Industry dynamics
1.12th 5-year plan pushes High-end device manufacturing
It is said that up to 2015, the annual sales of high-end equipment industry will exceed 60 trillion. And aeronautical facilities, satellite and its applications, railway transportation equipments, off shore engineering equipments and intelligent equipments will be the developing priorities.
2. China construction equipments still need to be improved
3. Construction machinery enterprise from both mainland and Taiwan work together to expand overseas market
3. Gross profit ratio in construction machinery field dropped in 3 consecutive years.
4. Prospect of small construction machinery market attracts the public attention
Overseas snapshot
1.Vietnam announced its suspension of importing obsolete used construction machinery
The premier of Vietnam agreed to suspend importing the used construction machinery or devices and production line since they are not only poor in quality but also environment unfriendly. He also urged the related departments to strengthen the inspection on related products or commodities and introduced related technical standards aiming on better management.
2.The Economist expressed his concern on American economy
Nouriel Roubini, the “doom doctor”, expressed in May, 2nd that America could fall into economy depression and the so called double dip, but he also said that America has better prospect than Europe.
3.Russia is about to invest hugely in high-speed rails construction
Russian premier Putin said that Russia would invest 50 trillion roubles in railway modernization and development in April, 26th.
4.Korea focuses on forging off shore engineering equipments
5.Ritchie win its first battle in its “guess the price and win an award” activity
6.Construction machinery renting industry seeks further development
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The recent data showed that investment on fixed assets didn’t increased as expected, which aggravated the market concerning towards the future macro economy. But according to the experts, except the real estate and manufacturing industry, investment in infrastructure construction is still increasing, and the NDRC is accelerating approval for projects.
The figures of railway ministry showed that investment in railway construction reduced 54.1%. And according to the 12th 5-year plan, arranged investment in infrastructure construction is 4 trillion RMB, which means investment of the first 4 months will at least reduce 1.3 trillion RMB, and in fact the accomplished is much lower.
At the same time, the sales volume of construction machinery reduced further, loaders, road rollers, and bulldozers reduced 23.8%, 54.6% and 32.1% respectively. Investment in fixed assets of the first 4 months reached 75.592 trillion RMB, increasing 20.2% in contrast to the 32 trillion RMB of financial budget, increasing greatly of 26.2%, which shows the adjustment of financial policy.
According to the announced news of NDRC, the speed for approval of projects is increasing obviously. In April, 328 projects were approved, which is much higher than that of last year. In general, these projects are mainly related with water conservancy, road construction, energy saving, technical reconstruction and innovations.
Since the high-speed rail accident of last year, investment on railways is continuously weak. Only 9 of 249 railway projects that arranged in 2012 are newly opened. However, investments in water conservancy and environmental protection are increasing dramatically. It is said that 18 trillion and 34 trillion will be put into water conservancy and environment protection separately in 5 years.
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According to the 21-sun, construction machinery market in April was not as good as unexpected which could see from the performance of excavators.
However, it’s worth noting that though the market was depressed, the homemade brands performed better than the foreign brands.
According to the survey, some distributors have lost their confidence in market in May due to the drastic drop in sales.
But market analysts said that there is no need to be too pessimistic about the market. They have the following reasons. First of all, currency is continuously loosing. Secondly, it is possible that the infrastructure construction could exceed our expectations. In fact, at the end of April, large-scale infrastructure construction projects have returned to work, the rate of returning to work is above 80%-90%.
Monthly sales of Sany reached 2013 units, which reduced 37% year-on-yearly. But it still holds the No.1 place with 12.7% market share. Other brands such as Zoomlion, Liugong, Xiagong sold 366,838 and 630 units respectively with increase of 43%, 4% and 68%. While Lonking and Sunward were a little weaker in performance, they sold 507 and 388 units, reducing 42% and 54% respectively. Foreign brands such as Hyundai, Komatsu, Hitachi and Doosan reduced drastically with a separated dropping rate of 61.0%，61.9%，57.8% and 55.5%.
Except for the rising of market share, the adjustment of profit structure will also provide developing channels for construction machinery.
