Since the second quarter of last year, affected by factors such as weakening domestic demand, saturation of construction machinery market and sharp rise in raw material prices, the construction machinery industry has shown an overall downward trend. Especially since 2022, the construction machinery sector in the secondary market has continued to decline. As of the closing on March 14, the sector index has fallen by more than 20%. The reporter recently visited a number of enterprises and learned that enterprises fully expect the weakening of the domestic market, and the leading enterprises generally speed up the overseas layout to break through.
Increasing downward pressure on the industry
According to the statistics of 26 excavator manufacturing enterprises by China Construction Machinery Industry Association, the sales volume of main products in the industry generally showed a sharp decline in January 2022. Among them, 15607 excavators of various types were sold, with a year-on-year decrease of 20.4%; 758 loaders decreased by 14.98% year-on-year; 1146 road rollers, a year-on-year decrease of 5.99%; 1550 truck cranes, a year-on-year decrease of 57.7%
While sales fell sharply, corporate profits also fell. According to the third quarterly report of Sany Heavy Industry, Liugong and Zoomlion in 2021, the net profit attributable to shareholders of Listed Companies in the current period decreased by 35.32%, 59.70% and 46.01% respectively year-on-year. Many respondents said that due to the high industry base in the first quarter of 2021 and the continuous "price war" and other factors, it is expected that the net profit of enterprises in the first quarter of 2022 will not change significantly.
"Since the construction machinery industry reached its peak in the first quarter of 2021, it has entered a downward inflection point, and this process will last for a long time." Wang Min, chairman and party secretary of XCMG machinery, believes that this round of industry downturn is not expected to be as severe as the wave of "sharp decline" around 2012, which will force the industry to transform and upgrade and pursue higher quality development.
It is worth noting that the central economic work conference in 2021 set the tone that stability will take the lead in 2022 to deal with the triple pressure of demand contraction, supply impact and weakening expectation. Among them, "moderately ahead of infrastructure investment" and "promoting affordable housing construction" have become the two key points for steady growth. According to the Research Report of Pacific Securities, in January this year, the enterprise sector increased credit by 3.36 trillion yuan, a year-on-year increase of 810 billion yuan, and the net financing of government bonds was 602.6 billion yuan, a year-on-year increase of 358.9 billion yuan, indicating that the policy overweight is driving the market to pick up.
Xiang Wenbo, chairman of Sany Heavy Industry, believes that the construction machinery industry has experienced five years of rapid growth from 2016 to 2021, and the growth has fallen moderately or even negative growth is expected. "There will be more variables in 2022. But I predict that the overall trend will be 'low before high'."
Some enterprises are cautious about the market prospect. Wang Bin, deputy general manager of Jiangsu Hengli Hydraulic Co., Ltd., believes that from experience, generally from March to May is the peak sales season of construction machinery enterprises, and the sales volume is 3 to 4 times higher than that in the second half of the year. Even if there is a trend of "low before high", it is difficult to hide the overall downward trend. "At present, the domestic market tends to be saturated, which can be seen from the operating rate of excavators and other equipment. However, there are still opportunities for sub circuits such as aerial work platforms in the industry."
Leading enterprises speed up their participation in international competition
During the interview, the reporter found that accelerating the pace of "going global" is becoming the common choice of many leading construction machinery enterprises. According to the data of China Commercial Industry Research Institute, the export volume of construction machinery products in 12 categories increased to varying degrees in 2021. Among them, the overseas sales of lifting working platform and crawler crane have doubled. The export volume of excavators, graders, bulldozers, forklifts, road rollers, truck mounted cranes and truck cranes increased by more than 50%.
The sharp increase in exports reflects that leading enterprises have accelerated their overseas layout. One belt, one road, was found in the press survey. The leading enterprises represented by Xugong machinery, Sany and Zhonglian heavy industry have focused on developing the market along the "one belt" road and participating in the high-end market competition in Europe and the United States.
