The 2021 China Construction machinery marketing & Post Market Conference officially kicked off on November 29. This conference gathered highly influential people in China's construction machinery industry, built a high-level communication platform, focused on "adhering to axiom", discussed many opportunities and challenges in the process of adhering to it, and contributed valuable and knowledgeable wonderful exchanges, in-depth collisions and solutions, Together with my colleagues, I will observe the current situation and look forward to the future.
On the afternoon of the 29th, Long Hui, chairman of Jiangsu Lihao Construction Machinery Co., Ltd., delivered a key speech with the theme of "change due to change, stability and progress".
Caterpillar is the benchmark of our construction machinery industry, and lixingxing is also the benchmark of our agency system. Their achievements are worth learning from.
Adhering to the principle of value, I reflect on the rapid growth of the market in the past five years. As an agent of a manufacturing enterprise, I reflect on what is short-term behavior and what goes against my original intention. At the same time, I am also thinking about why many agents have to stick to it when they often hold chambers of Commerce in Jiangsu? This adherence is partly due to the fact that the organizers of this meeting have always paid attention to the development of agents and have always adhered to them.
Today, I will use some data to analyze the gains and losses of construction machinery manufacturers, agents and customer groups in the rapid development of demand, use data to penetrate the dangers and opportunities of the construction machinery industry chain, and use data to judge the strength and weakness of industry cycle adjustment. Finally, it expounds that in the business transformation from seizing opportunities and indifferent to risks to paying attention to crisis and choosing tracks, agents lie flat and feel guilty in strategic choice and do nothing and do nothing in tactical choice.
Gain and loss
Gains and losses of both parties.
Manufacturer: from 2016 to 2021, the sales volume of domestic excavators increased from 70000 units to 300000 units. As a manufacturer, it has gained a market position, especially the agent manufacturer of domestic brands, which has significantly increased its market share to more than 75%. However, there is no obvious change in the share differential of major domestic brands.
We can see from the financial report from 2016 to the third quarter of 2021 that the operating revenue, accounts receivable, total profit, gross profit margin and net profit before tax of major domestic brands increased in 2016, indicating that their business strategy is correct and their business situation has been greatly improved in this wave of market.
Agents: from 2016 to 2021, under the business model of changing the share of excavator agents for factory award rebate, many agents have become larger, resulting in the expansion of the proportion of agents with a revenue of more than 500 million yuan from 12% to 24%, while the proportion of agents with a revenue of less than 100 million yuan has been reduced from 46% to 34%. In the process from 2016 to 2020, the operating revenue and profits of some agents increased simultaneously. The agent enterprises with profits of more than 50 million accounted for 10%, and about 30% of the agents lost money due to competition. At the same time, in this process, the market terminal has also experienced small excavation price wars and some price wars against medium excavation. However, there are still profits, but drastic changes have taken place by 2021.
From the survey data of the agency working committee, it is not difficult to see that the competition intensifies from 2020 to 2021, and the price war extends from small excavation to medium and large excavation, resulting in the loss of medium excavation models and the decline of gross profit of large excavation. At the same time, the price war and business war are carried out simultaneously, and the agent enterprises account for nearly 40% of the serious losses; Those enterprises that need policy subsidies from manufacturers to operate normally account for nearly 32%, and the situation of agents is in jeopardy. In the past five years, we have been constantly reflecting that the product price is certain and the policy is certain. The manufacturer's market share target is set relatively high. Why do agents have such a large loss?
Customer base: from 2018 to 2021, the price of terminal small excavation fell by more than 40%, the price of medium excavation fell by more than 20%, the residual value of second-hand cars shrank year-on-year, and a large number of individual users and tenants suffered.
Danger and opportunity
These circumstances have brought a series of consequences, that is, under the surface of the beautiful manufacturer's operating income, there are a large number of receivables hidden behind it. With the downward trend of the market, three tigers will appear: the first tiger, the profit will decline, 80% of the domestic brand agents will lose money, and the factory will continue to give blood to maintain the basic survival of the agents, which will lead to the decline of the gross profit margin of the industrial chain. The second tiger, overdue increases. From September, we can also see that, especially in the northwest, North China and northeast, the operating rate decreases, and many large-scale customers are overdue. The overdue area will expand and the terminal collection rate will decrease. The third tiger, the bad debt is prominent. Construction machinery is a typical credit sales product. Under the rapidly expanding sales, there is a huge amount of receivables, and there will be bad debts in the receivables.
Weak and strong
Strong period and weak period. The sign of market downturn: the weakening of infrastructure investment: the breaking of the balance between the supply of total social projects and the total time consumption of stock equipment.
