“I don’t get who will win after the dust has settled,” HCME president on Trump’s latest tariff push

“You read the news every day and it’s not good stuff,” says Hitachi Construction Machinery (Europe) N.V. (HCME) president and CEO Francesco Quaranta.

It’s a gloomy sentiment for the man who last year took the role of president and CEO of Hitachi Construction Machinery’s European branch, the Japanese construction machinery manufacturer’s longest established foreign branch.

Quaranta cites a downturn in construction industry across much of Europe, rising global geopolitical tensions, market uncertainty and the pressure to adapt to the energy transition as some of the many challenges disturbing his perusal of the morning papers.

Trump’s 9 July tariff deadline looms

Yet as an Italian leading a long-standing Amsterdam-based subsidiary of a major Japanese company, who has spent much of his career in leadership positions at firms in the UK, Switzerland and France, for Quaranta, it is the recent rise in trade protectionism, ushered in by US President Donald Trump’s tariff charges, that is currently proving the hardest to navigate.

“The reason Europe was born was because we decided we should not create opportunities to fight each other,” says Quaranta, who previously worked for management consultants Ernst & Young and A.T. Kearney before moving on to management positions at brands including CNH, Massey Ferguson and Agco Corporation. “I don’t know why we are not learning. At that time, when there were no tariffs, everybody wanted to be doing business with everyone. I don’t get who is going to win after the dust has settled.”

Photo: White House

Trump shocked the world in April when he announced his so-called reciprocal tariffs on more than 180 countries and territories designed to punish foreign nations which ran trade deficits with the US. However, just days later he signed an executive order agreeing to a 90 day pause on nearly all of the proposed additional duties until 9 July.

For HCME, which is responsible for the manufacturing, sales and marketing of Hitachi construction equipment in Europe and parts of Africa, Trump’s threat of imposing 50% tariffs on all EU goods from 9 July is not as terrifying a prospect as it is for other competitors. However, the fact that the company supplies some machinery to the Americas and sources some of its components and products from Asia still means it would not be insulated against the effects of an international trade war.

Quaranta says that the fact that the situation is in flux makes it difficult for companies like HCME to measure the potential impact of any changes.

For that reason, the company is taking a more “wait and see” stance to the situation, Quaranta tells IRN; “We are thinking about different scenarios, and those scenarios will change tomorrow depending on what he says.

“We’ll see what to do, but at the moment, saying what’s the implication is, it’s impossible for anyone.”

One way some companies are aiming to alleviate the potential impact of tariffs is to localise production to serve markets on a ground level.

However, Quaranta fears this could take years and cause further disruption; “It’s not only the what, but also the how this is happening that is creating trillions in damages for everyone.

“Even if some want to react, they will not be able to. Setting up a manufacturing plant, it takes years.”

Nonetheless, despite the unclear geopolitical landscape and sluggish European construction market, Quaranta says that sales at HCME are so far looking promising.

“I’m expecting strong order intake toward the end of the calendar year, and I’m seeing increased customer activity with more bookings coming through,” he says. “We’re receiving more orders than anticipated recently, which suggests there’s significant pent-up demand ready to boost.”

Quaranta adds that the company’s experience of this year’s Bauma when the company showcased more than 30 machines on its 4,000 square meter outdoor stand, positively surprised.

“We are having positive vibes from our customers. It’s going well beyond my expectations. I was afraid that this Bauma would have been a bit humble,” he says.

Rental demand strong in Europe

Much of this demand, Quaranta says, comes not from European contractors who in markets like Germany and the Nordics have been hit by notable slowdowns in residential and commercial construction, but rather from rental customers where demand remains strong, and in some markets, is growing fast.

“In the last six months, we saw more requests for rental, for sure,” he says. “We’re doing very well.”

He adds that the shift isn’t necessarily a permanent change in customer preference, but more due to a cautious attitude in the short-term.

“It’s linked to the uncertainty rather than a structural change in demand,” he says. “But it could become structural. Once people realise it works, they might stick with it.”

In the UK, where rental has long been embedded in construction economics, HCME has seen year-on-year growth, particularly through its subsidiary Synergy Hire.

“We’ve done better year-over-year in the UK, and we’re planning an even better year this year,” he explains.

Meanwhile, the company is continuing to expand its Rent-to-Rent programme, a model that sees HCME rent equipment to its dealers, who then rent to customers.

The model keeps the asset on HCME’s balance sheet while enabling dealers to earn margins and customers to gain flexibility. “It’s a very unique programme,” he says. “We don’t rent ourselves, but we help our dealers offer it strategically.”

“The Rent-to-Rent program is a unique value proposition that helps our dealers’ balance sheets, and they are using it more and more.

Photo: HCME

“Italy and Spain are delivering solid results for us. Even in France, where the market faces pressure, our rental division is performing strongly - indicating that many customers are choosing rental options when project timelines and commitments remain unclear.”

Crucially, he adds, is that the programme isn’t restricted to compact equipment, as HCME is also offering it with larger machines, including in the mining segment, based on customer demand.

“Rental is simply a way to make it viable,” he says. “And once your resale value is strong, there should be no limit [to what machines HCME can offer].”

He also believes that some of these short-term rentals may ultimately convert into purchases once project timelines become more certain. “If it does, they’ll buy.”

Moreover, with rental firms under pressure to adapt fleets to meet evolving sustainability expectations and fast-changing technology, Quaranta says rental firms too are looking for more flexibility.

“It’s tricky for long-term rental companies to bear the costs of electrification,” he notes. “If I were a rental company, I would not keep [electric machines] for more than a year. Best to rent it short-term.”

For its part, HCME is exploring alternatives, mainly through the development of electric machines.

Quaranta points to Norway as a frontrunner, where large construction equipment can be plugged into the grid during idle periods, enabling smaller batteries and reducing the need for oversized power storage.

“You don’t need 8 hours of battery,” he adds, “an excavator’s real running time is 45% to 50% of the hour. So, having a massive battery drives up costs and changes the machine’s structure unnecessarily.”

He does however predict more viable long-term electrification solutions will arrive when solid-state batteries become a reality and battery efficiency improves, led in part by innovation in Asia.

“China and Korea will come with more sustainable battery solutions very soon. And the ratio between traditional cost and battery power is going to go down because of smart batteries.”