In developed countries such as America and Japan, the ratio between machinery sales revenue and after market revenue is 64:100, while the ratio in China is 350:100, which we can see the wide profit space of parts market.
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People’s Bank of China announced that it would down regulated the RMB deposit reserve requirement ratio by 0.5% from 18th in deposit-taking institutions in 12th, which will bring advantage to the sales of construction machinery.
This is the second time that the Central Bank reduced the reserve requirement ratio in 2012, and the third time since 2011. After the effecting of the down-regulation, reserve requirement ratio in large-type financial institutions will reduce to 20%, while small and medium sized will reduce to 16.5%. And the Central Bank plans to put 4.3 trillion RMB into the market, which will alleviate the depression and drive the market demand from the current depressed situation.
A series of macroeconomic statistics in April showed that both the internal and external demands are very weak. The newly increased cash in bank is less than 7 trillion RMB, which is obvious lower that the market expectation. The attempt of Central Bank aims to stabilize the economy and make sure the market is healthy developed.
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In April, 24th, the 16th Russian mining machinery exhibition was successfully held in Moscow. Of course, China mining machinery manufacturers would not miss the opportunity.
Russia is quite lag behind in mining industry, and it has no local mine system. And in the exhibition, we saw no singular Russian mine system, or matched mining equipments. Though its small machinery device enterprises are developing, the market is flooded with low and medium-end products, and the high and medium mining machinery is still in its infancy. According to the current mine system of China, to enter into the Russian market, it is absolute possible to bring the low and medium products into the market.
Compared to the advanced mining equipment enterprises, China has a lot space to develop in technology and performance. But according to the mobility in the exhibition area, it is obvious that Russian customers are in love with China mining machinery. According to analysis, it may attribute to the following reasons: first, no matter in price or performance, China mining machinery could satisfy their needs. Secondly, compared to the advanced ones, the accessories produced by China are more advantageous in price. At last, Russian is adjacent to China, and they both belong to the BRICs; and there are preferential policies in export.
Though Russia possesses abundant mine and energy resources, but due to the lack of devices and technology, the mine development was greatly limited. In 2012, Russian mine equipment market is a sweet cake that every mining machinery enterprises want a piece of.
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When construction machinery develops to a certain degree, function design only could not satisfy the users any more, since they require more in appearance, ergonomics, comfortableness and intelligence. Individuation has been an important aspect decides which to buy.
In fact, Euroamerican manufacturers started to apply the concept to construction machinery in 1990s. They developed new products by widely using new technologies, improving the stability, and increasing the information technology content, while China construction machinery has lagged behind a lot. To capture more foreign customers, China has to work more on the product individuation. The following three are some about individuation that could be practiced:
1.selling point-first impression
Since the performance and quality of the most domestic machinery are no big difference, the appearance may become a deciding purchasing point. The color we most familiar with is the “construction machinery yellow”, but since the entering of foreign individuation products into China, we begin to see more colors. In the ocean of yellow, a red will definitely radiant and outstanding. Though the resistance of wind will not affect much of the speed of the construction machinery, the streamline form which will greatly elevating the expression has entered into the construction machinery field. Also, the surface was used to be roughly made, but the problem is about to change.
2.application of ergonomics
The comfortableness and convenience have always been taken into consideration when developing a product. This is we called ergonomics today. Whether from points of users or manufacturers, the application of ergonomics will be a developing trend for construction machinery. Except the above two, safety is always the first priority, and to ensure this, the strength of the cab glass has been improved year after year. In some Euroamerican countries, they not only have serious standard on emissions, but also on noise. At present, China still has no definite regulation about noise; however, some factories have started to adopt engines with noise absorbing effect to work out the noise problem. Besides, some details such as adjustable seat, kits, and air conditioners all expressed the ergonomics very clearly.
3.Intense foreign demands
In recent years, export has been an increasing point for construction machinery. And the foreign market has the most intense demand for individuation. First of all, China construction machinery is built on the basis of Chinese physiques, thus to the Europeans, the cab space of China construction machinery is comparatively narrower, and some designs are not to their habits.
