Editorial Article
The Excavator Is Why Hydraulics Survived Electrification
Two machines, one month, one difference that decides a market
In December 2025, according to the China Construction Machinery Association, Chinese manufacturers sold 23,095 excavators. Thirty-nine of them were electric — one in 592. In the same month they sold 12,236 loaders, and 2,722 of those were electric: a 22.25% electrification rate, up 13.17 percentage points on the year.
These are not two different industries. They are two machines working the same site, often for the same owner, bought through the same dealer. One has been electrified to a fifth of its volume. The other has been electrified to a rounding error.
That single gap explains why hydraulics is still a growing market — USD 42.8 billion in 2025 to USD 67.9 billion by 2033, a 5.9% CAGR, in our hydraulics forecast — while the machinery it is bolted into is being quietly redesigned around electric drives. It also explains why the growth is being earned differently from how it is being reported.
Electrification follows the duty cycle, not the battery
A wheel loader works a short cycle in a yard. It returns to the same place roughly every 45 seconds, it lifts and dumps in a fixed pattern, and the machine can be charged between shifts or, increasingly, opportunity-charged at the pile. That is a duty cycle a battery can serve without asking the operator to change what he does.
An excavator does the opposite. It is a machine built to convert diesel into hydraulic pressure in places where there is no grid: a trench 400 metres from the nearest connection, a demolition site with the supply isolated, a mine bench. Its whole design premise is that the power source travels with the tool. Electrifying it doesn’t mean changing the motor — it means either running a cable to the work face or accepting that the machine comes home twice a shift.
The numbers say operators have not accepted that yet. China’s 2025 excavator year was strong: 235,257 units, up 17%, with domestic sales of 118,518 (+17.9%) and exports of 116,739 (+16.1%). Inside it, electric machines remained a curiosity. Meanwhile the loader line, which has no such constraint, went from an experiment to more than a fifth of monthly volume.
So the honest statement of the hydraulics thesis is not that electrification is a threat. It is narrower and more useful: electrification removes hydraulic content from the machines where the actuator is stationary and the work is repetitive, and leaves it in the machines where force density has to travel. That perimeter is defensible, and it is larger than the industry’s own forecasts assume.
The mix is moving the wrong way for volume, and the right way for value
The same CCMA data shows where the units actually are. Small excavators (under 18.5 tonnes) were 141,006 of the 235,257 total, up 17.19%. Medium machines were 56,388, up 10.67%. Large machines (28.5 tonnes and above) were 37,863, up 26.79% — and in export markets large excavators grew 42.62%, while small ones grew 8.5%.
Read that as a hydraulics supplier and it is a mix statement. A small excavator carries a small pump, a small valve block and a handful of cylinders; a 40-tonne machine carries a much larger displacement pump, often two, and substantially more fluid. Unit growth of 17% led by small machines is not the same demand as unit growth of 17% led by large ones — and the fastest-growing part of the market by value is the part growing fastest in export.
This is the mechanism behind a discrepancy that would otherwise look like a contradiction. Our forecast has the global hydraulics market compounding at 5.9%. Parker Hannifin, the largest pure-play in fluid power outside the OEMs, reported fiscal 2025 sales of USD 19.9 billion with organic growth of just 1%. Both can be true: one is a value forecast for a global installed base priced in dollars, the other is the revenue line of a company selling into mature Western machinery markets, where North American Diversified Industrial sales fell 6.9% in the fourth quarter (−1.4% organic) and international order rates were flat.
Where the money is going: the margin, not the tonne
What Parker’s year does show is how the business now earns. Segment operating margin was 23.0%, or a record 26.1% adjusted; EBITDA margin was 27.3%, up 210 basis points; and North American Diversified Industrial delivered a 24.7% segment margin (26.7% adjusted) on falling sales. Orders were positive for a third consecutive quarter, and the company’s consolidated order rate was up 5%.
