The off-highway-equipment market in the United States is changing rapidly. In 2024, the US construction equipment market grew to more than $60 billion and the US agriculture equipment market to more than $50 billion.1 Both markets are expected to grow at a CAGR of 4 to 5 percent from 2024 to 2029. At the same time, OEMs that have recently entered US markets are gaining ground and putting pressure on equipment prices. Meanwhile, e-commerce is emerging as an integral channel for equipment and parts purchasing.
Equipment itself is also evolving. On the construction equipment side, machines such as graders and bulldozers are getting more connected and offer more advanced features than ever before, including predictive maintenance, machine guidance, and automation (for example, grade control). These features continue to see an increase in adoption along with other construction tech features and use cases. On the agricultural-equipment side, the shift to advanced agriculture technology has already progressed, with features such as automated spraying becoming mainstream. Amid these changes, equipment fleet owners are adapting their behaviors, seeking to reduce costs and increase productivity.
In this article, we provide vital context for off-highway-equipment OEMs and dealers navigating these turbulent times and pathways to set a winning strategy. We lay out the market context and macroeconomic trends affecting the industry and identify pain points along the customer purchasing journey. We also explore evolving customer preferences, namely increasing openness to diversifying equipment brands and growing demand for in-house repairs, alternative parts sources, and automated features and software. By considering potential actions based on these insights, US OEMs and equipment dealers can thrive in the years to come.
A bumpy road: Market context for off-highway equipment
The construction and agricultural-equipment industries are navigating a period of uncertainty, shaped by shifting demand patterns, evolving competition, and broader economic cycles. In the immediate aftermath of the pandemic, the construction and agricultural sectors benefited from strong tailwinds. Global spending on construction and agriculture rose by approximately 15 percent between 2020 and 2021 and maintained steady single-digit growth through 2023.2 This surge translated directly into machinery sales, with global construction equipment revenues expanding by roughly 22 percent to more than $232 billion.3
Yet growth also carried challenges. Supply shortages—which were driven by chip shortages and challenges ramping up production after the pandemic—limited output, and some OEMs reported that their order backlogs swelled by more than 50 percent between 2021 and 2022.4 Inventory levels rose sharply as well: Farm equipment stockpiles increased by 23 percent in 2021 and 46 percent in 2022, and construction equipment inventories grew by 12 percent and 29 percent, respectively.5 Inventory levels and backlogs remain elevated compared with prepandemic levels. In the United States, farm equipment inventory (measured in dollars) was 65 percent higher in 2024 than in 2020, and construction equipment was 74 percent higher over the same period.6
Amid these pressures, market dynamics began to shift. Especially for contractors, new entrants, particularly from China, moved quickly to capture demand with lower-cost, simplified machines that met the “good enough” threshold for many customers. Established OEMs responded by doubling down on telematics, embedding digital platforms directly into machines, developing proprietary applications, and linking data to sales and service models. Compact equipment such as mini excavators, compact tracked loaders, and compact wheel loaders also steadily gained popularity, reflecting contractors’ preference for machines that are versatile and can be more easily deployed.
In recent years, off-highway-equipment customers have contended with their own set of industry-wide factors, each of which has affected their equipment preferences:
- Slowing momentum for construction contractors. Historically low interest rates at or below 0.1 percent from April 2020 through early 2022 fueled a surge in housing activity7: Starts ran roughly 30 percent above a 2016 baseline for most of that period and totaled close to 35 million units.8 When rates began to climb, however, momentum slowed, and in the following 23 months, housing starts fell by about 1.4 million.9 Public infrastructure spending driven by the 2021 infrastructure bill has continued to be steady, but outside of growth in chip fabs and data centers, private nonresidential construction has continued to see growth pressure.10
- Difficult agricultural cycles. The agriculture sector experienced a 7 percent contraction in the value of global output from 2023 to 2024,11 while farmers faced sharply reduced revenue potential as commodity prices fell. For example, indexed prices for grains and oilseeds dropped from 104 to 117 in July 2023 (relative to a 2011 baseline of 100) to 75 to 85 by July 2025.12 The swing represented a significant compression in farm profitability over just two years, validated by declines in net farm incomes. McKinsey’s 2024 farmer survey clearly shows that farmer sentiment is low as they continue to face margin pressure.13
- Labor shortages. The average age of farm workers rose from about 36 in 2006 to nearly 40 by 2022, creating difficulties in replacing retiring agricultural labor.14 Construction has not fared much better, with a projected requirement for roughly 500,000 additional workers by 2026.15 This includes heavy-equipment operators, who are particularly scarce. A recent Associated General Contractors of America workforce survey confirmed the strain on the industry, noting that 92 percent of contractors report difficulty filling both hourly and salaried roles.16
Even as construction and agriculture equipment OEMs manage uneven demand, cost pressures, and labor shortages, new opportunities are reshaping their business models. For instance, equipment rental has emerged as a powerful growth channel, providing contractors with greater financial flexibility and operational agility. In North America alone, the rental market expanded from approximately $41 billion in 2013 to about $84 billion in 2024, underscoring a structural shift in how machines are accessed and deployed.17
The challenges and changes of the past few years have required adaptability and creativity. To better understand this evolving landscape, we use a customer-focused lens to identify customer pain points and preferences. We then explore potential solutions that the industry can deploy to resolve those pain points and build a better customer experience.
