Ninety Days' Notice, Either SideWide moat

Caterpillar (CAT) — moat facet

Either side can end a Caterpillar dealer agreement on ninety days notice, and almost none do, because the dealer's parts, mechanics and customers are all yellow.

The legal protection around Caterpillar's dealer network is almost nothing. Its dealer agreements "are terminable at will by either party primarily upon 90 days written notice"1, and "Our dealers do not deal exclusively with our products"2. A dealer could, on paper, walk to a rival in a season.

How Caterpillar sellsDealer agreementterminable on 90 days noticeExclusivitynone; Cat is usually the principal businessDealers150 in 190 countriesSold directprimarily turbines and locomotivesOwned dealerJapan, about 80% of the marketCaterpillar Form 10-K FY2025, Item 1
Loose contracts, tight economics.

They do not, because the economics say stay. In most cases, Caterpillar says, sales and servicing of its products are the dealers' principal business3. A dealer's value lies in its parts stock, its trained mechanics and its customers' installed fleets, and nearly all of that is yellow. A dealer that switched would be selling a new brand to customers who own old Caterpillars, with a service department trained on machines it no longer sold.

Caterpillar also binds dealers with money. Cat Financial provides retail and wholesale financing alternatives to customers and dealers4: it finances the dealer's inventory and the customer's purchase, so the dealer's working capital and its customers' credit both run through Caterpillar.

The company does not rely on dealers for everything. It sells some products, primarily turbines and locomotives, to end customers through its own sales forces5, and it owns and operates the dealer covering about 80% of the Japanese market6. Those are the places where it judged the independent model did not fit.

The Perkins and FG Wilson brands show the other model. Perkins engines are sold through 86 distributors covering 183 countries, and FG Wilson generator sets through 108 distributors covering 159 countries7. Those networks carry Caterpillar-owned brands through distributors rather than Cat dealers, a second channel alongside the dealer network.

So the moat is not in the contract. It is in the dealer's own balance sheet. A dealer adding a competing line of large machines, or a Caterpillar dispute with a major dealer becoming public, would show that the economics have weakened; until then, the ninety-day clause is a formality.

Moat trajectory: Holding steady

Non-exclusive, terminable contracts; principal-business dealers.

The number that tests this moat
Reported
Dealers in the network
150 (41 US, 109 outside) in the 2025 10-K

The network the contracts govern; a switch by a large dealer would show the economics weakening.

Source: Caterpillar Form 10-K, FY2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
A Dealer Can Carry a Rival Line
Caterpillar's dealers are free to sell a rival's machines, so the loyalty rests entirely on whether yellow still pays better.
References
  1. ReportedIts dealer agreements "are terminable at will by either party primarily upon 90 days written notice", and "Our dealers do not deal exclusively with our products".
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  2. ReportedIts dealer agreements "are terminable at will by either party primarily upon 90 days written notice", and "Our dealers do not deal exclusively with our products".
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  3. ReportedIn most cases, Caterpillar says, sales and servicing of its products are the dealers' principal business.
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  4. ReportedCat Financial provides retail and wholesale financing alternatives to customers and dealers: it finances the dealer's inventory and the customer's purchase, so the dealer's working capital and its customers' credit both run through Caterpillar.
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  5. ReportedIt sells some products, primarily turbines and locomotives, to end customers through its own sales forces, and it owns and operates the dealer covering about 80% of the Japanese market.
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  6. ReportedIt sells some products, primarily turbines and locomotives, to end customers through its own sales forces, and it owns and operates the dealer covering about 80% of the Japanese market.
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
  7. ReportedPerkins engines are sold through 86 distributors covering 183 countries, and FG Wilson generator sets through 108 distributors covering 159 countries.
    Caterpillar Form 10-K for fiscal 2025 - Item 1 business: dealers and distributors. — FY2025 · publ. 13 February 2026 · source ↗
Sources
Generated September 25, 2026