Off-Highway Vehicle Engine Market Size, Share & COVID-19 Impact Analysis, By Power Output (HP) (Construction: Less than 100, 101-200, 201-400, More than 400; Agriculture: Less than 30, 31-50, 51-80, 81-140, More than 140), By Fuel Type (Diesel, Gasoline, Others), and Regional Forecast, 2020-2027

The global off-highway vehicle engine market size was USD 12,509 million in 2019 and is projected to reach USD 15,809 million by 2027, exhibiting a CAGR of 7.1% during the forecast period.

The increasing adoption of off-highway vehicle engines is attributed to the positive growth of construction and agricultural machinery across the globe. Rapid urbanization, coupled with a rise in infrastructure activities in residential as well as the non-residential sector, has fueled the demand for construction machinery. Furthermore, government initiatives particularly in emerging economies to increase farm mechanization have propelled the demand for agricultural machinery equipment such as power tillers and heavy-duty tractors. Hence, these factors are attributed to the rising demand for engines used in off-highway vehicles for construction and agricultural activities.

COVID-19: Declining Sales & Production of Vehicles May Obstruct Growth

The impact of the COVID-19 pandemic outbreak on the off-highway vehicle market growth has been characterized by supply chain disruptions and factory closures. Key Original Equipment Manufacturers (OEMs) in the market operate manufacturing facilities in Europe and North America, where the pandemic-induced lockdown has led to a complete collapse in demand for off-highway vehicles, particularly in April and May. However, resumption of production operations has stabilized the early demand shock among manufacturers. 

Owing to government support, the production of agricultural machinery, particularly in India and China, has returned to pre-lockdown levels. For example, agricultural tractor production in India fell sharply to 158 units in April. However, production significantly rebounded to 30751 units in May and an exponential increase of 81445 units in June. The demand for construction machinery has considerably declined, with various construction projects being entirely halted or put under review, which impacts the long-term sustainability of smaller construction equipment manufacturers. 

Furthermore, regulatory bodies have extended transition deadlines for emission regulations for engines used in off-highway vehicles. The European Parliament, for instance, extended Stage V emission protocols deadlines for agricultural and construction machinery by 12 months. However, many manufacturers are expected to be financially and technologically restricted to adhere to these guidelines as a result of the pandemic. Hence, greater consolidation among smaller market players and reduced R&D funding for initiatives such as alternative fuel use is anticipated over the forecast period.

LATEST TRENDS

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Technological Advancement of Manufacturing Processes to Boost the Market

R&D spending by key manufacturers to develop sophisticated machinery for off-highway vehicle engines is expected to increase over the forecast period. They contribute to lower labor costs and considerably boost productivity. Overall production costs are thus reduced.  For example, Caterpillar Inc. recently acquired Marble Robot, a robotics and autonomous technology solutions company. The acquisition enables Caterpillar to leverage the company’s expertise to develop scalable solutions for construction and mining machinery.

Thus, enhancing manufacturing processes via technological advancement is positively influencing the off-highway vehicle engine market growth trends.

DRIVING FACTORS

Rise in Agricultural Mechanization to Propel Adoption

Large-sized farms in North America and Europe necessitate the use of agricultural machinery. Furthermore, increased awareness among farmers in emerging economies regarding the benefits of agricultural machinery and government initiatives, such as agricultural mechanization programs implemented in South Korea, have fueled the demand for agricultural equipment such as heavy-duty combine harvesters and tractors in this region.

Agricultural mechanization enables the maximization of productivity while considerably reducing labor input-hours. Higher engine capacity tractors and combine harvesters enable farmers to enhance production and increase farm productivity. Hence, an increase in the adoption of agricultural machinery is expected to propel the growth of the market for the off-highway vehicle engines.

Rising Infrastructure Activities to Augment Growth

Rapid urbanization, greater per capita income, and increasing population growth particularly in emerging economies have surged the demand for infrastructure across the globe. Furthermore, greater participation by the private sector in infrastructure projects coupled with an increase in government expenditure on these projects has fueled the demand for construction machinery equipment, which in turn propels the demand for engines for off-highway vehicles used in these projects such as loaders, excavators, and truck-mounted cranes, among others.

RESTRAINING FACTORS

Substantial Emissions and High Operating and Maintenance Costs to Restrain Growth

Owing to a greater need for environmental sustainability, electrification, particularly in construction machinery, has increased over the past few years. However, higher capacity performance is not yet comparable to diesel engines and hence large off-highway diesel engines are largely preferred in agricultural (tractors) and construction equipment (bulldozers, loaders).

However, off-highway vehicles equipped with diesel engines generate a significant amount of emissions. According to a study conducted by the US Environmental Protection Agency, large off-highway diesel engines contribute substantial amounts of NOx and particulate matter emissions. Furthermore, operating costs are also high owing to high power requirements that result in greater fuel consumption. Hence, emission control and high operating costs are factors likely to restrain the growth of the market.

