There has been much uncertainty and concern in the mobile original equipment manufacturer (OEM) landscape in 2024. All of manufacturing, really, has been affected due to issues such as inflation, global conflicts, the 2024 Presidential Election and a changing market that is going more digital. The mobile OEM landscape has been very analog compared to some of its counterparts, but that is changing. Concepts such as digital transformation and the industrial Internet of Things (IIoT) are taking root, but how and what they can do are still an open question. So are issues with supply chain management, electrification, fleet management and more.
For this year’s State of the Industry, OEM Off-Highway spoke with executive representatives across the equipment manufacturing landscape as they share their perspectives on today’s most pressing challenges and what may be the horizon for manufacturing in the future.
Many challenges and headwinds for OEMs
While no two answers were the same, there were many different challenges OEMs faced and will continue to face. There are many challenges ahead and many are the result of lingering effects over the past few years.
Jason Steadman, business development manager – electrification – North America for Vanguard Commercial Power, said, “2024 has been a dynamic year for mobile original equipment manufacturers (OEMs), with numerous challenges impacting the industry. While supply chain disruptions are easing, they haven't disappeared and continue to delay production and impact the availability of essential components. Getting timely access to the specialized components needed for new technologies like electrification remains a real challenge.”
Enrique Busquets, director of mobile service & aftermarket at Bosch Rexroth, said about the current market: “The mobile OEM landscape has been significantly influenced by the slowdown in agriculture, coming down from a peak in 2022, and construction, which has consequently resulted in elevated inventory equipment levels.” He also noted the challenges coming from all the uncertainty in the market relating to the market, the election and more, which has created general anxiety.
Electrification, or any power source or power generation, is going to be a major focus. Michael Lefebvre, manager of global marketing and product strategy for John Deere Power Systems, said, “OEMs must carefully assess the potential of each power source — from optimizing traditional internal combustion engines to exploring the possibilities of electrification, renewable fuels and even hybrid solutions.”
Steve Hornyak, president and CEO at Turntide Technologies, spoke about the skills gap, which has been another issue plaguing many manufacturers regardless of industry.
“As in past years, finding and retaining talented, experienced engineers continues to be a challenge for component manufacturers and equipment and vehicle OEMs. Currently, the demand is outpacing available personnel.”
Eric Alström, president at Danfoss Power Solutions, said about the market as a whole, “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.” That turned out to not be the case, though, Alström said, and the market has struggled. “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.”
Dr. Wilfried Aulbur, senior partner for Roland Berger, echoed these sentiments. “A key challenge of OEMs in 2024 was by and large a moderation of markets across the globe. The agricultural industry was significantly impacted as the buying bonanza induced by COVID, low interest rates and the war in Ukraine. The construction industry saw moderation in key regions, notably residential in China but also residential in Europe and the US, as homeowners adjusted to higher interest rates and a more difficult economic environment globally.
Overall optimism for the future of the mobile OEM market
Despite the challenges and headwinds the last couple years, there is a general sense of optimism. That was true even during the tough times. Many companies accepted there would be some turbulence, which has been a common theme this decade, as the world adjusted to a new reality thanks to the COVID-19 pandemic. Many practices considered common in manufacturing had to change and this has mostly been for the better as the status quo no longer became acceptable. The road ahead is a daunting one, but companies are prepared.
Lefebvre said, “2025 promises to be another dynamic year for the mobile OEM landscape. The industry won't be defined by a ‘one size fits all’ approach to power, but rather by a diverse array of solutions. We anticipate increased adoption of hybrid systems and battery electric solutions, all while advancements in internal combustion engines continue. OEMs will need to offer a range of options to meet the needs of various applications and customer preferences.”
Aulbur said OEMs would do well to safeguard themselves from international competition, particularly that coming from China. “The increasing presence of Chinese competition in emerging markets as well as Europe is a common theme across passenger cars, commercial vehicles and off-highway vehicles. Chinese players have made significant strides in key technologies such as batteries and smartphone-like user experiences in equipment that resonate with customers.”
He added companies need to respond to this challenge through improved services, cost-competitive products and better internal processes.
One way is with digital transformation and the IIoT, which can help coordinate many devices at once and provide a clearer picture of what’s happening through better automation. Busquets said about automation and its potential, “Automation within fleet management has enormous potential for OEMs, not only in system-wide monitoring and establishing operational standards, but in reallocating resources to different areas of the company. Tasks that perhaps took multiple operators previously can perhaps be done with one or two now thanks to strategic automation.”
Steadman agreed. “I also think we'll see a growing emphasis on integrating smart technologies and connectivity. OEMs will increasingly leverage telematics and data analytics to optimize machine performance, improve efficiency and enhance the operator experience,” he said, adding the data “unlocks a deeper understanding of equipment utilization, enabling optimized fleet management, remote diagnostics and proactive maintenance scheduling. This translates to increased efficiency, reduced downtime and improved profitability.”
Hornyak also sees flexibility on the horizon as mobile OEMs continue to innovate. “An improved infrastructure is on the horizon,” he said. “This will accelerate in 2025, opening the door for the increased adoption of hybrid and electric systems. Battery-electric power is the most accessible power alternative right now. The other zero-emission and lower emission options, including hydrogen, hydrotreated vegetable oil and other biodiesels, do not currently have much infrastructure and cannot currently scale geographically.”
On the future, Alström said, “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.”
Mobile OEMs may have been through a lot the last few years, but they have proven their resilience and their ability to innovate. There have been tough times, but the general optimism and hope for the future remains, partly because many of these companies and workers have seen a lot already. They’re hopeful they have weathered the storm for a better tomorrow.