An industry that produces record adjusted margins on 1% organic growth is not expanding. It is consolidating, pricing, and selling service. That is the correct lens for the hydraulics market’s next eight years: the unit count in the West is roughly flat, the value per unit is rising because the specification is rising, and the aftermarket — seals, hose, filtration, fluid, reman — is where a component maker converts an installed base into an annuity.
The specification shift is the part worth owning. Our own forecast names electro-hydraulic systems as the fastest-growing segment, and that is the accurate description of what “electrification” is doing to this industry: it is not replacing the hydraulic circuit, it is replacing the fixed-displacement pump and the proportional valve with a servo-controlled variable-displacement pump, a sensor set and a controller. The actuator stays hydraulic. The intelligence moves to the pump.
Two consequences follow, and they point in opposite directions for different companies. A cylinder maker competes on steel, welding and freight — a business with no pricing power and one that loses share to whoever is closest to the machine builder. A pump-and-controls integrator competes on displacement control, noise, efficiency and software, which is a business where the specification is written by the OEM and the margin survives a downturn. The same 5.9% market grows both, and enriches only one.
What would falsify this
Three things would break the argument, and they are worth watching rather than assuming away.
- A cable-fed excavator becomes normal. Electric mini-excavators already outsell their share in Norway and parts of China where sites are grid-adjacent. If 18-tonne-class electric machines reach even 10% of Chinese domestic volume, the small-excavator segment — 60% of units — stops being hydraulic territory.
- Large-machine growth reverses. The 26.79% growth in large excavators in 2025 is the single best support for hydraulic content per unit. It is also the most cyclical line in the data, tied to mining capex and Chinese export credit.
- Margin stops rising while organic growth stays flat. That would mean the consolidation and service story has run out and price competition has returned, which is the point at which a 5.9% value forecast and a 1% revenue reality stop being compatible.
The machine that resists
The most electrified machine in construction is the one that never leaves the yard. The least electrified is the one whose entire reason for existing is that the work is somewhere else. Hydraulics is not protected by inertia or by the cost of change; it is protected by the physics of transmitting force to a place where the grid does not reach — and by the fact that the alternative, for a machine that must both move and dig, is a bigger battery and a shorter shift.
That is a narrow moat and a real one. It will hold for the heavy end, thin at the small end, and pay whoever owns the pump rather than whoever owns the cylinder. The 5.9% is not evenly distributed, and the companies that treat it as an average will be the ones that discover, around 2029, that they were selling into the segment that electrified first.
Frequently Asked Questions
How big is the global hydraulics market?
Our forecast puts the global hydraulics market at USD 42.8 billion in 2025, rising to USD 67.9 billion by 2033 — a 5.9% CAGR over 2026–2033. The largest segment is hydraulic equipment and components, and electro-hydraulic systems are the fastest-growing.
Why has electrification not reduced hydraulic demand?
Because electrification has followed the duty cycle rather than the machine count. In China in December 2025, 22.25% of loaders sold were electric but only 39 of 23,095 excavators were. A loader returns to a charging point every cycle; an excavator is designed to take its power to a work face with no grid. Hydraulic content is removed first where the actuator is stationary and the work is repetitive.
Is the hydraulics market growing as fast as the machinery market?
No, and the difference is informative. Our global forecast is 5.9% a year, while Parker Hannifin reported fiscal 2025 organic growth of 1% on USD 19.9 billion of sales. The gap reflects mix: global value growth is weighted to large machines and emerging markets, while Western component revenue is broadly flat and earning margin instead of volume.
Who captures the value as hydraulics becomes electro-hydraulic?
Suppliers of the pump and the control system, not the cylinder. Electro-hydraulic architecture replaces a fixed-displacement pump and proportional valve with a servo-controlled variable-displacement pump, sensors and a controller. The actuator remains hydraulic, but the specification, the software and the margin move upstream to whoever integrates displacement control.