Recently, everyone is talking about a topic with relish. Not long ago, relevant news from John Deere said that John Deere would gradually stop the sales of complete construction machinery in China from November 1, 2021. As of October 31, 2021, the sales cooperation between John Deere construction machinery and forestry division and authorized agents in China has been terminated, and the parts and service dealer functions of the original agents have been retained.
It is undeniable that John Deere, not to mention his construction machinery sector, as a world top 500 enterprise and agricultural machinery industry giant with a long history of 184 years, has entered the Chinese market since 1976, rooted in China's agricultural world for 45 years, and has made great contributions to China's agricultural machinery and Agronomy. Up to now, John Deere's tractors, cotton pickers and other equipment are representatives of the top quality in the industry.
Let's go back to today's theme, "John Deere's withdrawal from China". In fact, if we make a detailed inventory in the past ten years, there are not a few foreign brand enterprises that have entered the Chinese market and withdrew as a result. Why has "John Deere" aroused people's heated discussion? The key lies in the "volume and influence" of foreign enterprises. The existence of foreign small brands or small volume enterprises in the Chinese market will not have a huge impact on Chinese users or a branch industry. But John Deere is different! This "strong deer" itself is the leader of the world's agricultural machinery industry, and it is also one of the world's top 500 enterprises. Although its construction machinery business officially entered the Chinese market relatively late, it has always occupied an important part in the power pattern of world construction machinery.
John Deere will gradually stop the sales of complete construction machinery in China. He can't help asking "why?" after calm and complete thinking, the reasons I can think of may come from two aspects. One is the factor that can only be realized in our hearts and can't be directly explained. As we all know, John Deere's main business segment is the field of agricultural machinery. So, how should such a world top 500 enterprise with international influence balance the differences between China and the United States, such as the previous Xinjiang cotton incident. We outsiders naturally cannot know the specific details, but the so-called "result" we can see now is the feedback of some "processes" in the middle, which can only be guessed by ourselves.
Another is to return to the market development law of construction machinery to look at this event. Generally speaking, the foreign brands represented by John Deere have withdrawn from the Chinese market, which is a process and phased result in line with the law of market development. Note that I didn't say it was an "end". Later, I will explain why "withdrawing from China" is not an "end", but just a "pause".
Komatsu push equity change
Although the equity change of Komatsu Shantui is a market measure of Komatsu Shantui, it also has the influence of market factors for the joint venture. Shantui Co., Ltd. announced on the evening of October 28 that according to the needs of the company's strategic development, the company plans to withdraw its 30% equity of xiaosongshantui Construction Machinery Co., Ltd. at the consideration of capital reduction of 750 million yuan through non proportional capital reduction.
It is understood that Shantui Co., Ltd., Komatsu (China) Investment Co., Ltd., Komatsu production office of Japan Co., Ltd. and Sumitomo Co., Ltd. hold 30%, 30%, 30% and 10% of the shares of Komatsu respectively. Shantui shares said that through this transaction, it will further reduce the company's asset liability ratio and improve the company's overall operating efficiency.
Komatsu Shantui mainly produces small and medium-sized hydraulic excavators, covering Komatsu brand excavators such as pc56-pc430. The capital reduction of Shantui shares and its withdrawal from Komatsu Shantui, on the one hand, is to increase cash flow, reduce liabilities and develop its main business. On the other hand, more importantly, Komatsu Shantui's performance growth has been declining in recent years, which does not significantly drive the stock price and business.
Behind the two messages is the strong rise of domestic construction machinery brands and the helplessness of foreign brands.
Domestic brands have risen strongly, and the market share has changed over the past 10 years
In 2000, foreign brands accounted for more than 95% of the market share of Chinese excavators, while in 2010, the market share of domestic brands was only about 30%. However, with the continuous improvement of the brand strength and product quality of domestic excavators, the independent brands represented by Sany Heavy Industry and XCMG have risen rapidly in the past decade, which has greatly squeezed the living space of Japanese and Korean excavators. In 2020, the market share of domestic brand excavators reached about 70%, while that of foreign brands was only 30%. In the past ten years, the market share of domestic and foreign capital has changed.
