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Another spring in the construction machinery industry: competition is concentrated, foreign giants are exploring the low-end market

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At the end of November, the Shanghai New International Expo Center was crowded with people. China's large construction machinery industry exhibition – the Shanghai BMW Engineering Machinery Exhibition is held every two years. The outdoor exhibition area covering an area of 100,000 square meters is filled with various brands of construction machinery, and major domestic and foreign brands such as Sany, Xugong, Komatsu and Doosan are all unveiled. In the exhibition area, both buyers and sellers shuttled between the towering cranes to find business opportunities. The audience gathered in front of the booth where the event was released, and occasionally applauded the highlights of the products.

According to the official statistics of the exhibition, the 2018 Shanghai BMW Exhibition has created a historically high level in terms of exhibition area, number of exhibitors and number of visitors. Among them, the exhibition area exceeded 330,000 square meters, and all the exhibition areas of Shanghai New International Expo Center were used. The number of exhibitors reached 3,350, an increase of 13% compared with the previous session. The total number of visitors reached 212,000, an increase of 25%.


Another spring in the construction machinery industry: competition is concentrated, foreign giants are exploring the low-end market


These eye-catching figures are in stark contrast to the previous exhibition: In 2016, Shanghai Baoma Exhibition saw the decline in the number of visitors for the first time, including domestic and foreign leading enterprises including Komatsu, Xiagong, Kobelco and Liugong. absence. At that time, China's construction machinery industry experienced a five-year depression, many small and medium-sized enterprises fell into a collapse, industry sales have entered negative growth since 2014. In the mouths of some industry professionals, this down cycle, which began in April 2011, is called the “slipping decline”.

However, judging from the development data of the construction machinery industry in the past two years, the harsh winter has ended. According to the statistics of the National Bureau of Statistics, from January to September 2018, the country's excavators and loaders produced a total of 194,153 units and 108,324 units, an increase of 51.7% and 26% respectively. Today, the industry is more concerned about whether the momentum of this round of rapid development will reproduce the brilliant scene of the construction machinery market between 2009 and 2011.

Say goodbye to the harsh winter: the infrastructure supplement board superimposed equipment update period

As the upstream industry of the construction industry, the prosperity of the construction machinery industry depends on the new construction area and the operating rate, and is affected by the fixed assets investment in the macro environment. From 2008 to 2011, the “four trillion plan” stimulus brought a wave of infrastructure and real estate construction. In the past three years, the annual growth rate of national construction machinery sales has remained above 30%, and the growth rate in 2011 reached 41.3%. Since then, with the "four trillion plans" coming to an end, the increasingly weak demand side is difficult to digest the inventory of engineering equipment, the industry began to decline from prosperity, and entered the downturn since April 2011.

“2014 was a tough two-year period for the global construction industry, when Caterpillar’s ​​business fell 25% in the past two years, and in 2017 and 2018 it has improved. Over the past 18 months There is a 50% increase in growth.” Thomas Pellette, Group President of Caterpillar's infrastructure business, told the media including 澎湃News ( Founded in 1925, Caterpillar is headquartered in Illinois, USA, and is principally engaged in heavy industrial equipment including construction machinery, mining equipment, and gas engines. According to the financial report, Caterpillar's revenue for the third quarter of this year was 13.5 billion US dollars, an increase of 15.5%. According to Bloomberg data, Caterpillar's 2017 construction machinery segment revenue reached $19.13 billion.

In China, Caterpillar is one of the foreign companies with a high market share in construction machinery. According to Chen Qihua, Chairman of Caterpillar (China) Investment Co., Ltd., which is in charge of the Chinese market, Caterpillar's rapid growth in the Chinese market this year mainly comes from the replacement of stock machinery, which is larger than the new machine sold. . “In addition, the Chinese government has continued to invest in infrastructure construction to promote stable economic growth.” He added, “We see this policy as a driving force for the industry as a whole.”

Since the beginning of this year, infrastructure investment has grown steadily and the growth rate has declined. In this context, the infrastructure supplement board was put on the policy agenda in the second half of this year. At the end of July, when the Political Bureau of the CPC Central Committee convened a meeting to deploy the second half of the year, it clearly proposed to increase the strength of the infrastructure sector. In November, the General Office of the State Council issued the “Guiding Opinions on Maintaining the Shortcomings in the Infrastructure Sector”, which requires efforts to supplement railways, highways, waterways, airports, water conservancy, energy, agriculture and rural areas, ecological and environmental protection, public services, and urban and rural infrastructure. Short-term areas such as shantytown renovation, and accelerate the promotion of major projects that have been included in the plan. According to the National Bureau of Statistics, infrastructure investment from January to October this year increased by 3.7% year-on-year, of which the road transport industry grew by 10.1%.