Secondly, different countries have different requirements. Take Russia for example, its local products are not only not good looking, but also cumbersome, which prompts them pursue the otherwise ones in the foreign products. China machines have won a breakthrough in the market by its cost performance, but they still have a lot to do on the outlook and comfortableness. Therefore, to seize the foreign market share, China manufacturers have to work out various styles to cater to different market demands.
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The market for construction machinery has been quite depressed since last May, and major products of the field almost shrink an half in the first quarter of 2012. Seeing year-on-yearly, excavators dropped 41.2%, loaders 27%, bulldozers 47.2%, crane truck 44.9% and road rollers 48.3%.
The depression may caused by government control, the end of 11th 5-year plan, the retreat of 40 trillion investment and the inspection of the national highways. It is revealed that investment in fixed asset has reached the historical low in 8 years. In highway construction, 1.575 trillion RMB was invested which reduced 9.5%, and highway reduced 10.5%.
To walk out the difficult situation, many manufacturers started to play the service card. Some launched the 360°comprehensive service, some serve with the most sincerity. China is always very weak in service. Thus, except improving and perfecting the products, there is a lot of work they can do on service.
We don’t know how long the depression will last, but we do know that who survives in the depression will develop better in the future.
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It is estimated that we would see a prosperous market for excavators in April; however, April disappointed us again. The major 28 excavators manufacturers sold total 15.370 units of excavators, which reduced 33.89% quarter-on-quarterly. Compared to 2011, the year-on-year decrease reaches up to 43.2%.April should be a busy season, however, since capital was not settled as planned, most of the new projects were not opened on schedule.
In the first four months, the major excavator manufacturers sold 59,457 units, which reduced 42.22% year-on-yearly, while domestic sales accounted for 56,910 units reducing 44%. But, excavators performed very outstanding in export with an increase rate of 100.24%.
Judging from brands, Sany continues to hold the No.1 post in monthly excavator sales. Its total four months sales outnumbered Komatsu near 4000 units. Its market share reaches up to an amazing 15.48%. Komatsu and Doosan both sold more than 5000 units of excavators in the first four months.
Judging from regions, Shangdong province still holds the No.1 position by selling 3,617 units. And Sichuan, He’nan, Hubei and Jiangsu all exceeded 3000 in sales quantity.
The small excavators have a comparatively favorable market. 24,961 units of 13-ton or below excavators were sold. It reduced 35.69% year-on-yearly, but accounted for 41.98% of the total quantity. With the expanding of urban and rural infrastructure construction, the advantages of small excavators are becoming more obvious. They are small in size but flexible to control. With the accelerating of environmental protection and ecological construction, small excavators have a broad developing prospect in gardens, afforest and farmland.
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Under the still tight macro currency control circumstances, the government is about to loosen the currency policy. It may not reverse the falling situation of construction machinery in China in a short time, but we still think that the demands will increase with the restart of railway construction.
In March, China construction machinery has experienced a very severe winter. Since the basic value of 2011 is very high, it is not surprised that the construction machinery dropped somehow in the first quarter, but increased quarter-on-quarterly. In the first quarter, excavators declined 41%, loaders 27%, bulldozers 47%, and cranes 45% year-on-yearly. At present, there is no sign of improvement in the industry, but it is expected to become better in the second quarter.
Investment in coal is continuously increasing, in the first 3 months; 54.6 billion RMB was invested in coal mining and related industries, which increased 35.1%. At present, coal and construction machinery industry is very competitive, and to cooperate with the downstream coal manufacturing enterprises has reached consensus within the industry.
Recently, the government has declared frequently that railway construction is guaranteed, and it is estimated to invest 5 billion RMB this year, in which 4 in infrastructure construction. This year, 6366 kilometers are going into operation, and 3500 kilometers high-speed rail.
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Francois Hollande was elected as the president of French with a 51.05% support rate in May, 7th, which means that the left side returning to power after 17 years, Sarkozy, who is about to retire the office, has become the 11th president stepping down due to the debt crisis.
But what does it to do with China construction machinery? Europe is always the place that China construction machinery wants to enter into. France is the fifth economic entity in the world, and the economic developing leader in Europe. The theme of Hollande is about change, which makes the international situation even more complicated.
How to size up or make use of the change is very crucial for the Chinese construction machinery manufacturers who want to land in the French market.
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