Future trend of global construction machinery industry

Although the current construction machinery industry is sluggish, and the arguments for singing the empty China on the international scene are also very popular, these heads of people have seen the opportunity through their solid operation in the Chinese market.

Question one: What is the future of the global construction machinery industry?

Zang Guangan, vice chairman and president of Guangxi Liugong Machinery Co., Ltd.: After a period of rapid economic growth in the past 30 years, the Chinese economy has entered a period of relatively moderate growth. For the construction machinery industry, strategic thinking needs to be adjusted. Last year, the economic development rate of the BRICS countries has been declining. However, unlike China, the currencies of these countries have depreciated sharply, and our currency has appreciated. China is an export-oriented country. This has hit us. From the perspective of China's export of construction machinery, due to the appreciation of currency, Chinese products are already close to the price levels of Europe, the United States, Japan, and South Korea. Enterprises can no longer use prices as an advantage, which also determines that we need to adjust our thinking.

Terex chairman and CEO Ronald Defoe: I'm not an economist, but borrow from what economists commonly describe: the global economy is mixed. The United States has shown a trend of strength but it has recovered very fragile. Europe has divided and Germany has performed well, while Italy, Portugal, and Ireland have been heavily burdened. For China, I think we have entered the worst trough and tomorrow should be a better situation than today. As a manufacturer, it should focus on the execution of business plans rather than on the market itself.

Zhan Chunxin, Chairman and CEO of Zoomlion: Globally, construction machinery is a relatively overcapacity industry. However, market opportunities can be increased through innovation and adjustment of product structure. For the Chinese market, when China's GDP is below double digits, the construction machinery industry is seriously overcapacity. In the past few years, the development speed of China's construction machinery industry is generally 2 times that of the national GDP, which is 20% to 25%. So, in the future, at a rate of 7% to 8%, as industry associations predict, the industry's growth rate is about 15%.

Technically speaking, the application of new materials and new technologies will greatly improve the quality of products and thus change the construction methods. For example, the application of carbon fiber makes the concrete pump truck boom more than 100 meters, which was unimaginable in the past. This is the product in technology and structure, through innovation or through the creation of new markets, so that construction machinery companies will have a new market space. Another example is the high-altitude platform, which is rarely used in China today, and it is relying more on scaffolding. Even if it is our street signs and shopping mall signs in the city, we will use scaffolding. In fact, the aerial work platform is a new product space.

Chairman and President of XCMG Group Wang Min: Although the world economy is relatively sluggish, development is still the main theme and there are still many opportunities. Especially for Chinese companies, it has changed from an expansion type to a stage of transformation and upgrading. Therefore, Chinese companies have the opportunity to bring their own high-quality products and Chinese-specific excellent services to the world market. Internationalization is still the path to be firm and to take the next step. I am full of confidence in China's construction machinery industry, and I am also confident in China’s economy.

Who can do a good job in China's construction machinery market may maintain a good position in the world. In the same way, as a Chinese company, if we want to do a good job of the world market, we will come to the front in the international market. Therefore, internationalization is very important for Chinese companies.

Hirokazu Kenichi, Executive Director of Hitachi Construction Machinery Co., Ltd.: The world economy will continue to grow for a long time, but growth cannot be carried out with a very large margin, but it grows slowly and steadily. After the subprime mortgage crisis in the United States, the world economy has indeed slowed down. Under this premise, we find that the entire construction machinery market is actually showing a very large swing of a plus or minus 30% every year. The future growth trend of the Chinese market should also be maintained at about 10% to 15% per year.

Of course, in the first two years, the Chinese government invested RMB 4 trillion to stimulate the economy, leading manufacturers in the industry to have an expectation for this market, which also caused us to step up the supply of this market, and eventually there was an imbalance of supply and demand and a surplus of products. The entire market is now not only burning in China, but going to the entire overseas market, and there will be a pattern of global competition.

Question 2: During the period of industry adjustment, is there any breakthrough change that may be caused by R&D?

Zeng Guangan: It is very difficult for the construction machinery industry to have breakthrough changes in the short term. However, as a Chinese company and a global company, I think there are three trends that must be grasped. First, China's labor costs are rising, which will create new demand for construction machinery. Second, the pursuit of safety, comfort and efficiency by Chinese customers will lead to higher requirements for technology. Third, energy conservation, environmental protection, and corporate social responsibility will all contribute significantly to Chinese companies’ product development, manufacturing processes, and marketing service processes. If we Chinese companies can meet these needs, I believe we can succeed in China.

On the other hand, the demand of emerging markets has not been as deep as we had imagined in the past by developed countries such as Europe, the United States and Japan. They have passively accepted the standards of some European, Japanese, and American companies. In the course of globalization in the past few years, we have found that a large number of customers in Southeast Asia, Latin America, Africa, and the Middle East, including the Russian-speaking region, have many special needs that have not been met. For example, the Thai market has been using the loaders of mainstream Japanese companies. As the demand changes, the loaders are getting higher and higher, but the arms are not long enough. Thus, Liugong developed an extended-arm loader that satisfies the Thai market. In just one year, the market share rose from about 10% to about 30%. Therefore, I think that Chinese companies should work hard to meet the real needs of customers in different countries, rather than passively accept the standards of developed countries. China is also a developing country. Therefore, there will be more similar experience and understanding of the needs of similar countries.

Zhan Chunxin: The current situation has given birth to opportunities for competitive companies. One of the opportunities is that the past has grown too fast and now it has time to organize itself well, improve management, and strengthen product technology innovation. On the other hand, it is also an opportunity to expand related industries. Construction machinery is a firm development of Zoomlion, but we must also enter the environmental industry from the strategic adjustment, but also to enter the agricultural machinery industry, but also into the heavy truck industry.

Why develop related industries? First, it is related first. Second, the average annual growth rate of construction machinery is between 10% and 15%. Then, how can companies develop faster and must expand related industries? Third, to do some mergers and acquisitions, we must use this opportunity to integrate more resources and work together to make the company bigger.

Question 3: How to look at capital operations such as mergers and acquisitions?

Wang Min: Enterprises should be big. Chinese entrepreneurs have experienced a period of rapid growth and have shown an expanding mentality. In the future, if China's construction machinery companies can truly become an international, world-class enterprise, they will probably have to go from expansion to transformation and upgrading. Entering this stage requires breakthroughs in technological innovation, market innovation, and management innovation.

One is to rely on their own accumulation to seek breakthroughs, and the other is the breakthrough in demand for mergers and acquisitions. As Xugong, we are still very focused on the development of construction machinery, because we are a long way from the world's best companies, so we should be more pragmatic, more focused on the construction machinery industry to do a good job, the gap between these areas is still In key core components. As a large group, XCMG does not have its own excellent engine. I think this is a regret. Therefore, we should pay attention to the development of parts so that we can truly become a world-class company.

Sakamoto Yuichi: As a Japanese company, Hitachi Construction Machinery has also experienced many mergers and acquisitions. How to find the business model that suits you is very important. For example, in this field, do we need to develop ourselves for specific areas or seek other ways to develop this product?

The changes in the industry are very fast and the speed needs to be taken seriously. So, I think that through mergers and acquisitions this way, it is actually not a merger and acquisition of a company, but a merger and acquisition time. Because through mergers and acquisitions, this industry will be greatly developed in an instant, from scratch.