Pain points in the customer decision journey
Outside of technical innovation, one of the most important areas for equipment OEMs and dealers to win is the customer decision journey. However, in both construction and agriculture, customers continue to face frustration in key steps of the purchasing process (Exhibit 1). In the latest McKinsey research on 400 customers of off-highway-equipment customers, contractors and farmers reported being most acutely frustrated with initial research steps as well as with critical moments during subsequent phases (see sidebar, “About the research”). Respondents reported that the overall challenge was an inability to easily understand and compare equipment, including pricing.
Contractors found it difficult to understand equipment features and did not know where to start looking for unbiased recommendations while researching equipment. Evaluating equipment posed its own challenges because contractors did not feel they could adequately compare and test equipment or understand pricing. Contractors had fewer concerns related to the actual transaction, customer service, and the equipment itself.
Like contractors, farmers flagged that identifying equipment that meets their business needs was difficult. While farmers were generally satisfied with sales representatives’ knowledge about equipment and customization options, they felt they could not compare equipment and prices adequately before making a purchase. As with contractors, the actual transaction process to acquire equipment is less frustrating for farmers, and they are not as frustrated with factors such as availability, paperwork, getting equipment that fits their needs, and customer service compared with the initial research process. These pain points clearly highlight areas where OEMs and dealers can improve the purchasing journey.
Shifting customer preferences
In addition to addressing pain points, OEMs have an opportunity to take active steps to meet customer demand. Today, customers are expressing three key trends: shifts in fleet purchase behavior, a desire for in-house repairs but independent parts, and adoption of automated features and software.
Shifts in fleet purchase behavior
Bottlenecks in current customer journeys—as well as the growing variety of equipment on the market—may be contributing to customer interest in diversifying equipment brands. Roughly 50 percent of construction fleet owners expect to make some sort of shift in fleet brand by 2028, a trend that was particularly strong among operators of larger fleets and fleet operators under the age of 50. This trend is less significant but still present among agricultural respondents (30 percent of US farmers).
To diversify fleets, contractors have expressed a growing interest in acquiring equipment from low-cost, nontraditional OEMs, and agricultural respondents reported a preference to purchase from local dealerships, particularly those with large farms (about 70 percent, compared with about 50 percent from small farms). As customers seek to diversify their fleets, it will be crucial for OEMs to proactively address these sourcing preferences.
Desire for in-house repairs but independent parts
In-house repair services are becoming increasingly important for both contractor and farmer equipment customers. In fact, for construction contractors, the preference for in-house postwarranty repair services nearly doubled from 2018 to 2023, the dates of the two most recent surveys (Exhibit 2). This shift is driven by fleet owners’ desire for faster and higher-quality repairs—which are particularly important given the high cost of equipment downtime—and the lack of technician availability.
However, when it comes to aftermarket and maintenance parts, construction and agricultural respondents diverged. Similar to farmers’ preference to source equipment locally, most famers prefer to source parts locally as well (70 percent of large farms and 45 to 55 percent of small farms), driven by the importance of vendor proximity, price, and availability. On the other hand, contractors are broadening the scope of where they look for aftermarket and maintenance parts, turning to specialized retailers, independent repair shops, online-only e-commerce platforms, and general retailers. These results indicate a strong desire among contractors for independence from the dealer for sourcing parts and repair, although achieving such independence can be difficult.
