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The global industrial vehicle engine market was valued at USD 4,302 million in 2024 and is projected to reach USD 5,997 million by 2032, exhibiting a CAGR of 5.0% during the forecast period. The U.S. market is a significant contributor, while China continues to expand rapidly, driven by industrial automation and logistics growth. The diesel engine segment remains dominant, accounting for a substantial market share due to its durability and fuel efficiency in heavy-duty applications.
Industrial vehicle engines are specialized power units designed for machinery such as forklifts, tractors, and industrial vans. These engines are engineered for high torque, fuel efficiency, and longevity under demanding operational conditions. Key variants include diesel and gasoline engines, with manufacturers increasingly focusing on hybrid and electric alternatives to meet stringent emission regulations.
The market growth is fueled by rising demand in warehouse logistics, construction, and agriculture sectors. Additionally, regulatory pressures for cleaner emissions are pushing manufacturers to innovate, with companies like Volvo Penta and Toyota Industries investing in low-emission and electric powertrains. For instance, in 2023, Volvo Penta launched an electric drivetrain for industrial vehicles, aligning with global sustainability goals. Other major players, including Doosan Infracore and Mitsubishi, are expanding their portfolios to cater to diverse industrial needs.
Expansion of Logistics and Material Handling Sector Accelerates Demand
The global logistics sector's rapid expansion, valued at over $8 trillion annually, is creating substantial demand for industrial vehicles powered by efficient engines. With e-commerce growth driving warehouse automation, forklift sales alone are projected to exceed 2 million units annually by 2026. This surge directly benefits industrial engine manufacturers, as over 65% of material handling equipment relies on internal combustion engines. Major players are responding with advanced engine solutions - Toyota Industries recently launched a new 2.5L diesel engine specifically for high-capacity forklifts, demonstrating how sector growth spurs technological innovation.
Stringent Emission Regulations Fueling Engine Modernization
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Tightening emission standards worldwide are compelling fleet upgrades across industrial vehicle categories. The Euro V and EPA Tier 4 Final regulations have triggered a wave of engine replacements, with the diesel industrial engines segment projected to grow at 4.2% CAGR through 2030 as operators comply with new norms. Engine manufacturers are investing heavily in SCR and DPF technologies, with Weichai Power allocating over $150 million for clean diesel R&D in 2023 alone. This regulatory push creates a sustained replacement cycle, particularly in developed markets where 40% of industrial vehicle fleets require upgrades to meet current standards.
Furthermore, the accelerating adoption of alternative fuels presents additional growth avenues:
➤ For instance, Doosan Infracore's recent LNG-powered forklift engines demonstrate how environmental compliance drives product innovation while maintaining operational efficiency.
High Initial Costs Restrict Fleet Upgrade Adoption Rates
While environmental regulations mandate cleaner engines, the premium pricing of compliant models creates significant adoption barriers. Tier 4 Final-compliant industrial engines carry 25-35% higher price tags than previous generations, causing hesitation among cost-sensitive operators. In developing markets like India and Southeast Asia, nearly 60% of industrial vehicle buyers prioritize initial cost over long-term emissions compliance, extending the lifecycle of older, more polluting equipment. This cost sensitivity is particularly acute in small-to-medium enterprises that operate over 45% of the global industrial vehicle fleet but lack capital for comprehensive upgrades.
Electric Vehicle Penetration Disrupts Traditional Engine Demand
The rapid advancement of battery technology is reshaping industrial vehicle power systems, with electric models capturing 38% of new forklift sales in 2023 compared to just 25% five years prior. Lithium-ion batteries now offer operational cost savings of 40-50% over diesel in many applications, prompting major fleet operators like Amazon and Walmart to set 100% electric procurement targets. While internal combustion engines still dominate heavy-load applications (over 8,000 lbs capacity), the expanding capabilities of electric systems continue to encroach on traditional engine markets. Engine manufacturers must accelerate hybrid and alternative fuel developments to maintain relevance in this shifting landscape.
Hybrid Power Systems Emerge as Strategic Growth Frontier
The developing hybrid industrial vehicle segment presents a $1.2 billion opportunity by 2027, combining the operational flexibility of combustion engines with electric efficiency. Manufacturers like Kubota and Mitsubishi are investing heavily in serial hybrid architectures that reduce fuel consumption by up to 30% while maintaining full operational capability. These systems are particularly attractive for mixed-use applications where pure electric solutions face range limitations. The mining sector's growing adoption of hybrid loaders and haulers, projected to grow at 8.5% CAGR through 2030, exemplifies this technology's potential in heavy industrial applications.
