Why does heavy equipment cost so much?

[The motor guy]

Is it just the engineering and relatively expensive/complicated parts that go on them? Like hydraulics and that sort of thing. I mean a relatively basic small excavator is still going to run like $500,000 dollars. Or is it just the fact that they can mark them up big time and make a huge amount of profit?

 

[pcoxe]

It takes a lot of heavy expensive machinery to manufacture heavy equipment.

 

[hatt]

A John Deere 210 is less than $250K. I wouldn't call that a small excavator. No idea what you're looking at. Heavy, large, extreme duty, low production equipment is going to cost more than cheap econobox throwaway stuff.

 

[Vern_in_IL]

Originally Posted By: motor_oil_madman
Is it just the engineering and relatively expensive/complicated parts that go on them? Like hydraulics and that sort of thing. I mean a relatively basic small excavator is still going to run like $500,000 dollars. Or is it just the fact that they can mark them up big time and make a huge amount of profit?



a "relatively small" excavator is a CAT 336. You can buy a used 2015 model 335K+tax/freight with an average life remaining of 96%

 

[BrocLuno]

Or lease ...

The steel that goes into a CAT is the envy of all the other MFG's. When they finally die, that is premium scrap that gets a higher price... That metal is specific alloys and it takes big heavy machines and jigs to machine it to fit. Then the submerged arc welding and re-heat treating to get it back to spec is not cheap. They do not do this for cars ...

Take an ore truck. It's supposed to carry 50~150 tons (or more) around the clock for 15 years minimum. Think a Toyota will do that? Heck, one tire will buy a Toyota (which can't carry it ...)

 

[UncleDave]

Having grown up within 10 miles of 3 caterpillar plants the investment in tooling and engineering to build these machines is staggering.

If you saw first hand the machines, men and resources it takes to make the machines you would have immediate clarity.


UD

 

[SuperDave456]

I remember back when I worked for Citigroup looking at a loan for a small bulldozer. $230,000 doesn't get you much.
It's all the hydraulics. They aren't cheap to build, cheap out on hydraulics and learn quick, and they are labor intensive to build.

 

[DoubleWasp]

If you look at the amount of people and hours that go into making a single weld on one of those things, you will understand.

Low production plays a major role in that too.

The machinery and engineering that goes into making ridiculously huge parts is also a factor.

Don't forget transport. You're not sending the 10-car hauler to get those out of the factory.

 

[OneEyeJack]

It helps to understand what a bargain a modern passenger car is considering all that goes into it.

 

[Pop_Rivit]

Take a minute and think about what goes into manufacturing a piece of heavy equipment such as an excavator. Think about the amount of research, development, raw materials, direct and indirect labor costs, the huge factory, taxes, overhead, transportation, and the amount of time it takes to build something like an excavator. Got it?

Now think about the idea of profit. Not only the manufacturer, but the dealer also needs to make a profit in order to stay in business (profit really isn't a dirty word). And not just the gross amount, but there has to be enough of a profit to make it worthwhile to continue building and selling excavators. Both the manufacturer and the dealer have to make a profit over and above the actual cost of building and selling the excavator. It's not all that different from the guy who mows grass for a living; he likes to make as much profit as possible and doesn't take the job if there is little or no profit in it (if he has any intelligence at all).

Understand now?

 

[Kestas]

One off-road equipment manufacturer spends a lot of money on my services. This is in contrast with other businesses, such as automotive, who pinch pennies. I am impressed with how the manufacturer makes sure they have a good, robust product.

 

[IndyIan]

Excavators are fairly specialized to design and build, and have relatively low production numbers.
Something like a 50-80hp farm tractor starts to get much cheaper to build per hp and many new ones still get the job done with 40-50 year old technology. For pickup truck money, you get something that will earn its keep for a few decades, and hold its value pretty well.
Also for tractors atleast, MSRP has lots of room to negotiate and with so much cheap money available, perhaps the heavy eqp manufacturers have a high msrp for padding leasing profits, but a cash buyer can knock 15-20% off?

 

[MNgopher]

Look at at this way: A huge amount of engineering and design work goes into the design of one of them. That cost is only split out over a relatively small number of units sold (relative to other mass produced things, say a car).

The sheer amount of material that goes into them doesn't come free, and given the service life that most lead (they aren't making money when they aren't working), downtime is never a good thing. Thus end users put a premium on being reliable.

Their size and complexity means that the facilities to build them aren't cheap.

At the end of the day, people wonder why construction can be expansive. The equipment needed to build things is a part of that equation... And thus part of how the prices the equipment costs can be managed - by buying what is needed and keeping it working all the time. Lease or rent the stuff you need for short term or spot use.

 

[totegoat]

I couldn't afford to own any but made a good living, and enjoyed operating heavy equipment.

 

[userfriendly]

Ask Warren Buffett how much he pays for an EMD (Caterpillar) locomotive. www.bnsf.com

Think bigger... or what Maersk paid for Ely Maersk Clampett? 2015 https://www.youtube.com/watch?v=rG_4py-t4Zw

 

[CT8]

Originally Posted By: userfriendly
Ask Warren Buffett how much he pays for an EMD (Caterpillar) locomotive. www.bnsf.com

Think bigger... or what Maersk paid for Ely Maersk Clampett? 2015 https://www.youtube.com/watch?v=rG_4py-t4Zw
The operating cost per hour is probably shocking.

 

[tom slick]

I'm looking at a 450hp Diesel engine for a project. A full turnkey package with cooling, emissions, and controls costs between $65k and $100k. That's a big chunk of the costs.

John Deere's newest biggest Ag tractor, the 9RX series costs $750k fully loaded. It is also one of the most high tech land vehicles you can buy. There is a ton of technology in these types of vehicles.

 

[CT8]

Originally Posted By: tom slick
I'm looking at a 450hp Diesel engine for a project. A full turnkey package with cooling, emissions, and controls costs between $65k and $100k. That's a big chunk of the costs.

John Deere's newest biggest Ag tractor, the 9RX series costs $750k fully loaded. It is also one of the most high tech land vehicles you can buy. There is a ton of technology in these types of vehicles.
Water pump?

 

[tom slick]

Originally Posted By: CT8
Originally Posted By: tom slick
I'm looking at a 450hp Diesel engine for a project. A full turnkey package with cooling, emissions, and controls costs between $65k and $100k. That's a big chunk of the costs.

John Deere's newest biggest Ag tractor, the 9RX series costs $750k fully loaded. It is also one of the most high tech land vehicles you can buy. There is a ton of technology in these types of vehicles.
Water pump?


That's a good guess, that's a common size for ag wells around here.

I'm building a custom harvester, lots of hydraulics and big fans.

 

[Silk]

I read somewhere that they used to cost out cars by weight. Could be why heavy equipment is so expensive.