The aftermarket of construction machinery refers to the various derivative services surrounding the use of the equipment after the equipment is sold. It covers the entire process of equipment from sale to scrap, and various follow-up services around equipment after-sales service and use of customer needs, resulting in a general term for a series of transaction activities. The construction machinery aftermarket mainly includes: repair, maintenance, spare parts supply, financial services, insurance, leasing, second-hand equipment, overhaul and remanufacturing, etc.
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The construction machinery market is severely affected by global economic conditions and construction volume, and the business of the construction machinery aftermarket is mainly affected by equipment ownership and operating rate. The overall market is much less volatile than the complete machine sales market, and the market volatility is relatively large. After the development of the construction machinery market, it can effectively enhance the enterprise’s ability to resist risks and ensure the survival and balanced development of the enterprise. In Europe and North America, companies in the construction machinery industry attach great importance to the development of the aftermarket. In this way, when the new machine sales market declines, the aftermarket revenue becomes an important guarantee for the company to "live".
According to international experience, for the mature construction machinery market, generally two-thirds of the profit comes from the aftermarket, and one-third comes from the sales of new equipment. However, the profitability of my country's construction machinery aftermarket business is relatively low and the development is relatively primitive. According to the survey data of China Construction Machinery Industry Association, in 2020, my country's complete machine sales business will contribute an average of 64% of the operating profit to agents, and the aftermarket business profit will account for 36%, including the sales of accessories, which has a higher contribution value of 19.9% , And the second mobile phone sales business is at a loss (as shown in Table 1). After the overall weakness of the market, my country's construction machinery industry has been greatly affected by the market. Since 2011, it has experienced five years of continuous decline and continuous lows. A large number of manufacturers have shut down and reorganized, which has brought a fatal blow to the industry.
In terms of historical development, my country's construction machinery aftermarket is unique. Looking back at the changes in the construction machinery market in my country in the past 20 years, since 2000, my country has seen strong development demand, and the sales volume of construction machinery has experienced a surge in the past 10 years. Construction machinery complete machines have gradually moved from importing foreign brands to buying domestic brands. Only from the changes in the excavator market, the market share of domestic brands has risen all the way, from less than 10% at the beginning to more than 60% today. In this process, in order to compete with foreign brands for the market share of the whole machine, domestic brands voluntarily gave up the aftermarket and launched the "Buy the whole machine, send parts, free service for life" model. The result is the working hours of all brands in the Chinese construction machinery market. There are many difficulties. The service income of most agents is not even enough for technicians.
At the same time, with the rise of China’s manufacturing industry, my country’s construction machinery parts manufacturers, suppliers and after-sales warranty services are gradually being replaced by lower-priced and more flexible small and medium-sized enterprises. The post-market fragmentation of the construction machinery industry is obvious. As a result of this transformation, the profit rate of the post-market has dropped significantly.
Under the existing market competition pattern, the development of the post-market of my country's construction machinery industry is difficult to reduce profit margins again, and to grab the market at low prices, a new track must be opened to obtain more market opportunities through innovation.
01Developing intelligent systems: replacing intensive labor with high-tech
my country's infrastructure is gradually being improved, and the difficulty of construction of new projects in the future will gradually increase. At the same time, my country's demographic dividend window has passed, and the shortage of human resources will become an important issue restricting the development of the industry in the future. The intelligentization of construction machinery is bound to become a trend, and the construction machinery industry will also enter the era of fully automated construction. Intelligent manufacturing is also a major trend in the development of my country's manufacturing industry. The construction machinery industry is the most important sub-industry in the equipment manufacturing industry and is one of the areas that the state encourages development. The transformation of construction machinery to intelligence has become an inevitable choice in the future.
The exploration and practice of Komatsu Manufacturing Co., Ltd., one of the world's largest construction machinery and mining machinery manufacturing companies, has set a benchmark for the construction machinery industry and the entire manufacturing industry. Komatsu has always had a clear ICT (Information Communications Technology) strategic plan, and in the early days provided the "Cam Chas System" as a standard configuration to a wide range of customers, making very useful explorations for intelligent services.
After years of accumulation, Komatsu's "Smart Construction" system mainly includes five parts: measurement, design, construction plan, construction and inspection (as shown in Figure 1).
Relying on this system and the cloud server for intelligent construction-KomConnect, in the pre-construction measurement stage, aerial surveying and mapping by drones are used to generate high-precision three-dimensional data models of the construction site, and intelligently and accurately matching the corresponding quantities according to the model And types of Komatsu construction machinery. After the measurement is completed, the data must be formed into a visual data map, and then Komatsu Cloud will compare the actual field data with the construction drawing data, automatically calculate the construction earthwork, and conduct a visual construction plan design.
In the construction of the construction plan, the construction plan can be simulated and deduced by comparing the construction period and cost. Users can compile a reasonable construction plan based on the amount of earthwork by themselves, and the process table for each type of work can be automatically generated. During the construction process, Komatsu's construction machinery can realize real-time updates of three-dimensional data on the construction site through the visual sensor (called KomatsEye) installed in the cab. These data will be transmitted to Komatsu Cloud to control the progress of the site. Through these advanced technologies, inexperienced novices can also complete high-precision tasks. The workload of on-site supervision is greatly reduced, and only need to check the completion status through the mobile APP.
