OPINION: What’s driving the compact construction EV market?

The compact construction market is leading the way for off-highway vehicle electrification. What’s driving it – and what could speed things up further? Alastair Hayfield, senior research director with Interact Analysis and an influential figure in the industry, considers these questions 

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Compact construction equipment is leading the charge toward electrification in the off-highway market around the globe. The market for battery electric compact construction equipment will be nearly 100 times bigger in 2030 than it is now.

What is driving this? First, these are the ‘easiest’ machines to electrify. The relatively low power requirements make engineering electric versions easier (and cheaper) than their larger siblings. Second, because of their size, these types of machines can be used indoors – in basements or demolition work – so making them emission free is a health benefit. Third, the lower noise level from electric machines versus diesel machines makes them a much better fit for work in urban areas – particularly residential areas – where they can operate for extended hours causing less nuisance for residents.

Although the global penetration of battery electric compact equipment is forecast to be only 10% by 2030, there is quite a lot of variation by country and machine type. In Western and Northern Europe, penetration will be closer to 20%, while in China it will be 15%. The penetration rate for mini-excavators will be 13% in 2030, compared with only 6% for compact track loaders and skid steers.

ABOVE: 10% of new compact construction equipment to be battery electric in 2030

Top five countries

Although the leading countries for market adoption of battery electric vehicles are in Western and Northern Europe, market volumes are going to be greatest in those countries with the largest overall markets for construction equipment. That means that largest markets for battery electric compact equipment in 2025 will be China, the USA, Germany, the UK and the Netherlands. If the USA can accelerate its policy landscape and provide more incentives, it could even overtake China by the end of the decade.

ABOVE: China and the US to be the largest markets by unit volume for battery electric compact construction equipment

Can the market speed up?

We’re often asked: what could make the market speed up adoption of battery electric machinery? Well, the answer is relatively simple – better incentives and clearer government policy. There is still a gap in total cost of ownership (TCO) between a battery electric excavator and its diesel equivalent. Although the gap is narrowing and will become positive in the mid-term, incentives that help offset the higher cost of battery electric machinery will speed up adoption. Furthermore, there is very little clear government policy related to battery electric construction machinery. If more countries and cities announced plans to phase out diesel machinery it would allow fleets to invest in the new technology, giving manufacturers and suppliers the confidence of greater volumes, helping them to reduce prices.

For more information on the off-highway vehicle market, contact Alastair Hayfield, senior research director.