Editor's Comment: Chris Sleight on the rise of Asia's manufacturers
By Chris Sleight14 April 2009
The results of our annual Yellow Table survey of the world's 50 largest construction equipment manufacturers point some interesting changes in the industry's centre of gravity. One of the most striking is the fact that for the first time last year, the Asian manufacturers in the league table had greater revenues than the Europeans.
A lot of factors contributed to the change, from the appreciation of the Japanese Yen, to the continued rise of China's manufacturers, to company-specific events like Doosan's acquisition of Bobcat.
Even more intriguing is the prospect of Asia's manufacturers overtaking North America's as the pre-eminent force in the construction equipment industry. By iC's reckoning Asian' manufacturers accounted for 33.7% of the top 50's revenues last year, compared to 36.3% for the North Americans.
The narrowness of that gap is particularly striking when you consider how wide it was only a few years ago. Back in 2005, near the height of the US construction boom, North American manufacturers claimed nearly 50% of the top 50 manufacturers' revenues, compared to just 25% for the Asians.
One of the reasons for the change has been the different fortunes of different construction markets around the world. North America has declined from a peak in 2006, while emerging economies in Asia - particularly China and India - have boomed.
Although most of the companies in the Yellow Table could be described as international, if not global, these regional trends have an impact because manufacturers tend to be strongest in their home markets. Take Caterpillar for example. Arguably the most globalised manufacturer in the industry, it still generated 44% of its revenues in North America last year.
It is not easy to read the markets these days, but I would say things will play into the Asian manufacturers' hands over the coming years. With construction output falling in most developed countries, emerging economies - most notably China - are providing all the growth that's to be found in the world today.
The growth of the Chinese market will of course provide its manufacturers with a boost, but so too will the growth of other developing markets. China's equipment manufacturers are exporting more and more, and their key markets tend to be other developing economies.
They may be smaller markets, but their advantage is they are attractive to Chines manufacturers because they are not burdened by the weight of legislation found in Europe, Japan or the US. And as fast-growing emerging markets, there is more room for new manufacturers than there is in relatively mature regions of the world.
A final point is the Chinese manufacturers' track record. In the last five years they have more than doubled their share of the top 50 manufacturers' revenues, and in this year's survey commanded a 6.7% slice of the pie. That may not sound like much, but it is the fifth largest country in the table after the US, Japan, Sweden and Germany.
It is an idle piece of speculation on my part, but if Chinese manufacturers doubled their share again over the next five years, they would overtake Germany and Sweden for the no. 3 spot. It would be a big leap, but not an impossible one.