At the BMW Show, a John Deere salesperson based in the Shandong market told the news ( that it was represented by the expansion of Shandong Haori Expressway and Jiqing Expressway. The project continued to advance, and the demand for construction machinery in Shandong surged, with representative excavator sales rising. He said, "The main source of sales growth of construction machinery this year is the old customers, and their engineering volume is also growing. Some old machines will not be able to keep up with new equipment when they can't keep up. One can increase to two."

As a representative of the US excavator, John Deere entered the Chinese market very late compared with Caterpillar. Caterpillar has established a joint venture with Xugong Group since the 1990s, and John Deere's wholly-owned factory in Tianjin was not put into production until 2012, just in the downturn of the construction machinery industry. However, at the annual meeting of the excavation machinery industry held on November 14, John Deere's data showed that the sales volume of the brand excavator increased by 246% in the first 10 months of this year, and the industry average was 51.7%.

Cautiously optimistic: the policy outlook is not clear, industry barriers have been established

Volvo CE president Melker Jernberg said in an interview with the news ( that sales growth in the Chinese market is expected to be about 30% this year, next year. It is around -10% to 0%. He stressed that a major feature of the construction machinery market is its strong volatility. At present, China's total market has reached a very high level. Even if the growth rate slows down or even has negative growth, it is also a very healthy market.

According to Bloomberg data, sales of Volvo Construction Equipment reached US$7.79 billion in 2017, ranking fourth in the world. Yen Berry said that the Chinese market has grown rapidly in recent years, accounting for about 20% of Volvo's global market.

Two Caterpillar executives did not disclose specific figures for future market forecasts at the press conference. Chen Qihua said that Caterpillar's judgment on the Chinese market is optimistic for a long time, and China's overall market is still very large. Peng Tangmou said that he believes that China's future growth will be very stable. "Considering the investment and efforts made by the Chinese government in infrastructure construction, China is definitely a very important market for us."

When asked if the Chinese market will return to the level of 2009 to 2011, the above-mentioned John Deere sales staff shook his head again and again. "It is still much worse than around 2010, almost the level of around 2007. (Market performance) It is okay at present, but how long can it last, whether the country has policy changes, this is not dare to say," he said.

Although the huge potential of the Chinese market is a common consensus in the industry, after 20 years of open competition, the door to this opportunity has begun to slowly close. The five-year decline in the industry's cliff-like decline is not a reshuffle, and some small and medium-sized enterprises with weak anti-risk ability are eliminated, and the remaining market share is trending toward the concentration of head enterprises. According to China Economic Weekly, by October 2016, the number of excavator manufacturers nationwide has dropped from more than 110 in the peak period to more than 20. According to the latest "2018 China Mining Machinery Industry Research Report", from January to October 2018, the top ten domestic market sales volume was 133,879 units, with a market share of 85.3%. The figure for 2017 is 75.35%. The story of “post-production” such as John Deere is increasingly difficult to replicate on newcomers.

At the outdoor exhibition area of ​​the BMW Show, the H?DROMEK booth is a 30-square-meter lodge with two or three white painted excavators and loaders parked on the open space. In the yellow-based exhibits, the design of the Hyde Merck product is somewhat refined, but it is not as good as the excavator array of Liebherr, which is a few meters away. Founded in 1978, Heide Merck is currently a large construction equipment company in Turkey, and its excavator and loader sales have been in the country for many years. According to its sales staff, Heider Merck's operating income can be ranked in the top 50 among global construction machinery companies. Over the past 40 years, its products have been sold to more than 100 countries, with major markets concentrated in Europe and North America.

In 2017, Heide Merck, who saw the opportunity to recover from the Chinese market, decided to enter the market, but the construction equipment manufacturer that has a good position in Europe has not made good progress in China. It is reported that this year, Heide Merck's products have only sold about 10 units in China, and its market share is negligible. In this regard, the sales staff told the news ( that Hyde Merck's product positioning is high quality and high price, and has confidence in the depth and volume of the Chinese market, optimistic about future development. However, when asked if he would open a subsidiary in China, the salesperson clearly denied it.

According to him, Hyde Merck's factory in Thailand has officially put into production in recent years, which is one of the reasons why the company decided to enter the Chinese market. In addition, Heide Merck has an office in Japan that is responsible for the operation and aftermarket services in the Asian market. At the BMW Expo, Chinese dealers were attracted by the Hyde Merck booth, hoping to discuss cooperation matters, but since Heide Merck did not hire Chinese-speaking employees, the two sides had to give up.

