Chinese Excavators Break Through Foreign Investment Circles

The excavator is the largest subdivision product market in the construction machinery industry and can be used as a replacement for loaders and bulldozers in various applications. Since the 1990s, the annual output of global excavators is much higher than that of loaders and bulldozers. However, foreign-owned excavators have occupied more than 70% of the market in China.

With the technical blockade on key components, foreign companies have set up many obstacles for Chinese construction machinery companies in the field of excavators. However, Chinese companies such as XCMG, Sany Heavy Industry, Liugong Machinery, and Sunward Smart are trying their best to break through the various routes.

Wang Min, chairman of the Nuggets excavator XCMG Group, said recently that the company's sales of excavators were very good in 2010 and they are very optimistic about the future situation.

At present, XCMG Group has located more than 800 mu of land in the excavator industry park in Xuzhou, producing excavators and planning a production capacity of 30,000 units. In fact, as early as October 1994, XCMG and Caterpillar have established Caterpillar (Xuzhou) Co., Ltd., the first joint venture in China to produce high-grade hydraulic excavators. At that time, XCMG and Caterpillar jointly invested 82 million U.S. dollars, and the two sides had a 4:6 shareholding ratio. The purpose of Xugong Group's introduction of Caterpillar at that time was to seek "market for technology."

However, the desire finally came to nothing and Caterpillar's core technology has not been delivered to the joint venture company. In addition to the company's operating issues, by 2008 Xugong Group decided to withdraw from the joint venture company, and set up its own wholly-owned excavator production company - Xuzhou Xugong Mining Machinery Co., Ltd., from a small excavator cut into, can now produce medium-sized and large-scale mining machine. At the 2010 China International Construction Machinery, Building Materials Machinery, Engineering Vehicles and Equipment Exhibition opened on November 23, the 70-ton excavator produced by XCMG made its debut.

Liugong Group is also an enterprise that developed excavators earlier in the country. In an industry conference in 2003, Liu Gong Machinery President Zeng Guangan said: "Liu Gongning can do less to 10,000 loaders, but also to do an excavator."

Currently, Liugong has an excavator manufacturing base in Liuzhou, Guangxi. Wang Xiaohua, chairman of Liugong Group, stated that the company is currently working on another excavator manufacturing base in Changzhou, Jiangsu. He said: "The company has already taken 600 acres of land in the local area and began digging at the beginning, slowly developing to medium and large excavators."

In order to raise construction funds, Liugong announced in August 2010 that it plans to conduct private placement and it is expected to raise RMB 3 billion for the construction of six major projects, of which RMB 0.9 billion will be invested to develop the Changzhou excavator project. Will achieve 10,000 units of production capacity.

In addition to state-owned enterprises, private enterprises are also nuggets excavators. According to He Qinghua, the chairman of Sanhe Intelligent, they are the first domestic private enterprises to do small excavators and currently have the production capacity of 0.8 tons to 47 tons of excavators.

Shanhe Intelligence has a competitive advantage in the domestic small excavator market and can produce a full range of small hydraulic excavators ranging from 0.8 tons to 13 tons, but the development of large excavators is relatively slow. In order to develop medium and large-sized excavators, Sanhe Intelligent currently wins 2,600 acres of land in Changsha, a large part of which is mainly used to expand the production capacity of medium and large excavators.

For the future production capacity of domestic excavators, Zhou Sili, an analyst at Northeast Securities, conducted statistics. He expects that the domestic company's production capacity will reach more than 100,000 units in 2015.

Breakthrough Parts In the early 1980s, Chinese excavator companies introduced Caterpillar advanced technology. However, after the mid-1990s, due to the large-scale entry of multinational companies and deteriorating domestic competitive environment, the middle and low excavator market was squeezed and excavated. Machine companies closed down. An industry lost almost the entire market in ten years.

In the 1980s, companies such as Komatsu of Japan proposed the slogan “Covering Caterpillar”, and cut prices by 40% to compete with Caterpillar. Caterpillar's contingency strategy is to accelerate the expansion of spare parts sales. In order to expand its customer base for spare parts, Caterpillar aims at the Chinese market.

This multinational engineering machinery giant has leading technologies in engine and hydraulic components, but this technology is not sold to other countries. "So, China's construction machinery is always stuck." Wang Xiaohua said, "The core problem of construction machinery is the engine and hydraulic components."

Until now, most Chinese excavator companies still rely on engines and hydraulic components produced by foreign companies. In order to solve this problem, Chinese companies have chosen different solutions.

XCMG is a joint venture with foreign companies to produce engines. On September 7, 2009, Xugong teamed up with Doosan of South Korea to launch a joint venture project in Xuzhou. This is the first engine joint venture project of the Chinese construction machinery industry. The above-mentioned joint venture company was named Xuzhou Xugong Doosan Engine Co., Ltd., and each of the two parties holds 50% of the shares. The joint venture company has a total investment of 99 million U.S. dollars, a production scale of 50,000 units in the first phase, sales revenue of 3.2 billion yuan, and a long-term production scale of 100,000 units.

Liugong chose to break through the hydraulic components. On June 18, 2010, Liugong officially started construction of hydraulic parts production base in Liuzhou with a total investment of 885 million yuan. The purpose is to improve the R&D and manufacturing level of hydraulic components, improve the technical level of mainframe products, and reduce the dependence on the import of core components. , reduce host manufacturing costs.

The private company Shanhe Intelligence is not to be outdone, and it is earlier than Liugong in the hydraulic components breakthrough. On September 27, 2007, Shanhe Intelligence purchased Wuxi Fangzhan Machinery Manufacturing Co., Ltd. for 37.76 million yuan, and later changed its name to Wuxi Heshan Hydraulic Machinery Manufacturing Co., Ltd. In March 2009, Shanhe Intelligence launched a new hydraulic production base in Wuxi.

“Now we can already use our own hydraulic parts, including electronic control equipment and control software. We also do it ourselves.” He Qinghua believes that the future development direction of excavator parts will be the cooperation of the whole machine company and professional parts companies. It is difficult to rely on either side alone to develop.

Mao Zhongwen, deputy secretary-general of the China Construction Machinery Industry Association, said that in the “Twelfth Five-Year Plan” of the construction machinery industry, breakthroughs and upgrades in key component technologies have been promoted as an important task, and they are proposed to be included in the national policy support. .

According to Zhou Sili, in the first half of 2010, foreign excavator brands such as Japan and South Korea remained dominant in the domestic market, and the combined foreign-invested market share reached over 70%. However, under the counterattack of Chinese companies in recent years, the market share of the Korean-based market, which is dominated by the middle-end market, has been declining. Chinese companies are moving from low-end to high-end markets, and their market share is gradually increasing. At the same time, the market of foreign companies is also increasing. Shares will be compressed. As foreign companies are also competing to expand their production capacity, the excavator market will become more competitive in the future, and only companies with competitive advantages will win.