Eric Alström, President, Danfoss Power SolutionsDanfoss Power Solutions
1. What challenges most affected the mobile OEM landscape in 2024?
Market dynamics have been the most challenging aspect of 2024. Last fall when we were talking to our customers and assessing what 2024 would look like, we were banking on a flat year compared to 2023. But for many of us, the market has been down quite a bit. A number of factors have led to this. War in the Middle East and Ukraine plus geopolitical tension in Asia are among them, but the root cause is the high interest rates we see in many of our key regions. Securing new off-highway machinery typically entails financing or leasing, so price sensitive end customers — particularly those in agriculture and construction — have delayed procurement because of high borrowing costs. In the ag market, crop prices aren’t helping. They’ve been low or wildly fluctuating, which means farmers are especially hesitant to replace machinery.
Working in such a cyclical industry, we are prepared for these down cycles, but the severity and length of this one took us a bit by surprise. So, 2024 has been tougher than expected. However, with the recent Federal Reserve and European Central Bank interest rate cuts, we’re optimistic we will see improvement in 2025.
2. What are your predictions for the mobile OEM landscape in 2025?
I think we’ll see demand increase next year. The difficult question to answer is when. A lot of factors will have an impact on this, interest rates being one of them. While the recent rate cuts have been welcome news and will help to some extent, we should be cognizant of inventory levels in our supply chains. With the lower demand we’ve seen this year, there are more machines sitting on dealer lots and our partners have higher levels of stock than normal. Moving existing inventory could delay the upswing a little bit. Again, we’re in a cyclical industry. It is difficult to grow while we’re in this trough, but the buyers will come back. I think things will start turning again in 2025. At what level and what pace is hard to predict, but the general consensus is that we will see an improvement on the demand side.
3. In what areas do you see the most potential for acceleration or advancement in 2025?
We see a lot of potential in high-efficiency hydraulics. Our customers and the markets they operate in are requiring more fuel-efficient and emissions-lowering technologies, and we're well positioned to support that, from both a core hydraulics and electrification standpoint. While some say the efficiency of hydraulics has plateaued, we believe there’s a lot more we can do. We continue to optimize our components; in fact, our latest generation of valves and pumps are significantly more efficient than previous generations — and more productive. There are also considerable optimization levers at the systems level. Suppliers know where their products run most efficiently and can generate control algorithms to operate at those peak points. We’re developing off-the-shelf, validated system solutions and, in some cases, we’re doing the systems engineering work for our customers. The higher productivity and better fuel efficiency we’re able to achieve is a compelling value proposition.
I expect OEM interest in and supplier commercialization of integrated system solutions will accelerate in the years to come. Hydraulic efficiency is arguably more important in battery-electric machines than it is in conventional diesel-driven machines because of the hydraulic system’s impact on machine runtime. Many of the first-generation electric machines out there are unable to operate for a full day on a single charge. We're fielding many inquiries and we’re working with customers to develop more efficient solutions. Hydraulic optimization for electric machines is becoming an everyday topic for us, and we only expect it to accelerate as electrification picks up.
4. What will be the biggest challenge for OEMs and the industry in general in 2025?
As OEMs strive to bring differentiated machines to market with ever-higher levels of efficiency, autonomy, and intelligence, we see a shift happening in the traditional procurement approach. Rather than buying single components and handling the full integration themselves, many OEMs will find it beneficial to bring fully optimized system solutions to their machines. This will require more of a partnership mentality with suppliers, which is a significant shift from the way things have been done in the past. The challenge will be overcoming the objections, but the advantage is gaining first-mover status. We strongly believe this approach will bring higher value machines to the market.
5. What factors should engineers and their companies consider when making decisions in the mobile OEM space in 2025?
Aside from the areas already discussed — striving for greater efficiency and considering system solutions and supplier assistance — sustainability is an increasing area of focus. Emerging legislation will challenge OEMs and suppliers to create more efficient and more recyclable solutions. We’re seeing OEMs evaluate the environmental impacts of a machine throughout its lifecycle, and suppliers like us are ready to equip them with the data they need for these assessments. They are very serious about it, as are we. Sustainability is at the core of our business; we integrate it into everything we do, from our operations to the way we engineer solutions. This concept also helps us recruit. Younger generations entering the job market are typically more environmentally conscious, and being part of a company that’s serious about sustainability can be a deciding factor in their job search. In general, there is strong pull for more sustainable and emissions-lowering technology. If it’s not already a consideration, OEMs would be wise to begin evaluating how it should play a role in their decision-making.
6. Please highlight a recently introduced product from your company that meets a specific, pressing need in the mobile OEM space, and describe briefly how the product is uniquely designed to meet that need.
Last year we introduced and we’re now getting ready for the production launch of our Danfoss Editron ED3. It’s a bidirectional onboard charger and electric power supply that offers high charging power and distributes energy to a vehicle’s auxiliary functions. Designed for off-highway machinery and on-highway commercial trucks, the ED3 enables rapid overnight and opportunity charging using readily available AC chargers. ED3 can deliver up to 44 kilowatts to the main high-voltage battery — the highest available today — and up to 44 kW of AC or DC power, as needed, to other subsystems. The ability to rapidly charge with AC power is crucial to making the electric machine business case. By providing nearly double the charging power of the market standard 22 kW onboard charger, the ED3 decreases charging time and enables overnight charging of heavy-duty machinery using AC chargers. By integrating an electric power take-off, the ED3 reduces complexity while providing space, weight, and cost savings.
7. What are some of your company's priorities in 2025 with regard to electrification, automation, innovation, emission reduction and/or other emerging trends?
Electrification is part of our core at Danfoss, and we invest in our core. Our Editron division is our fastest growing business, which is no surprise as the pace of electrification has picked up. What used to be proof-of-concept machines are now real electric solutions being sold to buyers interested in far more than sustainability. The lack of skilled labor is driving the industry toward more automation and more intelligence on machines. This will increase productivity and efficiency while improving safety. At Danfoss we are investing considerably in these areas as well as the software, electronics, and systems engineers required to deploy such capabilities. Hydraulics is also our core, and we remain bullish on the technology. We've grown our business by more than 50% since 2017, and we will continue to grow by virtue of having great hydraulic and electrification products complemented by fluid conveyance, electronic controls, and software.