Put down the body: foreign manufacturers force the market outlook, and explore the low-end market

Chen Qihua said at the press conference that the Chinese construction machinery industry has experienced rapid growth for two and a half years. Now all players are thinking about how to achieve sustainable growth. "We also keep a close eye on this." According to the situation of the new products released by BMW, the low energy consumption and intelligence of engineering equipment are the two future development directions of the first-line manufacturers.

In terms of low energy consumption, Caterpillar launched 11 new excavators at the BMW Show. Among them, the weight of five products, including 330GC, is between 30 tons and 45 tons, which is a “big digging”. According to reports, the series of excavators use intelligent weighing and other technologies, the work efficiency can be increased by up to 45%, while saving up to 15% of fuel consumption.

In 2015, Volvo Construction Equipment cooperated with Swedish customers, governments and universities to carry out electrification field operations. The project electrifies the transportation links of quarrying operations, including excavation to initial comminution, and then to intermediate transportation of secondary comminution. Since the start of operation in late 2018, the project has achieved higher-than-expected results. According to Jen Berry, the project's carbon dioxide emissions are reduced by 98%, power consumption is reduced by 70%, overall operating costs are reduced by 40%, and total cost of ownership is expected to fall by 25%. “In past practice, increasing environmental protection often meant sacrificing cost and efficiency. Volvo’s electrification field operations proved that we can balance safety, environmental protection and efficiency without having to make trade-offs,” said Yen Berry.

In terms of intelligence, according to Chen Qihua, Caterpillar has achieved the interconnection of 700,000 engineering equipments worldwide by the end of August, with a target of 870,000 units at the end of the year, achieving global connectivity. Chen Qihua said that there is still much room for the intelligence of the construction machinery industry. "According to relevant statistics and reports. In the past 20 years, the automation level of the global construction machinery industry is compared with the automation and intelligence level of the entire industrialization. It is low. There are many opportunities here, which can reduce a lot of waste."

Since the recovery of the construction machinery industry, domestic construction machinery manufacturers have rapidly narrowed the gap with foreign manufacturers both in terms of technology and market performance, and even have leading advantages in some areas. For example, the above device interconnection technology has been practiced among major domestic manufacturers. At present, domestic construction machinery enterprises including Xugong, Sany and Zoomlion have already set foot in the industrial Internet and launched remote management software for users.

In the exhibition hall of Zhongke Yungu Technology Co., Ltd., the data of the travel path, working time, load capacity and energy consumption of Zoomlion engineering equipment are all on the software interface. With the application software, users can get this data from their phone or tablet to optimize their device management solution. From the figures on the big screen, the number of devices that Zoomlion has participated in is about 11,000.

Sany Group, a privately-owned construction machinery company with the largest domestic market, exhibited a number of unmanned programs at the BMW Show, including the use of VR glasses with drones to remotely control excavators and heavy-duty cranes. In addition, the new SY365 intelligent excavator released by Sany was named "AI excavator", with electronic fence, radar obstacle avoidance, one-button slope repair, flat ground, automatic trenching, squatting, loading and other functions.

According to data released by the China Construction Machinery Industry Association, domestic brands have gradually dominated the market since 2011. In 2010, among the various types of construction machinery products, the market share of domestic brands was 29.4%, and it has risen to 46% in 2016. In terms of the main product line of excavators, domestic brands accounted for 54% of the total domestic sales in the first seven months of this year.

In the face of increasingly fierce market competition, foreign manufacturers urgently need to open up new advantages. In the past impressions, foreign manufacturers have an absolute advantage in large-tonnage equipment, while domestic manufacturers are good at low-end and mid-end product lines, with a price advantage. But at this year's BMW Show, Caterpillar released six mini-digging products, and Volvo released the EC75D small-tonnage excavator designed, developed and manufactured by the Chinese team. This effort to expand the low-end market is expected to impact domestic brands in the price range.

On the other hand, foreign manufacturers are also strengthening post-market services to enhance the user experience. Volvo Construction Equipment launched the "Wo+" overall solution at this year's BMW Show. In addition to monitoring the normal working hours, fuel efficiency, productivity and other data of the equipment, it also provides certification refurbishment, finance, accessories, leasing and other services. Yen Berry said that Chinese customers are increasingly demanding machine runtimes, and the Chinese market is moving from a simple market to a mature market.

Caterpillar also introduced a new generation of parts brand Yellowmark. According to its official article, Yellowmark aims to provide an economical and reliable part solution designed for one-time use, which cannot be reused or rebuilt, so the price is lower. In addition, Caterpillar presented a “2 hour response service commitment” at the BMW Show: within 50 km and 2 hours, Caterpillar's agents will respond to any customer's demand for product equipment services in a timely manner.