As the recovery of the North American market, which once powered the domestic construction equipment industry's record performance, is delayed, HD Construction Equipment and Doosan Bobcat, the two pillars of Korea's construction machinery sector, are shifting this year's strategic focus to Europe and emerging markets. Instead of relying solely on the North American market, where tariff and other uncertainties continue, they plan to find a breakthrough in emerging economies with ongoing infrastructure investment and in Europe, where a relative rebound is expected.
◇ "industry at the bottom… limits to a North American recovery"
According to the industry on the 20th, construction equipment makers that benefited from a North American boom after COVID-19 are going through growing pains after posting record highs in 2023. Among HD Hyundai Construction Equipment and HD Hyundai Infracore, which were integrated and launched as HD Construction Equipment in Jan., the operating profit of HD Hyundai Construction Equipment, which handles pure construction machinery, fell 10.3% last year to 170.9 billion won. Although sales rose 9.8% from a year earlier on infrastructure demand in emerging markets such as Africa, tariff burdens in North America and other factors weighed on profitability.
HD Hyundai Construction Equipment was affected by a total tariff of 21%, as a 15% general tariff was compounded by raw material-derived tariffs of about 6% on steel, aluminum, and others. As a result, last year's operating margin fell by 1 percentage point year over year to 4.5%.
Doosan Bobcat, which depends on North America for 73% of its sales, took an even bigger hit. Last year's operating profit plunged 21.3% from a year earlier to 686.1 billion won. Compared with the record high operating profit of 1.39 trillion won in 2023, profit was cut in half in two years.
The operating margin also halved, from 16.8% in 2023 to 7.8% last year. As demand in North America weakened, dealers focused on clearing existing inventories rather than placing new orders, and Doosan Bobcat's promotional expenditure rose to defend sales, eroding profitability.
The problem is that a meaningful rebound in the North American market is unlikely this year as well. HD Construction Equipment and Doosan Bobcat commonly view the recovery as limited because U.S. housing market indicators still trail baseline levels. On top of that, with tariff and geopolitical uncertainties unresolved, the prevailing view is that it will take time for dealers' appetite to rebuild inventory to fully recover.
◇ construction equipment industry moves to expand in new markets
In response, the two companies plan to target Europe and emerging markets with their flagship products. Looking at Doosan Bobcat's regional sales last year in dollar terms, North America (-3.0%) and Asia/Latin/Oceania (-13.2%) contracted, while Europe was the only region to grow, up 1%.
Doosan Bobcat's small construction equipment accounts for more than half of sales, making it highly sensitive to changes in the housing and rental markets. The company will therefore step up sales activities in Europe, where a housing market recovery is emerging, and strengthen sales of non-construction equipment such as agriculture and grounds maintenance equipment (GME) and material handling (MH), in addition to traditional construction machinery.
A Doosan Bobcat official said, "It is hard to say the European market has fully entered a boom phase, but we expect a relatively larger recovery than in the United States as the market rebound coincides with a rate-cutting trend."
HD Construction Equipment is expanding channels in emerging markets, focusing on "resource-rich countries." With about 40% of total construction equipment sales last year coming from emerging regions (Africa/Middle East 18.5%, Latin America 11%, India 8.7%, etc.), the company plans to defend results by leveraging solid demand in these areas.
Africa, including Ethiopia, where mining and large-scale infrastructure investment are active, and countries such as Brazil and Mongolia, where large resource development is underway, are key targets. In India, where annual growth of more than 5% is expected, the company will deploy its 20-ton flagship models and bid-strategy models, and it has drawn up a strategy to expand its sales network in the Middle East, including Saudi Arabia and the United Arab Emirates (UAE).
It will also strengthen its response to the European market. HD Construction Equipment plans to roll out next-generation new models in line with the resumption of European Union (EU) policy fund execution and reorganize its dealer network to ride a gradual market recovery.
An HD Construction Equipment official said, "In the ultra-large mining markets of emerging countries, which were difficult to penetrate as individual corporations such as HD Hyundai Construction Equipment and HD Hyundai Infracore in the past, the integrated entity is generating sales synergies," adding, "We will improve results not only through equipment supply but also through aftermarket businesses such as parts replacement and repair services, which can be up to four times the product sale price."
An industry official said, "As the supplier-dominant market that persisted after the pandemic has ended, competition among companies has intensified, but there is also an expectation that firm infrastructure demand in emerging countries will help the industry find a bottom and rebound."
The official added, "For the construction equipment industry's results this year, the key variable will be how effectively weakness in North America is offset by recovering demand in Europe and growing demand in emerging markets."