The author visited a number of excavator manufacturers and agents, trying to show the ecological evolution of the terminal market in the context of the five consecutive years of growth in the construction machinery market.
Behind the 5 years of construction machinery bull market, the ecological evolution of the terminal market
Behind the 5 years of construction machinery bull market, the ecological evolution of the terminal market
Core point of view:
The situation for the market to maintain growth in the first half of the year is basically certain, and unexpected growth cannot be ruled out. The outlook for the second half of the year is uncertain.
The customer operating rate is relatively high, but there is uncertainty in the investment landing; the unit price of the project continues to fall, and the industry ecology is facing a crisis.
Purchasing new machines has become a consumption inertia, and the replacement cycle of equipment has been shortened, which has had a greater impact on the aftermarket.
1. What is the prospect of the industry?
There is a high probability that 2021 will be a bumper year for the construction machinery industry. In the first half of the year, the market will maintain growth. Some agents predict that the sales of excavators in March of this year may exceed 50,000 units, reaching a new high; and the market in the second half of the year. The prospect is uncertain.
"I have been in this business for more than 20 years. I have experienced continuous growth for about three years in the past. I have never seen a'big bull market' for five consecutive years. I always feel that something is wrong. For the next trend, it is difficult for me to predict. Judgment," a foreign brand agent told reporters in this way.
2. Customer operating rate and project revenue
Most agents reported that due to the disappearance of the domestic epidemic and the implementation of investment projects, the operating rate of customers this year was much better than that of last year, and the operating time was earlier than previous years. A brand agent in Jiangsu stated that many customers started construction on the second day of the Lunar New Year, and the government's investment projects and construction volume have increased significantly compared with last year. Customers have strong confidence in the return on investment in construction projects.
However, some agents said that although the operating rate has increased, the funding of the project is worrying. Many projects are started first, and the construction party advances to the site.
3. Changes in the terminal market
1. Increasing competition
The price has dropped further. In some regions, 6-ton small excavators have been lowered to 100,000 to 110,000 yuan. Foreign brands have lost their competitive advantage in the small excavator market.
A sales director of a foreign brand said: “We have always controlled the down payment ratio strictly. In principle, it is 30%. If customers make a 20% down payment, they will need to charge some extra fees. But as far as I know, the down payment ratio of mainstream local brands is generally About 10% to 15%, that is, 20 tons of equipment, you can pick up the machine with a down payment of 50,000 to 100,000."
Manufacturers’ assessment pressure on the market share of agents has been transmitted to salespersons layer by layer, and violations of regulations have even occurred in some areas.
"Although the market demand is strong, the competition among various brands is also fiercer. In order to grab orders, complete performance evaluations, and even do illegal things, for example, the reserve price of a certain excavator is 500,000. Customers If you say you must give me 470,000 yuan, the salesman will use various methods and methods to make up the difference to the customer."
2. Customer consumption habits have changed
In the past, there was no obstacle for older equipment to work on the construction site. This year, there is an obvious phenomenon: Party A is more inclined to allow quasi-new aircraft with an age of less than 1-5 years to enter the site, and equipment enters the site. The increase in the threshold has promoted the accelerated elimination of senior equipment. In the leasing market, when quasi-new machines become the majority, the competitiveness of old equipment becomes lower, which further promotes the exchange of old excavator customers. Buying new machines has formed a consumption inertia.
"Our local construction in the urban area is mainly based on new machines, and there are still some old vehicles in the countryside. The non-road national three standards were implemented from April 2016. By 2021, it has been close to 5 years, and more than 5 years of equipment. They are all National II emissions and are not welcomed by construction sites, operators are hard to find, and environmental protection is not up to standard, and they are gradually entering the phase of elimination."
The shortening of the excavator replacement cycle is indeed good for OEMs and agents, but it is also prone to market fluctuations and cyclical fluctuations, and industry participants are looking forward to a stable and stable growth market. The production plan and the control of the agent company's scale are more favorable.
3. Impact on the aftermarket
The shorter cycle for customers to replace equipment has also had a significant impact on the aftermarket.
"From the sales data of our parts and components, the average part sales of a single customer has dropped by nearly half compared to 2019. Many customers have replaced their machines with new machines, and the frequency of maintenance and the amount of parts and components consumption has dropped significantly. Customers' old cars flow We are also very puzzled about where we are, because there are very few old cars in our local countryside now, and it may be flowing to remote areas in the southwest," said an excavator salesperson.
