The increasingly fierce price war of construction machinery and the continuous price reduction of equipment will have a great impact on the future post market? What impact will this have on the post market?
The price war reduces the post market potential space
The post market potential space is closely related to the price of the whole machine. Usually, high-value things are worth repairing. In the past, the price of excavator was very high, and the labor cost it can replace is also considerable, which can naturally produce great economic benefits. In case of equipment failure, early repair can make money and generate benefits. Compared with the price of new products, maintenance is still very cost-effective.
Some international well-known brands have established potential models for the after-service market of equipment. For example, in the life cycle of equipment, the sales potential of excavator after-service market is about equal to the selling price of new equipment. The post market potential of different products is different, but they are basically proportional to the price of equipment. In other words, the cheaper the equipment price, the smaller the post market potential. When the equipment is too cheap to be repaired, users will consider replacing the new equipment.
Computers, mobile phones and many white goods have entered this stage. Products are getting cheaper and cheaper. Many times, computers and mobile phones are eliminated before they are broken, just because the performance of new products is more attractive. In this way, the market will continue to shrink after service.
The impact of price war on social service resources
Some people believe that the price war has lowered the threshold for purchasing excavators, so that more users have the opportunity to own equipment, and the ownership has greatly increased. However, more equipment does not mean greater market potential after service.
Firstly, the demand will not change with the increase of the number of equipment, and the potential of the post market is directly proportional to the running time of the equipment; Second, with more equipment, the competition is more intense, the average working time of the equipment is shorter, and the return on investment will also decline. Therefore, the capital invested by the owner in equipment maintenance will decrease, and it will be more sensitive to the price of accessories and services. In this regard, social service resources will get more opportunities.
However, the host price war will also affect the parts market, making the parts price more transparent, the profit thinner and the competition more intense. The survival of the parts store is also facing challenges. At the same time, users also pay more attention to the operation and maintenance cost of equipment, which makes the original parts and services of main engine manufacturers and agents face greater challenges. It is more and more difficult to ensure high gross profit of accessories only by technological monopoly. After the warranty period ends, about 80% of users lose to the society. How should main engine manufacturers and agents change?
Obviously, the price war is a double-edged sword for everyone in the industry, facing both challenges and opportunities.
Impact of environmental emission on post market
On December 1, 2022, China's construction machinery will implement the fourth national engine emission standard. What does this mean for main engine manufacturers, agents and users? On the surface, the technology of Guosi engine is more complex and requires higher skills for maintenance. The newly added tail gas aftertreatment can bring new growth points to the aftermarket and new opportunities to enterprises. The actual situation is much more complex.
Let's look at the truck market first. This year, when trucks were switched from national five to national six, there were a lot of buyouts in the market. The manufacturers wanted to rush the sales, resulting in a large number of agents buying out national five trucks. It is estimated that it will be difficult to digest them by the end of the year, because since July this year, more than 50% of the sales in the truck market have fallen, which makes the truck agents worse.
Will the same drama be staged in the construction machinery market next year? In order to impact the sales volume and share, the main engine factory will produce and stock a lot of equipment, which will force the agent to buy out in the second half of the year. All the pressure may eventually be passed on to agents and users. Will there be a new round of price war in 2023?
After the implementation of the Fourth National Congress, the equipment price is bound to rise. Manufacturers and agents will take the opportunity to lure users with price reduction, digest their national third inventory equipment and transfer the risk to users. In the future, many government projects will restrict the entry of equipment whose environmental protection does not meet the fourth national standard. Although the third national equipment is cheap, the return on investment may not be cost-effective. Are users fools?
If agents hold a lot of national third-party equipment in their hands, they will have to reduce prices and ship them under pressure, or even sell them as second-hand equipment, which will cause heavy losses at that time. In the past two years, the overall profit of the agent is very poor, and the cash flow is even worse. How much cash can be used to buy out? If the agent buys out the equipment and takes the life of the enterprise, will the main engine factory come to save you?
2023 will be a new test for many enterprises. I hope we won't fall into the same river twice. Nevertheless, many enterprises will repeat their mistakes. All the roads we pass are the only way. Compared with the previous round of market decline, enterprises now seem to be more vulnerable because of larger sales, thinner profits and higher risks.
In the face of the future escalating emission standards (national five, national six or even higher), many diesel engine enterprises are powerless in technology and capital. Many enterprises directly focus on electric equipment, and electrification will greatly reduce the space of the post service market. As an enterprise engaged in the post market of construction machinery, how should you deal with this change? Are you ready for the future?
