With the gradual improvement of the impact of the global new crown epidemic, the international engineering construction market has begun to pick up. Since the second quarter of 2021, affected by factors such as weakening domestic demand, the saturation of the construction machinery market, and the sharp rise in raw material prices, China's 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 close on March 14, the sector index has fallen by more than 20%. The reporter recently visited a number of companies and learned that the companies have full expectations for the weakening of the domestic market, and leading companies have generally accelerated their overseas deployment efforts to break through.

The industry is under increasing downward pressure

According to the statistics of 26 excavator manufacturers by China Construction Machinery Industry Association, in January 2022, the sales of major products in the industry generally showed a sharp decline. Among them, 15,607 excavators of various types were sold, down 20.4% year-on-year; 7,598 loaders, down 14.8% year-on-year; 1,146 road rollers, down 5.99% year-on-year; 1,550 truck cranes, down 57.7% year-on-year...

While sales have plummeted, corporate profits have also slumped. According to the third quarterly reports of Sany Heavy Industry, Liugong and Zoomlion in 2021, the current net profit attributable to shareholders of listed companies fell by 35.32%, 59.70% and 46.01% respectively year-on-year. Many respondents said that due to factors such as the high industry base in the first quarter of 2021 and the continued "price war", it is expected that the company's net profit in the first quarter of 2022 will not be significantly improved.

"Since the construction machinery industry reached its peak in the first quarter of 2021, it has entered a downward turning point, and this process will continue for a long period of time." Wang Min, chairman and party secretary of XCMG Machinery, believes that this round of industry downturn is not expected to be the same as the one around 2012. That wave of "slumps" is just as severe, which will force the industry to transform and upgrade and pursue higher-quality development.

It is worth noting that the 2021 Central Economic Work Conference will set the tone, and 2022 will focus on stability to deal with the triple pressure of demand contraction, supply shock, and expected weakening. "Construction" has become the two major drivers for stable growth. A research report released by Pacific Securities believes that in January this year, the corporate sector added 3.36 trillion yuan in new credit, an increase of 810 billion yuan year-on-year; the net financing of government bonds was 602.6 billion yuan, an increase of 358.9 billion yuan year-on-year, showing that 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 high-speed growth from 2016 to 2021, and it is expected that the growth will decline moderately or even show negative growth. "There will be more variables in 2022, but I predict that there will be a trend of 'before low and then high' as a whole."

There are also companies cautious about the market outlook. Wang Bin, deputy general manager of Jiangsu Hengli Hydraulic Co., Ltd., believes that from experience, March to May is generally the peak sales season for construction machinery companies, and the sales volume is 3 to 4 times higher than the overall sales in the second half of the year. Even if there is a trend of "low front and high back" this year, it is difficult to conceal the overall downward trend. "At present, the domestic market is becoming saturated, which can be seen from the operating rate of excavators and other equipment, but there are still opportunities in industry segments such as aerial work platforms."

Leading enterprises accelerate their participation in international competition

Due to the weakening of domestic demand and the saturation of related markets, accelerating the pace of "going out" is becoming a common choice for many leading construction machinery companies. According to data released by the China Business Industry Research Institute, in 2021, the export volume of China's 12 major categories of construction machinery products has achieved varying degrees of growth. Among them, the overseas sales of lifting work platforms and crawler cranes doubled; the export volume of excavators, graders, bulldozers, forklifts, road rollers, truck-mounted cranes, and truck cranes all increased by more than 50%.

The substantial increase in exports reflects that leading companies are accelerating their overseas deployment. The reporter learned through investigation that leading enterprises represented by Xugong Machinery, Sany Heavy Industry and Zoomlion have shifted from focusing on developing markets in countries along the Belt and Road to participating in high-end market competition in Europe and the United States.

In 2011, XCMG invested in the construction of a construction machinery industrial park in Brazil; in 2021, XCMG's operating income in Brazil will increase by 219% year-on-year, ranking among the top in the local market segments such as cranes, graders, road rollers, and trenchless drilling rigs. On this basis, XCMG began to actively deploy to the high-end market in North America and built a localized "research, production, supply, sales and financing" system. "The developed markets in Europe and the United States have high requirements for product quality and technical services, and the competition is fierce, which is the 'hard bone' that must be gnawed to build an international brand." Wang Min said. In 2021, XCMG Machinery announced that it plans to invest US$99 million to formally establish an American company and its subsidiaries, and is currently stepping up site selection and implementation.

It is not only XCMG that is accelerating its deployment to developed countries. Not long ago, Sany Italy opened its business, undertaking product display, direct sales, service, training and other functions, and as the Italian headquarters and accessories center to support and radiate the entire Italian agent. Xiang Wenbo said that the largest market for construction machinery in the world is not a developing country, but a developed country. Sany Group is changing from its previous focus on expanding markets in Asia and Central and South America to expanding markets in North America and Europe. At present, Sany Group has successively invested in the construction of construction machinery R&D and manufacturing bases in India, the United States, Germany and Brazil.

Zoomlion has also accelerated its efforts to develop markets in developed countries in Europe and America. Zoomlion's European factory has been officially completed in Italy, and its base in Belarus has also been completed and put into production.

Many respondents said that although counter-cyclical policies will play a role, the domestic construction machinery market is close to the "ceiling". And after several rounds of shuffling, the concentration of the construction machinery industry has been greatly improved, and accelerating the international layout will be an inevitable trend for the development of leading enterprises, and it is also an important direction for the transformation and upgrading of the domestic construction machinery industry. It should be noted that international leading companies such as Caterpillar and Komatsu have advantages in network layout and key core technology research and development; especially in developed markets, consumers' requirements for products and services are generally higher than their requirements for price. , which means that Chinese enterprises must upgrade their management, technology, and services.

Construction machinery "going out" uncertainty risk intensifies

The reporter learned through investigation that although many leading companies have accelerated their "going out" layout, there is still a long way to go to truly achieve sustainable development. Wang Min said that XCMG Brazil has sharpened its sword in ten years and has become a local mainstream construction machinery brand, during which time it also paid a lot of "tuition fees". Among them, supply chain construction and localized operations are the keys.

The survey found that under the influence of factors such as the "dual circulation" strategy and the layout of the international industrial chain, most of the domestic construction machinery enterprises "going out" are inseparable from the support of domestic manufacturing links. Parts assembly) mode cut is evident. In the face of the current global industrial chain restructuring environment, construction machinery companies are facing many uncertainties in "going out".

Some companies said that due to the current Russian-Ukrainian conflict and other factors, cross-border logistics was restricted, and a batch of construction machinery of the company was backlogged at domestic ports and could not be transported. Some companies also said that due to factors such as the new crown pneumonia epidemic and geographical conflicts, business personnel travel was restricted, and the refusal rate of visas in some countries remained high.

Heads of several companies said that factors such as the over-issue of the US dollar currency, the continuous appreciation of the renminbi, and the increase in operating costs of overseas factories have affected the overseas competitiveness of Chinese brands and the development of the international market. Some companies have begun to respond by speeding up localized talent recruitment, planning product resource plans in advance, and shipping logistics plans.

Respondents suggested that a national credit enhancement agency should be established at the national level to support overseas financing of "going out" enterprises, and through the formulation of relevant policies, Chinese-funded financial institutions should be encouraged to provide financing guarantees and preferential funds for overseas financing. At the same time, re-examine the tax reduction and exemption policies for major technical equipment, and cancel the tax reduction and exemption policies for products that already have the ability to substitute for localization. Editor / Xu Shengpeng