The competition in the construction machinery industry is becoming centralized, and foreign giants are exploring the mid to low end - domestic excavator parts

2025-05-26

At the end of November, the Shanghai New International Expo Center was crowded with people, and the largest construction machinery professional exhibition in China, the biennial Shanghai BMW Construction Machinery Exhibition, was being held. The outdoor exhibition area covering an area of 100000 square meters is filled with various brands of construction machinery, including well-known domestic and foreign manufacturers such as Sany, XCMG, Komatsu, and Doosan. In the exhibition area, both buyers and sellers shuttle between the tall tower cranes in search of business opportunities, while the audience gathers in front of the exhibition booths where there are promotional events, occasionally giving applause for product highlights.

According to official data from the domestic excavator parts editor, the 2018 Shanghai BMW Exhibition achieved the highest historical level in terms of exhibition area, number of exhibitors, and number of visitors. During this period, the exhibition area exceeded 330000 square meters, utilizing all exhibition areas of the Shanghai New International Expo Center. The number of participating companies reached 3350, an increase of 13% compared to the previous session. The total number of viewers reached 212000, an increase of up to 25%.

These impressive numbers are in stark contrast to the previous exhibition: in 2016, the Shanghai BMW Exhibition saw a decline in visitor numbers for the first time, with leading domestic and foreign companies including Komatsu, Xiamen Iron and Steel, and Liugong absent due to cost issues. At that time, China's construction machinery industry experienced a five-year slump, with many small and medium-sized enterprises falling into closure and professional sales entering negative growth since 2014. In the mouths of some professionals, this downward cycle that began in April 2011 is referred to as a 'cliff like decline'.

However, based on the data on the development of the construction machinery profession in the past two years, the harsh winter has now come to an end. According to data from the National Bureau of Statistics, from January to September 2018, a total of 194153 excavators and 108324 loaders were produced nationwide, an increase of 51.7% and 26% respectively compared to the same period last year. Nowadays, the more important issue in the profession is whether this rapid development will reproduce the glorious scene of the construction machinery market between 2009 and 2011.

Farewell Winter: Infrastructure Shortcomings and Equipment Renewal Period

As an upstream industry of the construction industry, the prosperity of the construction machinery profession depends on the amount of newly started construction area and construction rate, and is further influenced by fixed asset investment in the macro environment. From 2008 to 2011, the impact of the "Four Trillion Plan" brought about a wave of infrastructure and real estate construction. During these three years, the annual growth rate of construction machinery sales in China remained above 30%, with a peak growth rate of 41.3% in 2011. Afterwards, as the "four trillion yuan plan" came to an end, the gradually weakening demand side found it difficult to digest the inventory of engineering equipment, and the industry began to decline from prosperity to decline, entering a downward period from April 2011.

The years 2014 and 2015 were relatively difficult for the global construction industry, as Caterpillar's operations decreased by 25% in these two years, but improved in 2017 and 2018. In the past 18 months, there has been an increase of about 50%, "Thomas Pellette, Caterpillar's group president in charge of basic construction affairs, told the media. Caterpillar, founded in 1925, is headquartered in Illinois, USA. Its main business includes heavy industrial equipment, including construction machinery, mining equipment, and gas engines. According to the financial report, Caterpillar's revenue for the third quarter of this year was $13.5 billion, an increase of 15.5% year-on-year. According to Bloomberg data, Caterpillar's operating revenue in the construction machinery sector reached 19.13 billion US dollars in 2017, ranking first in the world.

In China, Caterpillar is one of the foreign-funded enterprises with the highest market share in the construction machinery market. According to Chen Qihua, Chairman of Caterpillar (China) Investment Co., Ltd., which is in charge of mall affairs in China, Caterpillar's rapid increase in malls this year mainly comes from the replacement of existing machinery, which is larger in scale than the new machines sold. In addition, the Chinese government has continuously invested in infrastructure construction to promote stable economic growth, "he added." We see this policy as a driving force for all professions

Since the beginning of this year, infrastructure investment has steadily increased, but the growth rate has slowed down. In this context, addressing the shortcomings of infrastructure will be put on the policy agenda in the second half of this year. At the end of July, when the Political Bureau of the Central Committee of the Communist Party of China held a meeting to assign tasks for the second half of the year, it was clearly proposed to increase efforts to fill gaps in the infrastructure sector. In November, the General Office of the State Council issued the "Guiding Opinions on Adhering to the Efforts to Make up for the Shortcomings in the Scope of Infrastructure", requiring efforts to make up for the shortcomings in areas such as railways, highways, water transportation, airports, water conservancy, energy, agriculture and rural areas, ecological environment protection, public services, urban and rural infrastructure, and shantytown renovation, and accelerating the promotion of major projects that have been included in the plan. According to data from the National Bureau of Computing, infrastructure investment increased by 3.7% year-on-year from January to October this year, with the road transportation industry increasing by 10.1%.