On the one hand, the average age of the equipment in the market is getting shorter, and the customer churn rate of agents in the out-of-warranty market is also high; on the other hand, it is difficult to make money from selling new machines under 20 tons. The market and the aftermarket are facing dual pressures.
4. Changes in the operating conditions of agents
In the current situation of poor profitability in the new machine market and low retention rate in the aftermarket, the next step for agents is the lack of profit support for after-sales service guarantees and they fall into an unsustainable development model. Agents of individual brands have considered transferring their agency rights, but this is only an isolated phenomenon.
(1) "Excavator price increase" event
"For the'excavator price increase' incident that broke out in the industry in February this year, I think the possibility of the price increase is very low. It should be the agent’s actions to relieve the salesperson’s negotiation pressure. The company said that the price increase, the business The staff maintains the original price for the customer, which makes the customer feel that they are reducing the price, and they are psychologically benefiting."
Another person in the industry expressed a different view of the collective shouting of agents.
"I feel that this is the agent's collective "eyedrops" for manufacturers. The price increase in March last year was initiated by the OEMs, and this round was initiated by a few large sales provinces. Yes, it actually shows an imbalance in the distribution of benefits for agents. The OEMs have made a lot of money, but the channels have lost money, and the debts are high. The agents must have opinions." Mr. Li (pseudonym) interviewed Continuing to add, “After this round of price increases initiated by agents, it will surely trigger a game among manufacturers. Considering the need to increase market share, there is a high probability that OEMs of local brands will make certain contributions to agents. The degree of compromise can realize the redistribution of benefits."
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5. The unit price of construction has fallen, the overdue rate has risen, and the end-customer ecosystem has shown signs of unhealthy signs
1. Decline in construction unit price drives down equipment prices
Most agents said that although the operating rate has increased, the client's construction unit price, profit and cash flow situation have not changed positively. Many people continue to come in, and many people withdraw from the engineering circle, in a state of survival of the fittest and drastic changes.
The decrease in the rate of return on project investment directly leads to lower expected prices for equipment purchases by customers. This is also one of the driving factors for local brands to become popular, and some foreign capitals to obtain the market through reductions in allocations and prices.
2. The overdue rate has increased significantly compared with last year
The company where Mr. Sun (pseudonym) works is the agent of three construction machinery brands from different countries. The main market is excavators and loaders. The market volume is small, but it can still maintain low profit operations in 2020.
"In terms of the risk of payment, loaders are far better than excavators, because they are not expensive and they are bought as tools for their own use. Customers have ample reserves of funds and the repayment period is more than one year. Agents The fund return cycle is short. But the excavator is different. One is that the unit price is high, the repayment cycle is longer, and customers generally use project revenue to repay, with less reserve funds and greater risk of overdue.
"From the payment collection situation at the end of last year, loaders are almost risk-free, and the overdue rate of excavators has increased significantly. At the end of 2019, the overdue rate of our customers was around 50% to 60%. By the end of 2020, this ratio has risen to 78%. More than 40% of customers have applied for deferred repayment, usually about 3 months later, indicating that it is difficult for customers to recover the project funds at the end of 2020. Fortunately, we are small in size and use our own funds to help customers advance payments. It can be turned around."
Talking about the next strategic plan, Mr. Sun (pseudonym) said: "We strive to be a small and beautiful agent, guarding our loyal customers, and we are going to expand to group customers in the next step. Our current price for a 20-ton excavator is It is still close to one million. The technological advancement is synchronized with the European market and is nearly twice as high as the mainstream local brands on the market. However, customers recognize the product’s work efficiency, quality stability, energy saving and comfort, and the repurchase rate very high."
"In the future, we will enter the railway and steel industries with some special equipment and excavator derivatives. At the same time, we will establish contacts with construction contracting companies with the prefix of Chinese characters and sell them to countries along the Belt and Road to seek breakthroughs."
Regarding the current market structure, Mr. Sun expressed his views from the perspective of industrial progress: "I think a market must be flourishing and diversified competition can develop. The pursuit of cost-effectiveness can indeed increase market share, but it is not conducive to the entire construction machinery industry. Technological progress, many foreign brands introduced into China's products are still the technology of the 1990s. If things go on like this, there may be no key technological innovations in products like loaders."
