This study focuses on conducting a reliability analysis of an excavator from its field failure data and improve its reliability cost effectively. The aim of the research is to perform reliability estimation of systems and identify the critical subsystem with significant contributions to system unreliability. The reliability analysis was performed using repairable system data analysis approaches. Life cycle cost (LCC) was estimated for critical subsystems, and it was optimized to select cost effective reliability improvement strategy. The results of the study provide valuable insights into the performance and cost-effectiveness of the excavator and its subsystems, which can assist manufacturers and operators in optimizing their equipment’s reliability, availability while considering the cost implications over the life cycle of the equipment. The results show that the undercarriage has critical contributions to system unreliability. This study attempts deep down reliability analysis of critical undercarriage components for optimal selection of improvement method among feasible alternatives. LCC analysis and its optimization performed on the critical sub-system is expected to help OEM save approx. 15% of LCC. The empirical data used in the paper is based on field data gathered during the operational life of the hydraulic excavator over approx. six years in its Indian operations.