Eu-
rope, America and Asia each had order vol-
umes of 19, 25 and 89 thousand units with the
rest of the World’s 138 thousand units made
up of Africa and Oceania. Based on these
quarter one orders we estimate the full year to
increase up to 510 thousand units as Europe
and Asia are expected to expand while other
regions are set to remain relatively flat.
In terms of production class 4/5 are to see a
increase of roughly 5% over the next two years
resulting in over 500 thousand units in 2019.
China is the largest globally in this market with
the country accounting for roughly half of all
production. They are on course for a 10% in-
crease in production this year with a 5% rise in
both 2018 and 2019. The EU & EFTA region
are the next largest globally with roughly 100
thousand units produced in 2016. Production is
expected to rise between 3-4% this year and is
set to expand further in 2018 increasing 9%.
Non-Road Mobile Machinery and Engine and Aftermarket Forecast Service

Meet us!
KGP will be attending various industry events in Autumn/Winter 2017. Contact us to arrange a free
consultation on Single Client, Multi-Client and Special Reports at any of the following:

• 12-14th November - Agritechnica - Hannover See our website

• 14th-15th IVT Conference 2017 November - Cologne for information on:

• 15th November LMC Commercial Vehicle Seminar 2017 – London Regular Services
We can also prepare a client specific webinar to introduce our services and provide an industry CV Engine and
overview. Aftertreatment
Forecast
Briefings
KGP’s free briefings are published twice per month covering Commercial Vehicle and Non-Road
Non-Road Engine and
Mobile Machinery topics. Forthcoming briefings will include:
Aftertreatment
• Hybrid and Electric Commercial Vehicle Trends Forecast

• Hybrid and Electric Non-Road Mobile Machinery Trends

References New Services

• Knibb Gormezano and Partners Q2 2017 Non-Road Engine Market Sum- Non-Road Mobile
mary Report:- Click Here Machinery Driveline
Non-Road Mobile
• Off-Highway Research International Database Service Update August
Machinery
2017 Click Here Electrification
KGP’s partner, Off-Highway, Off-Highway Research offers a unique level of international research
expertise to the construction, earthmoving, mining, industrial and agricultural equipment industries.
This specialist capability, offered by offices in the UK, China, India, the USA and Japan is available
through a combination of Subscription Services and Private Client Research. The company is
staffed by industry specialists with a wide range of industry, language and consultancy skills, and
is supported by a unique database of information. Recent Multi-Client studies launched by Off-
Highway Research include: South Korea Click Here and Global Excavators Click Here

Contacts
Alex Woodrow Managing Director
alexwoodrow@kgpauto.com
James Dorling Senior Analyst
jamesdorling@kgpauto.com
Paris Kiernan Analyst
pariskiernan@kgpauto.com
Mick Beeson Sales Manager
mickbeeson@kgpauto.com
Knibb, Gormezano and Partners

6 Lancaster Park, Newborough Road, Needwood, Staffordshire, DE13 9PD UK

Disclaimer
Information contained in this document has been obtained by Knibb, Gormezano & Partners from
industry sources believed to be reliable. However, because of the possibility of human or mechani-
cal error by our sources, Knibb Gormezano does not guarantee the accuracy, adequacy, or com-
pleteness of any information and is not responsible for any errors or omissions or for the results
obtained from the use of such information.
Copyright Knibb, Gormezano and Partners 2017

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