SEGMENTATION

By Power Output Analysis

High Demand for Medium-duty Tractors in Asia Pacific to Favor 51-80 HP Segment Growth

By power output, the market is segmented into less than 100, 101-200, 201-400, and more than 400 HP for construction machinery and less than 30, 31-50, 51-80, 81-140, more than 140 HP for agricultural machinery. The 51-80 HP segment is anticipated to grow at a higher CAGR owing to greater demand for medium-duty tractors in the Asia Pacific region, which holds the largest share of the agricultural tractor market.

The demand for high-performance tractors is particularly high in Europe and North America and hence the 81-140 HP and more than 140 HP segments are likely to show significant growth in these regions over the forecast period.  

The demand for backhoe loaders, dozers, and excavators equipped with 101-200 HP engines is largest across the globe. Hence, the 101-200 HP segment is expected to show a good growth rate in the market for off-highway vehicle engines.

By Fuel Type Analysis

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Diesel Segment Dominated in 2019 Fueled by Demand for High-Performance Off-Highway Vehicles

Based on fuel type, the market is segmented into diesel, gasoline, and others. According to a recent study conducted by the European Agricultural Machinery Association, IC engines with high power density fuels such as diesel are likely to remain as the preferred option among consumers owing to their powerful performance as well as flexibility such as easy refueling. Furthermore, they avert issues such as charging infrastructure required for electric machinery. Hence, the diesel engine segment is likely to dominate the market over the forecast period.

The others segment is anticipated to show good growth in the market. Electrification of heavy-duty machinery in the construction industry such as excavators and loaders has increased over the last few years. Key OEMs such as Komatsu and Caterpillar that account for the majority of the market share are increasing their electric construction equipment portfolio, which increases their commercial viability among potential customers. These factors are attributed to the positive growth of this segment.

REGIONAL INSIGHTS

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The market in Asia Pacific is characterized by growth in infrastructure activities such as road construction, housing, among others, which fuels the demand for construction equipment, and in turn augments the growth of the market for off-highway vehicle engines. Moreover, India and China are also among the largest tractor markets in the world, with government policies aimed at improving the adoption of agricultural machinery over the next few years. These factors are responsible for the dominance of Asia Pacific in the off-highway vehicle engine market share.

The market in Europe is expected to show good growth over the forecast period owing to greater adoption of heavy-duty agricultural tractors and exponential growth of non-residential construction activities, which propels the demand for engines for off-highway vehicles used in such operations.

North America is also anticipated to show good growth in the market owing to rising government spending on municipal infrastructure projects that have contributed to the high demand for construction machinery, which boosts the production of engines used in off-highway vehicles. In fact, North America and Europe are expected to exhibit similar off-highway vehicle engine market trends.

KEY INDUSTRY PLAYERS

Leading Players to Focus on Expanding Manufacturing Operations Globally

Key players in the global market include engine manufacturers such as Deutz AG, construction equipment manufacturers such as Hitachi Construction Machinery, and agricultural tractor manufacturers such as Mahindra & Mahindra Ltd.

The majority of the OEMs are focused on the expansion of manufacturing operations via joint ventures and strategic partnerships. For example, the production capacity of European OEMs is largely concentrated in Europe, with more than half the OEMs having no production footprint in other continents. Therefore, key players are focused on enhancing production capabilities via technological sharing and partnerships with regional manufacturers, particularly in countries such as China and India.

LIST OF KEY COMPANIES PROFILED:

• Caterpillar Inc. (Illinois, United States)


• Cummins Inc. (Indiana, US)


• Deutz AG (Cologne, Germany)


• Kubota Corporation (Osaka, Japan)


• Deere & Company (Illinois, US)


• Komatsu Ltd. (Tokyo, Japan)


• Hitachi Construction Machinery Co. Ltd. (Tokyo, Japan)


• AGCO Corporation (Georgia, US)


• JC Bamford Excavators Ltd. (Rocester, UK)


• Mahindra & Mahindra Ltd. (Mumbai, India)

KEY INDUSTRY DEVELOPMENTS:

• In April 2021, JCB has unveiled 45 new or improved machines in its first major product launch of 2021. The aim of the new product announcements is the adoption of EU Stage V emissions-compliant diesel engines.


• In February 2021, Kohler announced its Kohler KDI 3404TCR SCR Engine, which is a Four-stroke in-line diesel engine featuring a high-pressure injection and a turbocharger.

REPORT COVERAGE

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The off-highway vehicle engine market research report covers a detailed analysis of the market and focuses on key aspects such as leading companies, product types, and leading applications of the product. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report delivers in-depth market analysis of several factors that have contributed to its growth over recent years.

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