China excavator sales beat in June, but UBS warns of weak underlying demand

Excavator sales in China outpaced expectations in June, but the uptick masks deeper concerns about demand softness, according to an update from UBS analyst Steven Fisher and the bank’s China construction machinery team.

Citing data from the China Construction Machinery Association, the July 11 report noted total excavator unit sales rose 13% year-over-year in June, bringing year-to-date growth to 17%. Domestic sales climbed 6% in June and 23% YTD, while export sales jumped 19% in June and 10% YTD.

However, channel checks with dealers revealed that much of the domestic strength was driven by mid-year sales pushes linked to internal performance evaluations, not by genuine end-user demand. UBS estimates that, excluding these artificial boosts, real domestic sales could have declined by double digits.

Seasonal slowdown ahead

Most dealers expect subdued demand to persist through the summer months, which are traditionally considered an “off season” for the industry. A recovery in domestic sales is expected after September, but at a slower pace than the strong growth seen in the first five months of the year (up 26% from the prior year).

A separate UBS note from June 24 referenced an industry expert’s forecast of 15% year-over-year growth for domestic excavator sales in 2025. That projection suggests a deceleration in growth during the second half of this year, reinforcing expectations of a market plateau.

Adding to the competitive dynamics, some dealers pointed to increased pricing pressure from Tier 2 brands. While those lower-tier manufacturers are becoming more aggressive, Tier 1 players appear to be shifting their focus toward margin preservation over volume.

Implications for Caterpillar and Cummins

The UBS team sees these developments as potentially signaling a peak in momentum for China’s excavator market, an important read-through for major global suppliers like Caterpillar (NYSE:CAT) and Cummins (CMI).

For Caterpillar (NYSE:CAT), which is exposed to Asia-Pacific construction trends, the June figures raise caution about consensus expectations for a second-half revenue rebound in the region. Current forecasts call for a 2% year-over-year decline in H2, a marked improvement from an 8% drop in the first half. UBS warns that such a recovery could be at risk if domestic demand remains artificially propped up.

As for Cummins (CMI), the bar is lower. The company has already guided to a global construction equipment revenue decline of 0% to -10% in 2025, driven largely by weakness in China’s property sector and falling export demand. UBS views any 2025 growth, particularly if skewed toward the first half, as a neutral to slightly positive outcome for Cummins (CMI).