Aftermarket Services Expansion Enhances Revenue Streams
With the global industrial vehicle fleet surpassing 50 million units, engine manufacturers are recognizing the untapped potential in aftermarket services. Predictive maintenance solutions leveraging IoT sensors can reduce downtime by 40% while creating recurring revenue streams. Volvo Penta's recent Connected Services platform, which increased parts and service revenues by 28% in its first year, demonstrates how digital transformation unlocks service-based growth. As industrial vehicle operators increasingly prioritize total cost of ownership over initial purchase price, comprehensive maintenance packages become key differentiators in engine procurement decisions.
Supply Chain Disruptions Impact Engine Production Timelines
The industrial vehicle engine sector continues facing material availability issues, with lead times for specialized components like turbochargers and emission control systems extending to 35 weeks in some cases. Over 70% of manufacturers report production delays due to semiconductor shortages affecting engine control units. These constraints come at a critical juncture when demand for replacement engines is peaking, creating a mismatch between market needs and manufacturing capacity. While diversifying supplier networks helps mitigate risks, the industry remains vulnerable to geopolitical factors affecting raw material flows.
Other Challenges
Skilled Technician Shortage
The growing complexity of modern industrial engines has created a widening skills gap, with an estimated 45,000 unfilled technician positions in North America alone. Training programs struggle to keep pace with evolving technologies, particularly in emissions diagnostics and hybrid system maintenance.
Regulatory Fragmentation
Diverging emissions standards across regions complicate global engine platform strategies. Manufacturers must maintain multiple engine variants to comply with differing regulations in markets like China (China VI), Europe (Stage V), and North America (Tier 4 Final), increasing development costs.
Diesel Engine Segment Dominates Due to High Torque and Fuel Efficiency in Industrial Applications
The market is segmented based on type into:
Diesel Engine
Subtypes: Turbocharged, Naturally Aspirated, and others
Gasoline Engine
Hybrid/ Electric Powertrain
Alternative Fuel Engines
Subtypes: CNG, LPG, Hydrogen, and others
Forklift Segment Leads the Market Due to Rapid Growth in Warehouse Automation
The market is segmented based on application into:
Forklift
Tractor
Van
Construction Equipment
Material Handling Equipment
Mid-Range Power Segment (50-150 HP) Holds Largest Share for Versatility in Industrial Operations
The market is segmented based on power output into:
Below 50 HP
50-150 HP
151-300 HP
Above 300 HP
Stage V/Tier 4 Final Compliant Engines Gain Traction Due to Stringent Environmental Regulations
The market is segmented based on emission standard compliance into:
Stage V/Tier 4 Final
Stage IV/Tier 3
Stage III/Tier 2
Stage II/Tier 1 and Below
Manufacturers Focus on Emission Compliance and Fuel Efficiency to Gain Competitive Edge
The global industrial vehicle engine market features a dynamic competitive environment with a mix of established multinational corporations and regional specialists. Caterpillar Inc. and Cummins Inc. dominate the high-power segment, leveraging their technological expertise in heavy-duty diesel engines for construction and mining equipment. These industry giants command significant market share due to their extensive service networks and reputation for durability.
In the medium power range, Kubota Corporation and Yanmar Holdings have carved out strong positions through their focus on compact industrial engines. Their success stems from optimizing power-to-weight ratios for forklifts and small agricultural tractors, where space constraints demand efficient designs. Both companies continue to expand their Asian market presence through localized production facilities.
The transition to alternative fuels has become a key battleground, with Perkins Engines investing heavily in hybrid-electric solutions while Volvo Penta advances its methane-diesel dual-fuel technology. Regulatory pressures in Europe and North America are accelerating this shift, forcing manufacturers to balance immediate cost considerations with long-term sustainability requirements.
Chinese manufacturers like Weichai Power and Shanghai Diesel Engine are aggressively expanding beyond domestic markets through competitive pricing strategies. Their growing technical capabilities in emission control systems now allow them to meet Euro V and Tier 4 Final standards, eroding the traditional quality advantage of Western brands in developing economies.
The industrial vehicle engine market is witnessing a significant shift toward greener solutions, driven by stringent emissions regulations and corporate sustainability goals. Electrification and hybridization are becoming prominent trends, with manufacturers investing heavily in alternative fuel technologies. While diesel engines still dominate the market, accounting for approximately 65% of global industrial vehicle engine sales in 2024, electric powertrains are projected to grow at an accelerated CAGR of over 8% through 2032. This transition is further supported by advancements in lithium-ion battery technology, enabling longer operational cycles for electric forklifts and other industrial vehicles.
Automation and Smart Engine Systems
Industrial vehicle engines are increasingly being integrated with IoT-enabled sensors and predictive maintenance systems, enabling real-time monitoring of engine performance. Major players like Toyota Industries and Volvo Penta are incorporating AI-driven diagnostics to optimize fuel efficiency and reduce downtime. This technological integration has shown to improve engine efficiency by up to 12%, while simultaneously extending service intervals by nearly 30% in optimized fleet operations.