Over the past decade, the domestic excavator brand has gradually walked on the road of endeavor. From design to process, from engine to pump valve, domestic brands are catching up; From market development to brand marketing, from losing most of the market to recapturing 70% of the market share, domestic brands continue to expand their territory, attack cities and pull out their strongholds. Domestic excavator brands are rising strongly, which is not only the rise of quantity, but also the rise of quality. It is no longer the partial rise of small excavation and local market, but the all-round rise of all models and operation. In 2020, domestic brands will have a market share of 78% in small excavation, 64% in medium excavation and 57% in large excavation.
It is in the strong rise and pressing market environment of domestic brands that the living space of foreign brands has been seriously compressed. With the excavator market gradually entering a downward cycle in 2021, the pressure on foreign brands is even greater!
Technology first failed to surpass market first after all
Several major foreign brands entering China have rich market operation experience in the world. Unfortunately, this kind of experience can not be fully applicable to the Chinese market. In the environment of rapid changes in the domestic economic cycle, Chinese customers give priority to "cost performance" in product selection. Due to the properties of the means of production of construction machinery, even if there are differences in quality and performance, under the condition of no shutdown failure, high cost performance is particularly important to the economic interests of customers. However, foreign brands pursue high quality and high price too much and fail to make reasonable adjustments to their products quickly, which gradually reduces the relative advantages of high performance of new products and enlarges the disadvantages of high price, The quality advantage is weakened and the cost performance is declining day by day. In this vicious circle, the loyal customer group of foreign brands is rapidly reduced.
There is no doubt that foreign-funded products have certain advantages in technology. Compared with the market first strategy, using technology to obtain the market is a temporary advantage. It has proved to be a strategic mistake to ignore the market first strategy of domestic brands with technical advantages. In the game between technology and market, technology must be sold to the market to obtain high profits, and continue to develop technology. If technology loses the market, it will decline. On the contrary, the strong market first strategy of domestic brands has gained the upper hand in the end. The market can cultivate, develop and create technology. Broadly speaking, technology can't compete with the market in the end!
Indeed, although the price of foreign brand products has been greatly reduced compared with the peak value in previous years, in the current market competition environment, the limited decline is not enough to ensure their "cost-effective" competitiveness.
Among all foreign brands, caterpillar is the fastest to meet the needs of Chinese users. In particular, it launched "GX" series excavators in November 2020, which is close to the price of domestic brands. It can still adhere to the market share in the environment of a sharp decline in the market share of foreign brands, which can see the effectiveness of its decision-making.
The cycle goes down and the international market competes
It is worth noting that, recently, the results of major enterprises in the third quarter were announced, and the performance of domestic brands was generally "cold" (see the article "summary of performance in the third quarterly report of construction machinery sector," sharp decline "performance indicates a downward cycle?" for details), while foreign brands generally showed an upward trend.
Caterpillar: the net profit in the third quarter was US $1.426 billion, an increase of 113.47% year-on-year;
Komatsu: the business increased by 35% in the first six months of fiscal year 2021;
Liebherr: in the first half of 2021, the turnover was 5.616 billion euros, a year-on-year increase of 13.4%;
John Deere: the revenue in the second quarter of fiscal year 2021 was US $12.1 billion, a year-on-year increase of 30%;
The growth of these four foreign brands mainly comes from the economic recovery of the international market and its mature internationalization strategy, which also highlights the ability to deal with regional cyclical changes. One belt, one road, has been pushing up the domestic brand in recent years. The excavator has increased for more than 50 consecutive months. But it still has a long way to go to get more results in the international market.
Compared with domestic brands, foreign brands still have advantages in technology and products. Their development in the Chinese market also needs more "grounded" product strategy and business strategy, as well as perfect sales and service channels. In the face of the upcoming downward cycle, we are also waiting for enterprises to "cross the sea with eight immortals and show their powers". This war without gunpowder has just begun!
