By CONEXPO-CON/AGG
The “Equipment Triangle” is a philosophy where transactions between end users, distributors, and original equipment manufacturers (OEM) should be a win-win for all parties. However, with significant changes in the construction equipment industry underway, dealerships and manufacturers must adapt to keep the Equipment Triangle in balance.
We asked industry leaders what the future holds:
1. Online sales and online rentals will increase significantly
In 2021 online sales of automobiles reached 30 percent of the market, their highest level. In July 2022, Ford announced it would move sales of its electric vehicles online at a fixed price, following Volvo and Tesla. "Whatever happens in the auto industry is coming to construction equipment dealerships," says Garry Bartecki, former CFO of the Associated Equipment Distributors.
In a 2021 study, off-highway dealers think it is likely that OEMs will implement a direct-to-consumer model within five years. As a result, they expect digital purchasing of new equipment to increase. There will still be transportation, delivery, and service, but it will be much more efficient,” explains Steve Clegg, Managing Director of Winsby, Inc., a business development firm.
“Dealers are behind the curve, and contractors are ahead of the curve when it comes to utilizing the Internet,” says Ron Slee, Managing Director of Learning Without Scars, a training resource for dealers. The shift to e-commerce creates what he calls "the Amazon effect," which means dealers must transition from selling things to selling services.
2. Electrification will disrupt the dealer’s revenue model
Electrification of construction equipment is in its early stages, but the global off-highway electric vehicle market size is expected to reach $42.7 billion by 2030. Lower operating costs, improved battery technology, and lower battery costs will drive growth. "You are going to see the whole industry switch to battery-operated or hybrid machines," says Clegg. "The number of parts drops by about 90 percent, so if your operating costs for a skid-steer were $20 an hour, that drops to $3 per hour.”
Dealers make their money on parts and services, which cover all the expenses of the dealership. “Electric machines will cut maintenance costs so that the dealers will make less money and the OEMs will make less money,” says Bartecki. “It’s a whole new ball game.”
Dealerships must focus on new revenue sources. "Because they have the service expertise, I recommend they move into supporting and servicing batteries, providing services such as recharging vehicles, tires, wear parts, and repair," says Clegg. "They can also expand into new lines of equipment."
To read the rest of this article, you are invited to purchase the digital issue here.
This article originally appeared in the bimonthly Arizona Contractor & Community magazine, May/Jun 2023 issue, Vol. 12, No. 3.
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