The resurgence of manufacturing activities post-pandemic has created strong demand for material handling equipment, subsequently boosting the industrial vehicle engine market. Asia-Pacific currently holds the largest market share at 42%, with China's forklift production increasing by 18% year-over-year in 2024. Meanwhile, North American markets are seeing rapid warehouse automation adoption, with the U.S. industrial vehicle engine segment expected to grow at 4.2% CAGR through 2030. This geographical expansion is accompanied by strategic partnerships between engine manufacturers and industrial vehicle OEMs to develop region-specific engine configurations that meet local emission standards and operational requirements.
North America
The North American industrial vehicle engine market is characterized by stringent emission regulations and the rapid adoption of advanced powertrain technologies. Stringent EPA Tier 4 and CARB regulations are driving manufacturers toward cleaner diesel and hybrid-electric solutions, particularly for forklifts and tractors. The U.S., being the largest market in the region, is witnessing increased demand due to warehouse automation trends and e-commerce-driven logistics expansions. The Infrastructure Investment and Jobs Act further fuels demand for industrial vehicles, benefiting engine suppliers like Cummins and Kohler, who dominate the market. However, high production costs and supply chain disruptions remain challenges.
Europe
Europe is a mature market for industrial vehicle engines, with a strong emphasis on sustainability and fuel efficiency. EU Stage V emission norms have accelerated the shift toward low-emission diesel and alternative fuel engines, particularly in countries like Germany and France. Major players such as Volvo Penta and DEUTZ lead the market with innovations in electrification and hydrogen-compatible engines. The region’s focus on circular economy principles has also encouraged retrofitting older engines to meet compliance. Despite growth opportunities, high operational costs and labor shortages (especially in manufacturing) pose restraints.
Asia-Pacific
Asia-Pacific dominates the global industrial vehicle engine market, accounting for over 40% of total demand, driven by China, Japan, and India. The region benefits from massive industrial and agricultural sectors, where diesel engines—manufactured by companies like Weichai and Kirloskar Oil Engines—remain prevalent due to cost-efficiency and durability. Growth is further propelled by government initiatives (e.g., India’s PLI scheme for manufacturing) and rapid urbanization. However, the transition to electric powertrains is slower here compared to the West, with price sensitivity delaying widespread adoption.
South America
South America’s industrial vehicle engine market is in a growth phase, supported by Brazil’s agricultural and mining sectors, which rely heavily on diesel-powered tractors and forklifts. Local manufacturers face competition from global players like Toyota Industries, but economic instability and currency fluctuations often disrupt procurement. While environmental regulations are less stringent, some countries (e.g., Chile) are tightening norms, creating gradual opportunities for cleaner engines. Infrastructure gaps, however, limit the market’s expansion.
Middle East & Africa
This region shows potential with increasing construction and logistics activities, particularly in the UAE and Saudi Arabia. Demand for rugged, high-torque diesel engines (from brands like Perkins and Mitsubishi) remains strong for heavy-duty applications. However, limited local manufacturing and reliance on imports hinder cost competitiveness. Governments are investing in port and warehouse modernization, which could drive future growth, though political instability in parts of Africa poses risks.
This market research report offers a holistic overview of global and regional markets for the forecast period 2025–2032. It presents accurate and actionable insights based on a blend of primary and secondary research.
✅ Market Overview
Global and regional market size (historical & forecast)
Growth trends and value/volume projections
✅ Segmentation Analysis
By product type or category
By application or usage area
By end-user industry
By distribution channel (if applicable)
✅ Regional Insights
North America, Europe, Asia-Pacific, Latin America, Middle East & Africa
Country-level data for key markets
✅ Competitive Landscape
Company profiles and market share analysis
Key strategies: M&A, partnerships, expansions
Product portfolio and pricing strategies
✅ Technology & Innovation
Emerging technologies and R&D trends
Automation, digitalization, sustainability initiatives
Impact of AI, IoT, or other disruptors (where applicable)
✅ Market Dynamics
Key drivers supporting market growth
Restraints and potential risk factors
Supply chain trends and challenges
✅ Opportunities & Recommendations
High-growth segments
Investment hotspots
Strategic suggestions for stakeholders
✅ Stakeholder Insights
Target audience includes manufacturers, suppliers, distributors, investors, regulators, and policymakers
-> Key players include Doosan Infracore, Toyota Industries, Perkins, Global Component Technologies, Kirloskar Oil Engines, Volvo Penta, Mitsubishi, Weichai, Anhui Quanchai, and Zhejiang Xinchai, among others.
-> Key growth drivers include increasing demand for material handling equipment, expansion of logistics and warehousing sectors, and rising industrialization in emerging economies.
-> Asia-Pacific is the largest and fastest-growing market, driven by China, Japan, and India, while North America and Europe remain significant markets.
-> Emerging trends include transition toward electric and hybrid industrial vehicle engines, adoption of emission-compliant engines, and integration of IoT for predictive maintenance.
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