Editor's Comment: Equipment manufacturing in China
01 February 2011
Where would you say was the heartland of the global construction equipment industry? It depends where you are, but the US mid-West, parts of southern and Western Germany, the UK's midlands and the Japanese archipelago's main island of Honshu could all stake reasonable claims. But what about the Chinese city of Changsha - home to Sany, Sunward and Zoomlion - or provinces such as Jiangsu and Shandong?
China's manufacturers were largely unknown outside their domestic market ten years ago, but by the end of 2012 there will be almost enough construction equipment manufacturing capacity in place in China to meet the entire world's demand for machines. It will be owned by a combination of domestic manufacturers and international companies, which together will be able to build something in the region of 450000 excavators per year and 200000 wheeled loaders, along with tens of thousands of compact excavators, rollers and cranes of various description.
Some of this growth in manufacturing capacity is in response to the continued boom in the Chinese market of course, but the gap between domestic demand and potential supply could be as much as 300000 machines. So where will they all go?
Exports to other emerging markets will be the first port of call. Major countries like Brazil and India have significant construction equipment manufacturing of their own, which combine with various tariffs, layers of bureaucracy and unique local requirements to make exporting to these places unattractive. However, there are plenty of other economies around the world that are booming and need construction equipment for their development.
These 'rest of the world' markets (ie everywhere outside China, Europe, Japan and the US) account for about 25% of global construction equipment demand at the moment, and their high growth compared to the rich world means like China they will be even more significant in the future. Manufacturers that still want to compete in these markets will have to strike the right balance between price, features, quality and value for money with their equipment.
This is not to say that the industry's old household names in Japan, Korea, the US and Europe don't stand a chance of competing with the Chinese in these parts of the world. Many manufacture in China themselves and are building capacity as fast as anyone. What's more, many have a long-standing presence in other regions and developing markets.
But what is clear more than anything else is that the days of a 'one size fits all' machine are gone forever. Apart from anything else, this year's new round of engine emission laws in Europe and the US mean machines made for these markets will not work in other parts of the world because the necessary ultra-low sulphur fuel is not widely available.
But more than this, manufacturers need to come to terms with the fact that the type of machine packed with computers, special features and available with all manner of options that might be popular in Europe or the US, is not necessarily what's required elsewhere.
I believe issues like quality, fuel efficiency and durability are universal, but beyond that there are a lot of variables.
Editor, Internatioanl Construction