Adoption of automated features and software
Persistent labor shortages have driven customers to adopt equipment with automated features such as machine guidance and task automation. Automated features can significantly reduce the training time for an inexperienced equipment operator, and the younger workforce is already more comfortable with digital controls. Accordingly, contractors and farmers are increasingly interested in acquiring equipment with these features to improve performance, safety, driver comfort, and productivity (Exhibit 3).
OEMs have a distinct opportunity in software services, especially in agriculture. Although about 65 percent of farmers purchase precision agriculture equipment separately (that is, not preinstalled) today, 70 percent of farmers have expressed increased openness toward buying it directly from equipment OEMs in the future. This is because agriculture and farms are a controlled, closed-system environment and there is a lack of true third-party options.
This trend is less prevalent but still present among contractors; a growing percentage report wanting to source software solutions from OEMs (42 percent), followed by specialized telematics providers (34 percent). Contractors report being concerned with data security, data access, and modularity when purchasing automated equipment. Coupled with the fact that most contractors have multibrand fleets with different types of equipment, this means that the software solutions need to be compatible across the entire fleet. Contractors are increasingly expressing desire for this type of compatibility, which is especially important on job sites, where many different players come together using their own solutions. If OEMs can find ways to address these preferences, they may be better able to reach these customers.
How off-highway-equipment OEMs can thrive
As customer needs and preferences shift, off-highway-equipment players can put strategies in place to improve customers’ purchasing experience and remove pain points. OEMs and dealers can consider implementing some or all of the following actions in their strategies:
- Use enhanced go-to-market strategies leveraging digital tools, AI, and gen AI. Amid today’s shifting brand mix, OEMs and dealers can build their own interfaces for connecting with customers to offer product information and comparisons to help with product selection and price shopping. Gen AI, including gen AI agents, could also help customers select products based on their desired end application.
- Develop a direct-to-customer and do-it-yourself strategy. For customers who service their own equipment and prefer to use non-OEM postwarranty parts, companies can create specialized service options tailored to in-season versus out-of-season equipment. For example, customer-friendly e-commerce platforms could allow customers to order parts that are then delivered directly or via dealers, depending on customer preference, enabling speedy delivery times. Additionally, online maintenance videos or gen AI–enabled maintenance agents could help build close customer relationships.
- Deepen postwarranty customer engagement through national agreements and dealerships. To increase part share, OEMs and dealers can leverage telematics data to proactively offer extended-warranty contracts to customers. National agreements for large fleets and local-dealership-based agreements for smaller fleets could also help broaden customer reach.
- Expand product, services, and solution offerings. Both contractors and farmers use a variety of tools for smaller site tasks, but integrating these tools together is major pain point. OEMs and dealers can develop solutions based on connectivity, including support for mixed fleets, to improve site productivity and precision agriculture for contractors and farmers, respectively. Companies can explore building platforms with other service providers that offer an integrated experience across various interconnected services.
- Prioritize autonomous features in design. Most fleets and contractors are struggling with limited availability of trained and seasoned operators for equipment, and with job site complexity increasing, automated features in equipment are increasing in importance. Similarly, for agricultural equipment, automation can help reduce the skill and precision needed for critical tasks such as spraying, which can save input costs for farmers. Low-cost automated features could help OEMs and dealers differentiate their product portfolios, and offering them as optional features in equipment for smaller fleets could make it easier for customers to adopt them.
- Build new businesses that include flexible ownership models for customers. OEMs could enhance the customer experience by exploring new businesses. For instance, these businesses could provide subscription services for new offerings (for example, automation features) or offer as-a-service models for electric equipment such as charging infrastructure. Such businesses could allow customers to try and to adopt new products and services while creating a more deeply integrated end-to-end customer experience.
- Enhance the front-end customer experience by building dealer capabilities. As the front line, dealers are key to building a great customer experience. OEMs can invest in building critical capabilities for frontline sales teams and service technicians. They can also consider integrating gen AI tools into dealer functions in applications such as mapping use cases and end applications to provide critical product information to sales teams. Other gen AI applications include service tech advisers to assist service technicians and build their capabilities and parts-ordering agents that leverage telematics data and predictive analytics on break-fix maintenance and parts to help dealership operations.
With a deep understanding of customer trends, OEMs and dealers have an opportunity to make moves today that can significantly affect their market position in the future. Players that act slowly or make misguided moves could find their market position challenged in the years to come.
