China Construction Machinery Industry Report

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Global construction machinery market composition:

The global construction machinery market is worth US$130 billion, with China, the United States, and Japan as the three pillars. According to Off-Highway, the global construction machinery market will reach US$130 billion in 2022, a year-on-year growth of 4%. According to KHL’s YellowTable list, among the top 50 global construction machinery manufacturers in 2021, Chinese companies accounted for 24.2% of sales; the United States accounted for 22.9%; Japan accounted for 21.2%.

Figure 1. Global construction machinery market share by region in 2021

Figure 1. Global construction machinery market share by region in 2021

Current Status of China’s Construction Machinery Industry:

There are many types of construction machinery in China, with 20 categories, 109 groups, 450 models, 1090 series, and tens of thousands of models of product equipment. Traditional construction machinery products have strong cycle attributes, including earthmoving machinery, hoisting machinery, and concrete machinery. Judging from the sales data disclosed by the Construction Machinery Association in 2022, excavators sold 261,000 units, the largest market size, and are mainly used in infrastructure, Real estate, municipal engineering, farmland water conservancy, and other fields have the most extensive application scenarios; hoisting machinery is used in equipment hoisting, cross-region and cross-height transportation of raw materials, and prefabricated parts hoisting. In recent years, the number of application scenarios has gradually increased; concrete machinery is used in concrete pouring. The main application scenarios include real estate and infrastructure. The downstream fields of forklifts and aerial work platforms are scattered, and in addition to cyclical attributes, they also have certain growth attributes.

Changes in China’s Domestic Construction Machinery Market and The Reasons for The Changes:

The market share of Chinese domestic brands continues to expand. According to the statistics compiled by the China Construction Machinery Industry Association, the operating income of the entire industry in 2021 will reach 906.5 billion yuan, a year-on-year increase of 17%. The CAGR from 2011 to 2021 is 5.2%, and the overall growth is steady. The proportion of domestic sales in the excavator market increased from 22% in 2008 to 71% in 2020; European and American brands have advantages in the high-end market, and their market share remained stable, rising from 11% in 2008 to 14% in 2020; Japan and South Korea Brands have been hardest hit, with the sales proportions of Korean and Japanese brands falling from 28% and 39% in 2008 to 8.3% and 7.5% in 2020.

Natural Renewal Demand: Expected to Bottom in 2023 and Rebound in 2024

(1) Calculated based on the gradual update from 6 to 10 years, it is expected that the natural replacement demand for excavators will bottom out in 2023 and enter a new upward cycle in 2024-2025. The update cycle of major engineering machinery products is about 8-10 years. Large excavation machines used in mines suffer heavy wear and tear due to complex working conditions and are generally replaced after 4-6 years of operation. Assume that the excavator has a 10-year life and replacement starts from the 6th year. From the 6th to the 10th year of the excavator’s life, it is assumed that the annual replacement ratios are 10%, 20%, 40%, 20% and 10%. Then the annual naturally updated excavator sales are the weighted sum of the new sales in the previous 6-10 years according to the coefficients of 10%, 20%, 40%, 20%, and 10%. Based on this calculation, the natural replacement demand for excavators from 2023 to 2025 is 8.6/10.3/146,000 units, accounting for 34.6%/32.3%/36.1% of total sales.

(2) Changes in relevant domestic environmental protection policies in China require the use of more advanced emission control technologies, such as diesel oxidation catalytic converters, particle traps, urea selective catalytic reduction systems, etc. In addition, the new regulations also require that off-road mobile machinery must be equipped with OBD systems for emission monitoring and fault diagnosis.

(3) Demand for electrification replacement: During the product layout period, there is huge room for long-term penetration, and policies at all levels are continuously introduced to promote the transformation of construction machinery to electrification. The fuel efficiency of diesel engines is only about 33%, and the emissions of CO, HC, NOx, PM, etc. will pollute the atmosphere. In recent years, relevant policies in the construction machinery industry have guided the construction machinery industry to develop towards cleanliness and high technology. The central government has pointed out the direction for the development of electrified construction machinery in terms of emission reduction targets, prevention and control technologies, and supporting policies, and various provinces and cities have successively introduced relevant policy plans for the construction machinery industry.

Changes in China’s Foreign Construction Machinery Market and The Reasons for The Changes:

Although the overall overseas market is expected to decline in 2023, after years of overseas business layout, leading domestic OEMs have entered the harvest period of overseas markets with their product strength, channel strength, and cost strength. Affected by inflation and interest rate increases in Europe and the United States, Off-highway expects overseas construction machinery market sales to decline by single digits year-on-year in 2023, ending a two-year expansion cycle. However, due to the increasing requirements of overseas customers for cost-effectiveness and the complete product and channel layout of domestic OEMs, it is expected to continue to maintain an increase in share.

  • Product strength: In recent years, the international rankings of leading domestic construction machinery companies have steadily improved, and their global competitiveness has gradually increased. According to the YellowTable list released by the authoritative construction machinery magazine of the British KHL, a total of 10 Chinese companies will enter the top 50 global construction machinery companies in 2021. Calculating market share based on sales caliber, Carter’s market share dropped from 22.8% in 2010-2021. to 13.8%, Komatsu dropped from 14% to 10.9%, and Sany rose from 5.1% to 6.9%.

Figure 2. Market share of global construction machinery companies in 2010

Figure 2. Market share of global construction machinery companies in 2010

Figure 3. Market share of global construction machinery companies in 2021

Figure 3. Market share of global construction machinery companies in 2021

  •  Channel power: In recent years, the regional structure of my country’s construction machinery exports has become more diversified, and the global channel layout of domestic complete machine manufacturers has gradually improved; with a complete industrial chain layout, the delivery cycle of domestic equipment has significant advantages over foreign competitors. Taking Sany Heavy Industry as an example, the market share and sales volume of excavators in various regions have increased rapidly. In 2022, overseas revenue includes 14.85 billion yuan in Asia and Australia, an increase of 41.1%; 11.78 billion yuan in the European region, an increase of 44%; and 4.03 billion yuan in North America. yuan, an increase of 85.8%; the South American region was 3.07 billion yuan, an increase of 63.8%; the African region was 2.85 billion yuan, an increase of 35.4%.
  • Cost power: Made in China has industry chain synergy and cost advantages. Domestic OEMs have higher net profit margins than Caterpillar during the upswing of the industry cycle. In 2019, Sany’s net profit margin was 15.2%, which was higher than Caterpillar’s 11.3%. This is because compared with Caterpillar’s global layout, Sany Heavy Industry’s domestic revenue accounts for a larger proportion, the cyclicality is more obvious, and the economy will rise from 2016 to 2021. In the interim period, Sany Heavy Industry’s revenue and profit upward elasticity are better than Carter’s. Carter’s net profit margin has recovered in 2022, mainly due to the high prosperity of real estate and mining downstream in North America.

About Aprilparts

Aprilparts stands as a prominent supplier in the global market for construction machinery components, showcasing China’s pivotal role in exporting these essential parts worldwide. Renowned for our commitment to quality and reliability, we have earned the trust of clients worldwide. As a key player in the industry, we specialize in delivering top-notch engineering machinery components. We invite our esteemed customers to reach out and connect with us to explore the extensive details of our construction machinery components. Your inquiries are valued, and we are dedicated to providing you with comprehensive information and solutions tailored to your needs. Join us in forging a strong partnership and ensuring the seamless operation of your construction machinery.

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