In 2011, XCMG invested in the Construction Machinery Industrial Park in Brazil. In 2021, XCMG Brazil's operating revenue increased by 219% year-on-year, ranking in the forefront of the local crane, grader, roller, trenchless drilling rig and other market segments. On this basis, XCMG began to actively layout to the high-end market in North America and create a localized "research, production, supply and marketing financing" system. "The markets of European and American developed countries have high requirements for product quality and technical services, and the competition is fierce. It is a 'hard bone' that must be chewed down to build an international brand." Wang Min said. In 2021, XCMG announced that it planned to invest US $99 million to officially establish the US company and its subsidiaries. At present, it is stepping up the site selection and implementation.
XCMG is not the only one speeding up its distribution to developed countries. Not long ago, Sany Italy company opened to undertake the functions of product display, direct sales, service and training. As the Italian headquarters and accessories Center, it supports the radiation of agents in Italy. Xiang Wenbo said that the largest market of construction machinery in the world is not developing countries, but developed countries. Sany group is committed to expanding the markets in Asia and central and South America to North America and Europe. At present, Sany group has successively invested in construction machinery R & D and manufacturing bases in India, the United States, Germany and Brazil.
Zoomlion also accelerated its efforts to explore the markets of developed countries in Europe and the United States. Zoomlion's European plant has been officially completed in Italy. Meanwhile, Zoomlion's base in Belarus has been completed and put into operation.
Many respondents said that although the counter cyclical policy will play a role, the domestic construction machinery market is close to the "ceiling". After several rounds of reshuffle, the concentration of the construction machinery industry has increased significantly. Accelerating the international layout will be the inevitable trend of the development of leading enterprises and an important direction for the transformation and upgrading of the domestic construction machinery industry. In addition, international leading enterprises such as Caterpillar and Komatsu have advantages in network layout, key core technology research and development and other fields. Especially in the markets of developed countries, consumers' requirements for products and services are generally higher than those for prices. This means that Chinese enterprises must upgrade their management, technology and services.
Construction machinery "going global" uncertainty risk intensifies
The reporter found in the survey that although many leading enterprises have accelerated the layout of "going out", the road to truly realize sustainable operation and development is still blocked and long. Wang Min said that XCMG Brazil has been grinding a sword for ten years and has become a local mainstream construction machinery brand. During this period, XCMG also paid a lot of "tuition fees". Among them, supply chain construction and localized operation are the key.
The interview found that under the influence of factors such as the "double cycle" strategy and the layout of international industrial chain, the "going global" development of domestic construction machinery enterprises is mostly inseparable from the support of domestic manufacturing links. This can be seen from the fact that many construction machinery enterprises often adopt CKD (full loose assembly) mode overseas. In the current situation of global industrial chain reorganization, construction machinery enterprises are facing many uncertainties in "going global".
Some enterprises said that due to the current conflict between Russia and Ukraine, cross-border logistics is limited, and a number of construction machinery of the company are overstocked at domestic ports and cannot be transported. Novel coronavirus pneumonia and geopolitical conflicts are also factors affecting the travel restrictions of business travelers.
The person in charge of many enterprises said that the excessive issuance of US dollar currency, the continuous appreciation of RMB and the increase of operating costs of overseas factories have affected the overseas competitiveness of Chinese brand products and the development of international markets. Some enterprises have begun to respond by accelerating the recruitment of localized talents, planning product resource plans and maritime logistics plans in advance, but they still face great pressure alone.
The respondents suggested that a national credit enhancement institution should be established at the national level to specifically support overseas financing of "going global" enterprises, and Chinese funded financial institutions should be encouraged to provide financing guarantees and preferential funds for overseas financing by formulating relevant policies. At the same time, re-examine the tax reduction and exemption policies for major technical equipment, cancel the tax reduction and exemption policies for products that already have the ability of localization substitution, and appropriately slow down and extend the relevant policies for those that do not, so as to ensure the competitiveness of Chinese products in overseas markets.