In fact, the upward wave from 2007 to 2011 has tripled, from 70000 to 170000, more than doubled, and the whole market has increased nearly five times from 2015 to 2021. The market is like a spring. The longer it is pressed, the greater the rebound. This is an economic law. Look at the market downturn from 2011 to 2015, two-thirds of the market is gone, and there are only 50000 units by 2015. Through today's meeting, in the domestic market, construction machinery, especially excavator, will go down the channel. Is it a strong cycle or a weak cycle? I personally think it is a strong cycle.
The downward transmission chain is also that the balance between project supply and equipment time consumption has been broken. From January to October this year, the growth rate of China's infrastructure investment was only 0.4%, which led to the decline of terminal rental price and the extension of repayment cycle.
From 2011 to 2015, the same manufacturing enterprises, from operating revenue to accounts receivable to gross profit margin in 2011, we should especially look at the net profit margin, which is close to 0. The difference between gross profit margin and net profit margin. The gross profit margin is so high that the net profit margin is close to 0. We should deeply realize that the economic law is the economic law. In the downward period, even if the state introduces some policies, it may only be a spray in the downward channel.
When the market enters the downward period, we predict the competition situation. Now the price war has extended from small to medium. This may be inevitable. Why? The basic logic is the problem of quantity. The supply is too large, the demand is too large, the production capacity is huge, and some enterprises say that they would rather lose 500 million to enter the industry. We predict that there will be different price reductions for small excavation, medium excavation and medium excavation. This will cause the gross profit margin or net profit margin of manufacturing enterprises to continue to decline. What's more terrible is that the product price war will also continue to the three unconditional war. Now there are some models of low down payment and rent for sale of new machines, which will prolong the repayment cycle, extend to the lease price war, and eventually extend to manufacturing enterprises, so as to spread to the whole industrial chain. Between 2011 and 2015, rental prices also fell sharply.
At the same time, in the wave from 2011 to 2015, all of you may have participated in the b-end leasing. Many enterprises lease by resolving creditor's rights, and the price must be lower than the rental price of the customers we sell, which will cause our terminal leasing price to be low, which is the most fundamental driving force for the market downturn.
What is the difference between this round of downturns and the previous round of downturns? In my opinion, at least the sales terminals had gross profit in the last round of downturn, and the profit model was different from that in this round, so this round would put double pressure on manufacturing enterprises. One is that manufacturing agents suffered serious losses. Did manufacturing enterprises not want agents? If you need blood transfusion, the repayment cycle of end customers will be prolonged, and the overdue face and overdue rate will expand. These two pressures will devour the gross profit and net profit of manufacturing enterprises. This is different from the last round. In the last round, our profits may not meet expectations. This round, we have done a lot, but we can't make money.
Yes (yes) and no (yes)
As an agent, there are actually two ways: one is to lie flat and give up the strategy, which may be able to protect or preserve some of your assets from erosion; The other is to continue to carry it in the next three to five years. In terms of tactics, I think you want to continue to participate in this hand-to-hand fight. Maybe it's those inaction practices. If you really want to think about it, why don't you make money? Because we have done too much harm to our customers. So I think you can improve the operation quality by selecting high-quality customers, optimizing the team and controlling the conditions. When you are dying, I think it is the same as the bank treating customers. He will only do what he can, and he will never give help in time. I think the same is true for manufacturing enterprises. When your operation has problems, he hates you very much.
There are some empty questions. As an agent enterprise, how to carry the impact of the downturn in the next four years in different markets is what we all here want to think about. Then, as the industry is about to enter a downward period, it is either promising or lying flat as soon as possible. The unprofitable business activities are contrary to the commercial essence, and the imbalance of interest distribution in the industrial chain will be unsustainable.
As a promising manufacturer, we should formulate appropriate share objectives and change the pursuit of share objectives into the pursuit of enterprise management quality; Control the bottom line of terminal prices and business conditions, and strictly control false, cross domain and flood sales. Of course, don't use data to attack your competitors. Competitors should survive with you.
As promising agents, this is a profit model of many agents, which depends on the share in exchange for the award rebate of the factory. In order to obtain post market income, I don't think this can be replaced by digitization in the future. Maintain business balance and value bottom line, control operating costs, each enterprise should pay attention to organizational efficiency and eliminate excessive promotion. The way of management is to do something and not do something, so as to achieve sustainable development.
Finally, the agent is facing the double rising pressure of eroded operating profits, terminal overdue face and rate. To do the right thing is what the agent leadership needs to think about. What is the right thing? Sticking to value, I think, is to do many things we haven't done or made mistakes in the past five years. Our action power is reflected in doing the right things. I hope you will be strong enough to survive the future downward period.