At the BMW exhibition site, a John Deere salesperson stationed in a shopping mall in Shandong stated that with the continuous promotion of large-scale projects represented by the expansion of Shandong Weiri Expressway and Jiqing Expressway, the demand for construction machinery in Shandong has surged, and the most representative excavator sales have risen to the top of the country. He stated, "The primary source of the increase in sales of construction machinery this year is old customers, whose workload is also increasing. Some old machines cannot keep up with the power and will be replaced with new equipment. The original one can be increased to two or three

As representatives of American excavators, John Deere entered the Chinese market very late compared to Caterpillar. Caterpillar has established a joint venture with XCMG Group since the 1990s, while John Deere's wholly-owned factory in Tianjin was not put into operation until 2012, coinciding with a downturn in the construction machinery industry. However, at the annual conference of the excavator industry held on November 14th, data released by John Deere showed that the brand's excavator sales increased by 246% in the first 10 months of this year, significantly ahead of the industry average of 51.7%.

Cautious and optimistic: The policy and vision are not clear, and professional barriers have been established

Melker Jernberg, President of Volvo CE, stated that it is estimated that the sales growth rate in Chinese malls this year will be about 30%, and next year it will be around -10% to 0%. He emphasized that a major characteristic of the construction machinery market is its strong volatility. Currently, the overall market in China has reached a very high level, and even if the growth rate slows down or even shows negative growth, it is still a very healthy market.

According to Bloomberg data, the sales revenue of Volvo Construction Equipment reached 7.79 billion US dollars in 2017, ranking fourth in the world. Jenberry stated that in recent years, the number of shopping malls in China has increased rapidly, accounting for about 20% of Volvo's global shopping malls.

The two executives of Caterpillar did not disclose the specific numbers predicted for the future market at the press conference. Chen Qihua indicated that Caterpillar's judgment on Chinese shopping malls is optimistic in the long run, and all shopping malls in China are still very large. Peng Tangmou stated that trust in China's future growth will be very stable. "Considering the investment and efforts made by the Chinese government in infrastructure construction, China is definitely a very important market for us

When asked if China's shopping malls would recover to the level of 2009 to 2011, the salesperson from John Deere shook their heads repeatedly, saying, "Compared to around 2010, it's still far behind, almost at the level of around 2007. (The mall's performance) looks good now, but it's hard to say how long it will last, and whether there will be any policy changes in the country," he said.

Although the enormous potential of our country's business market is ubiquitous in professions, after more than 20 years of open competition, this door full of opportunities is slowly closing. The five-year career cliff like decline is nothing but a reshuffle, screening out some small and medium-sized enterprises with weak risk resistance capabilities, while the remaining market share shows a trend of gathering with top enterprises. According to China Economic Weekly, as of October 2016, the number of excavator manufacturers in China has decreased from over 110 at its peak to over 20. According to the latest "2018 Research Report on Exploring Mechanical Occupations in China", from January to October 2018, the top ten domestic enterprises sold 132879 units in their shopping malls, with a market share of 85.3%. The figure for 2017 was 75.35%. Stories like John Deere's "latecomer" are becoming increasingly difficult to replicate for newcomers.

In the outdoor exhibition area of BMW, the booth of H? DROMEK is a small house of about 30 square meters, with two or three white painted excavators and loaders parked on the open space outside the door. In the exhibits with yellow as the main color, the design of Heide Merck products has a touch of delicacy, but compared to Liebherr's excavator array a few meters away, it is not eye-catching. Founded in 1978, Hedmock is now the largest construction equipment company in Türkiye, and its sales of excavators and loaders have ranked first in China for many consecutive years. According to its sales personnel, Heidelberg's operating income ranks among the top 50 global construction machinery companies. Over the past 40 years, its products have been sold to more than 100 countries, with major markets concentrated in Europe and North America.

In 2017, the domestic excavator parts editor saw the opportunity for market recovery in China and decided to enter the market. However, the development of this construction equipment manufacturer with a considerable position in Europe in China is not smooth. It is reported that since the beginning of this year, only about 10 units of Hyde Merck's products have been sold in China, and their market share can be ignored. In this regard, the salesperson stated that Heidelberg Merck's product positioning is high quality and high price, and they are determined about the depth and scale of China's shopping malls, and are optimistic about future development. However, when asked if they would establish a subsidiary in our country, the salesperson clearly stated in the negative. According to him, Hyde Merck's factory in Thailand has officially started production in recent years, which is also one of the reasons why the company has decided to enter the Chinese market. In addition, Heidelberg has set up an office in Japan responsible for the operation of Asian shopping malls and post mall services. At the BMW exhibition site, a Chinese dealer was attracted by the Heidelberg Merck booth, hoping to negotiate cooperation matters. However, as Heidelberg Merck did not hire employees who understood Chinese, both parties had to give up in the end.

Put down your posture: Foreign manufacturers are making efforts to provide after-sales services and exploring mid to low end shopping malls

Chen Qihua stated at the press conference that China's construction machinery industry has experienced rapid growth for two and a half years, and now all players are considering how to achieve sustainable growth. "We also insist on paying close attention to this." From the new product releases at this year's BMW exhibition, low energy consumption and intelligence of engineering equipment are the two major future development directions vigorously emphasized by first tier manufacturers.

