Why do the Chinese not sell the shield machine at 90% of the foreign price but at 10% of the price after they have developed it?
1、 The price mechanism for complete sets of customized equipment is very complex
Similar to complete sets of customized equipment such as shield machines, mining equipment and complete sets of concrete equipment, the price formation mechanism is very complex. There are various preconditions, constraints and restrictive clauses in the contract. No one knows the specific details except the parties signing the contract. Therefore, the argument that "foreign shield machines used to be 10 times that of domestic shield machines" is a little weak. In fact, there are more than 40 product categories in the construction machinery industry. Apart from extreme cases, it is rarely heard that there is such a pricing mechanism.
However, under various constraints, it is possible for the contract price to be very high.
For example, the normal delivery period is 3 months, and it must be 1 month.
For example, for a product I have been in contact with, the customer requires the guarantee speed of all parts in extreme cases. The final solution is that the factory specially sets up a warehouse in the local area, and all parts are ready. Even the parts that need to be replaced only 20 years in theory have been stored. The final contract price is sky high, because the factory has paid huge operating costs.
For another example, I was completely surprised by the price at which a competitive product was sold to customers at that time. A few years later, things changed. After I had left the industry, I learned that his family provided customers with a buy back option. It was agreed that the factory would buy the equipment back in a few years.
Of course, these are the simplest cases. In reality, the price formation mechanism of complete sets of orders is more complex. The explicit contract price is only one of them. Basically, it's OK to listen to it. In most cases, the real cost and price are unknown. Perhaps, the so-called "foreign price" of 90% or several% of the so-called foreign price is just the face price.
2、 Constraints of the market environment
There are only two situations faced by the overseas market price of domestic construction machinery:
1. In fact, the shield machine can not be regarded as the most successful model of domestic replacement in the construction machinery product line. The most successful example is the concrete equipment. After being replaced by domestic products, Zoomlion, XCMG and sany further purchased all their teachers and European counterparts.
According to some respondents, can we sell at a high price? did not.
China consumes 90% of the world's concrete. In other words, there is little demand for concrete equipment in the overseas market. If there is a need, it can also be solved through some alternative solutions. Even if it cannot be replaced, it is feasible to modify some equipment for operation. After all, others would have. Of course, some extreme cases should be excluded here. For example, the 2011 East Japan earthquake temporarily required a high meter pump truck for emergency rescue.
2. The internal structure and form of the same product are different.
The most typical product is the loader. The domestic loader technology comes from the technology transfer between caterpillar of the United States and Komatsu of Japan. After the output burst, it was exported to South America, Southeast Asia, Africa and other places. What about sales in Europe, America, Japan, Australia and other countries? The sales volume is very small. Caterpillar, Komatsu and other manufacturers still sell loaders in the global market at 5-7 times the price of new domestic machines.
The loader technology of European and American manufacturers is developing in the direction of comfort and low noise. The loader that looks the same uses the hydrostatic scheme, the vibration and noise of the equipment are very small, and the driver's comfort is greatly improved. Driver comfort is not a priority in underdeveloped markets. It has become the number one problem in countries like Europe, America, Japan and Australia where there is a shortage of labor in the construction industry. There is no one to open equipment for you.
3、 The cost performance advantage should be seen in the overall link
It is very difficult for a device to move from low-end product to high-end product, from high-end product to brand, and from brand to competitive moat advantage, which requires the addition of many conditions. When it comes to price alone, such medium - and high-end industrial products are generally big accounts.
More than a decade ago, the sales volume of domestic machine tool products surpassed that of the world's top ten in terms of machine tool turnover. Over the years, there has been no trace of domestic enterprises. Domestic manufacturing enterprises are basically using machine tool products from Japanese, European and Taiwan manufacturers in a large area.
Why? It's no use just being cheap. Machine tools are means of production, so we should consider the failure rate, output and discount. The price of machine tools is nothing in the whole output.
Similarly, there is still a gap between domestic excavator products and caterpillar and Komatsu, but the gap is not large. But in the American market, the price of a second-hand Carter excavator can buy two new machines of the same tonnage in China. Even with this price advantage, Sany, the largest domestic brand in terms of sales, has a factory in the United States and has been working for many years. Its market share is still a poor single digit.
Why? The core reason is to calculate the large account, which is divided into two parts. First, the project cost is geometric multiple higher than the excavator price. The primary goal of purchasing equipment is to ensure the project progress and quality. (I am not saying that domestic products are bad, but there is a huge gap between good products and customers' trust in your products.). Second, the residual value of the equipment should be calculated. The excavators of first-line brands can be sold at a high price after a few years, and the intermediate use cost is not high. So how to create residual value? In addition to quality and brand, there must be a global pricing system, service system, spare parts system, disposal channels of second-hand equipment and network construction, which not only takes time, but also costs a lot of money.
That is, to build a high premium brand requires long-term, cross cycle capital investment, as well as long-term training and recruitment of high-quality international talents. These are only basic conditions. Many things depend on luck and luck. There are only a few engineering machinery enterprises that can produce high premium in the world. This is the elite among the countless bankrupt enterprises. It is not appropriate to compare them in a straight line.
Conclusion:
I was suddenly interested in writing this answer because I was thinking about how to do a good job in the overseas construction machinery market recently. I spent a long time studying why Komatsu of Japan could grow from a small enterprise whose product quality was 50% of that of its American counterparts to an industry giant that swept the world and forced many American construction machinery enterprises to go bankrupt in the 30 years after the war.
After reading a lot of Chinese and English papers introduced in this area, I feel that they are just scratching the surface. Many conclusions, it sounds reasonable to attach importance to quality, the construction of global system and supply chain construction, but it is difficult to explain why such brilliant achievements can be made in such a short time. It is difficult to get a glimpse of the whole picture with countless details and profound business insight and decision.
Industrial products with high price, gross profit and net profit, except for some cases where athletes such as tobacco are referees, are basically the collective wisdom crystallization of the smartest brains on the planet. A manufacturing enterprise that can find a good balance between quality, output, delivery date, quality control and price is already a great leader in the industry.
On this basis, it is too difficult to form a brand premium and a competitive moat. The unknowability and uncertainty faced by the insiders are difficult to get answers every day and night. This is why business consulting companies like McKinsey and Boston have to spend astronomical costs to recruit young people from the best universities.
Some respondents can even think of losing money for decades, forcing others to die and selling at a high price. This is the wild fox Zen learned from the local stall literature. Even Samsung's success is based on its deep understanding of the industry and business insight, and on luck and dividends of the times. It cannot be simply attributed to the counter cyclical expansion method.
To fragment and linearize such a complex business world into such a one-dimensional logic can only express admiration.