Komatsu has also established a strong service center to provide remote support services on site in various ways. Not only can it provide various types of data inquiries, but also guide operations at any time. If there are changes to the design drawings, the service center will revise the drawings in time, and the revised data will also be transmitted to the ICT construction machine in time to avoid on-site shutdowns as much as possible.
Recently, Komatsu has launched an excavator with KomVision human body detection and collision mitigation system (as shown in Figure 4). When the excavator starts to move or swing, the system recognizes people around the excavator and prevents the excavator from moving. When the excavator is traveling at low speed, the system will also stop the excavator when a person is detected. With these functions, the safety of the construction site has been improved, and Komatsu's equipment has been further advanced to full automation.
The introduction of intelligent equipment has given Komatsu a very high market share in China. There are more than 110,000 Komatsu equipment installed with Komatsu Yasushi system in China, and more than 470,000 Komatsu Yasushi systems have been installed in the world. Among Taiwan's Komatsu equipment, the number in China is second only to Japan.
02Financial Service: Use its own credit system to strive for more services
Construction machinery and equipment generally have a higher price per unit, and customers mainly purchase them through mortgages, installments, financial leases, etc., and complete financial services can reduce the financial pressure on customers. Caterpillar uses the "manufacturer financial globalization" model to control inventory, stick to customers, and realize the extension from equipment production to aftermarket services.
Manufacturers in the construction machinery industry are generally strong, and there is a big difference in financing capabilities and financing costs between their downstream customers. Caterpillar Financial's Moody's long-term credit rating is A2. Its good credit status and stable asset portfolio enable it to directly obtain the large amount of low-cost financing needed by issuing commercial paper and medium-term notes. A large number of small and medium-sized enterprises and individual operators downstream of construction machinery find it difficult to obtain direct financing from the capital market, or even to obtain bank loans. Such customers can accept interest rates much higher than Caterpillar's financing costs, laying a customer base for them to obtain a stable level of spreads.
With the support of strong financial services, one of the most important advantages of Caterpillar agents is that customers can achieve one-stop services such as "equipment selection and purchase, equipment financial services, spare parts supply, equipment maintenance" and so on in an agent . Caterpillar uses financial services and financial leasing services as the link to drive the aftermarket service business based on stock assets, and realizes the deepening of the enterprise industrial chain through the control of the aftermarket. Caterpillar has achieved its competitive advantage and stable growth in the product market based on its core technology and equipment, financial services as the link, and stock asset after-market services as its focus.
03New lease model: rapid market expansion
Because construction machinery requires professional operation and has high technical requirements for personnel, my country's traditional engineering leasing model mainly provides "operators + equipment". In the cost structure, lessors mainly face two categories: fixed costs and labor costs, while equipment leasing is billed for services, and equipment is only the means of production for the services they provide. In this mode, the importance of "people" is far greater than that of "equipment". Due to the high mobility of personnel, overall expansion is more difficult.
The vocational education system in our country has been gradually improved, and the number of workers with skilled construction machinery operation skills has increased, providing opportunities for the reform of my country's leasing model. The leasing service of construction machinery and equipment in my country should be transformed from providing "operators + equipment" to only providing "equipment". Since this leasing model does not rely on mature skilled workers, it can rely on scale to achieve rapid growth.
Take United Rentals as an example. In 2018, United Rentals had an operating income of 8 billion U.S. dollars, a staff of approximately 19,000, and a per capita output value of up to 420,000 U.S. dollars. From a product point of view, URI mainly configures a pure equipment rental model. Pure equipment-based leasing enabled joint leasing to expand rapidly and established a nationwide network layout. As of the third quarter of 2019, the number of URI North American outlets reached 1,172 (as shown in Figure 5), and the annual revenue contribution of a single outlet could reach US$6.82 million, forming a scale effect.
04Full chain model: Provide full life cycle services
Finally, from the perspective of the full life cycle of mechanical equipment, the complete equipment service life of "new machine-second mobile phone-scrap" will help improve the overall stickiness of customers and form a complete after-market service system.
In the previous article, it was mentioned that Caterpillar took financial services as the entry point to deepen the industrial chain of construction machinery, and fully integrate the company's business from early sales to after-market services. Japan's Komatsu, through the aforementioned "Conzas System", collects a large amount of equipment usage data, and uses the data as an entry point to structure the business model of the entire aftermarket.
Since 2015, Komatsu has launched a key work policy to reduce customer LCC (Life Cycle Cost) globally. On the basis of big data, the "troika" of the marketing headquarters (complete machine sales), PS (product support) headquarters and ICTS (solution) headquarters has carried out a comprehensive plan for the aftermarket and opened up Complete machine sales, leasing, second-hand phones and after-sales services. Through the Kangchas system, product data tracking and system update after the product is sold, continue to help customers to effectively produce, and achieve the lowest cost Maximize the benefits. And through the collection of data, even if there is a problem with the product, the user is prompted to overhaul and update, so that it can operate well and meet the national exhaust emission standards during the life cycle of the product. Covers leasing, second mobile phones, and complete machine sales Komatsu's "big market" with after-sales service has quietly kicked off.
China's construction machinery industry has experienced severe overcapacity, accounts receivable remains high, and risks are superimposed sharply. Facing the "new normal" of the industry, it is vital to expand and cultivate "post-market" services. The aftermarket has huge potential. In the future China's construction machinery industry, users will never pay attention to "price", but "quality" and "service". China's construction machinery industry will fully enter the post-market era.
