Challenges, not roadblocks

The assessment of a number of parties is that unit sales will be down roughly 20% in 2009. It’s a brave person who puts a figure to what will be very uncertain times, but some planning has to be done to respond to the changed business environment. The real sting is in what many people predict will happen to the price of new equipment around February 2009, when stock bought under the “old money” dries up and the cost of new equipment reflects current exchange rates. Depending on the currency involved, price rises could be substantial: the table below compares some peak favourable exchange rates last year to the exchange rate in late December.On paper different currencies have been affected differently, and it looks like Korean and United Kingdom manufacturers should come out relatively well compared to the United States and Japan, with European manufacturers not faring too badly. The price advantage of Chinese equipment will diminish. Should these differences remain entrenched in the Australian market for some time, they may well have a significant effect on relative market shares and blunt the Chinese assault on the Australian market.Some might say: “Yeah, but the manufacturers and distributors will wear some of the pain, right?” Sadly, the manufacturers have already swallowed some of the price rises of steel and other components during the boom times, so there’s nothing left in the cookie jar to ease the pain.Some manufacturers may have the option of switching the factories that they draw from to reduce the impact of changes in exchange rates, but that benefit will probably be minimal.Put in perspective, the downturn in sales volumes comes at the end of an abnormally long period of sales volume increases in Australia and around the world, and the projected volume for 2009 is around that of four or five years ago, which was not at the trough of a cycle. And it’s really only a couple of years ago that Australia had similar exchange rates with the dollar. Somehow we got through things then, and no doubt we’ll get through these times as well. Those planning to exhibit at or attend ACE – the first major trade show of the year, held at Sandown (Melbourne) in late February – don’t seem to have the jitters and organisers report only one stand cancellation to date, significantly bigger display areas than previous shows, a waiting list for exhibitors and an increase in pre-registrations to attend.Some new product releases are planned, but the overall schedule for new product releases in 2009 could end up being quite erratic. In a slow market, stocks of existing models will be slower to move and it would be poor judgment to release a new model until existing stocks were cleared.Some manufacturers are moving towards hybrid power systems, with Komatsu offering an excavator exclusively for the Japanese market at present, and Volvo having a wheel loader in the wings. This type of machine may not be seen in Australia in 2009, but 2010 looks likely.

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