In terms of low energy consumption, Caterpillar launched 11 new excavator models at the BMW exhibition. Among them, the body weight of five products including 330GC ranges from 30 tons to 45 tons, which belongs to the "big digging" category. It is reported that this series of excavators uses intelligent weighing and other skills, and the operating power can be increased by up to 45%, while saving up to 15% of fuel consumption.

Volvo Construction Equipment collaborated with Swedish clients, government, and universities in 2015 to carry out on-site electrification projects. This project has electrified the transportation process of quarrying operations, including the intermediate transportation from excavation to initial damage and then to secondary damage. Since its launch in late 2018, the project has ultimately been more effective than expected. According to Yenberry, the project has reduced carbon dioxide emissions by 98%, electricity consumption by 70%, and overall operating costs by 40%, with an estimated cost reduction of 25%. In past practice, increasing environmental protection efforts often meant sacrificing both cost and power. Volvo's electrification on-site operation project proves that we can balance safety, environmental protection, and power at the same time without having to make trade-offs, "said Jenberry.

Schematic diagram of Volvo Construction Equipment's "zero emission" operation project

In terms of intelligence, according to Chen Qihua, Caterpillar has completed the interconnection of 700000 engineering equipment worldwide as of the end of August, and aims to reach 870000 units by the end of the year, achieving global interconnection. Chen Qihua said that there is still much room for the intellectualization of the construction machinery profession. "According to relevant data calculation and reporting, in the past 20 years, the global construction machinery profession's level of automation has slowed down compared with the level of automation and intellectualization of the entire industrialization, and the benefits are low. There are many opportunities here, which can reduce a lot of waste."

Since the recovery of the construction machinery industry, domestic construction machinery manufacturers have been rapidly narrowing the gap with foreign manufacturers in terms of skills and market performance, and even have leading advantages in some areas. For example, the above-mentioned device interconnection skills have been put into practice among leading domestic manufacturers. Now, domestic construction machinery enterprises including XCMG, Sany and Zoomlion have entered the industrial Internet and launched long-distance management software for users.

In the exhibition hall of Zhongke Yungu Technology Co., Ltd., the data on the travel path, operation time, load capacity, energy consumption, and other aspects of Zoomlion's engineering equipment are clearly visible on the software interface. With application software, users can obtain this data from their mobile phones or tablets and optimize device management solutions. From the numbers on the big screen, it can be seen that the number of devices connected by Zoomlion is about 11000.

Sany Group, the private enterprise with the largest proportion of construction machinery in domestic shopping malls, exhibited multiple unmanned driving solutions at the BMW exhibition, including the use of VR glasses to cooperate with unmanned aerial vehicles for long-distance operation of excavation machines and unmanned driving experience rooms for heavy cranes. In addition, the new product SY365 intelligent excavator released by Sany is named "AI excavator" and has functions such as electronic fence, radar obstacle avoidance, one click slope and flat ground repair, active digging, throwing, and loading.

At the BMW exhibition, Sany showcased a remote-controlled excavator.

According to data released by the China Construction Machinery Industry Association, domestic brands have gradually taken the dominant position in the market since 2011. In 2010, the market share of domestic brands in various types of construction machinery products was 29.4%, which had risen to 46% by 2016. In terms of the most important product line of excavators, domestic brands accounted for 54% of the total sales in domestic shopping malls in the first seven months of this year.

Faced with increasingly fierce market competition, foreign manufacturers urgently need to explore new advantages. In the past impression, foreign manufacturers had an absolute advantage in large tonnage equipment, while domestic manufacturers were proficient in mid to low end product lines and focused on price advantages. But at this year's BMW exhibition, Caterpillar released six mini excavator products, while Volvo unveiled the EC75D small tonnage excavator planned, developed, and manufactured by a Chinese team. This effort to expand into mid to low end shopping malls is expected to have an impact on domestic brands within this price range.

On the other hand, foreign manufacturers are also strengthening their after-sales service and improving user experience. Volvo Construction Equipment launched the "Volvo+" comprehensive solution at this year's BMW exhibition, which not only monitors the normal operation time, fuel power, production rate and other data of the equipment, but also provides certification innovation, finance, accessories, leasing and other services. Jenberry stated that Chinese customers have increasingly high requirements for machine operation time, and Chinese shopping malls are transforming from simple malls to mature malls.

Caterpillar has also launched a new generation of component brand Yellowmark. According to its official article, Yellowmark aims to provide cost-effective and reliable component solutions, specifically designed for one-time use and not reusable or remanufactured, resulting in lower prices. In addition, Caterpillar presented a "2-hour response service commitment" at the BMW exhibition: Caterpillar agents will promptly respond to any customer's demand for product and equipment services within 50 kilometers and 2 hours.

This is our new promise: no matter where our customers are or what their needs are, Caterpillar and our agents will provide timely, efficient, and excellent services to our customers.

More information about excavator accessories can be found on Chuanna Industry (www.kscna. cn). We hope this article titled "Competition in the Construction Machinery Industry is Centralized, and Foreign Enterprise Giants Explore the Middle and Low End" will be helpful to everyone. If you still have any questions, please feel free to leave a message or consult Chuanna Hydraulic's national service hotline at 15850333149. We will answer your questions as soon as possible!

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