In 2018, China's construction machinery market is in good condition, and the production and sales of major products have witnessed rapid growth. According to data obtained by CRI from relevant departments of the Chinese government, the cumulative sales of excavators in China reached 187,393 units from January to November 2018, up 48.4% from the same period last year, and the cumulative sales of loaders reached 109,000 units, up 22.3% from the same period last year. The output and sales of other construction machinery, such as compacting machinery and concrete machinery, have increased to varying degrees.
According to Research Report on China's Construction Machinery Industry, the main reasons for the high growth rate of China's construction machinery industry in 2018 include:
The growth of infrastructure investment in China. In order to ensure the sustained growth of China's economy, the central and local governments have invested heavily in infrastructure, such as high-speed rail, subway, public facilities and other fields. For example, in 2018, China's railway fixed assets investment reached 732 billion yuan ($107.6 billion) and built 4,000 kilometers of railways, including 3,500 kilometers of high-speed rail, which set a new record for China's high-speed rail construction. It is estimated that China's annual investment in the railway sector will not be less than 110 billion dollars in 2019-2025. As of January 2019, more than 40 cities in China are building or planning to build urban rail transit (subway and light rail). It is estimated that the annual investment in urban rail transit construction in China will exceed 50 billion US dollars in 2019-2025. "Research Report on China's Construction Machinery Industry, 2018-2022" predicts that the construction of railway and urban rail transit alone will reach more than 8 billion US dollars in China's construction machinery market demand in 2019-2025. China's highway, municipal engineering and real estate construction demand for construction machinery is higher.
Replacement requirements of existing construction machinery. According to the "Research Report on China's Construction Machinery Industry, 2018-2022", by the end of 2018, there are more than 5 million construction machinery in China. According to 10% replacement per year, the replacement demand will exceed 500,000 units per year.
Export market growth. According to CRI analysis, China's total export of excavators in 2018 was about 19,000, an increase of about 98% compared with the same period last year. From January to November 2018, China exported about 21,000 loaders, an increase of about 21% compared with the same period last year. Most of the other types of construction machinery exports have also achieved different growth rates. In 2018, the reasons for the growth of China's construction machinery exports, including the construction machinery in China, had certain price advantages in the international market, and the "one belt and one road" promoted the growth of China's construction machinery exports.
Global economic uncertainty
Brexit Britain leaves Europe
According to the Research Report on China's Construction Machinery Industry, the sales revenue of China's construction machinery industry in 2017 is about US$82 billion, of which the export volume is about US$20.1 billion, accounting for about 1/4 of the total sales. It can be seen that the export market is very important for China's construction machinery industry. In 2017, China exported 2.389 billion US dollars to the EU, an increase of 25.51% over the same period last year. Exports to the EU accounted for 11.9% of China's total construction machinery exports in 2017. If Brexit causes economic fluctuations in the EU and the UK, it will inevitably have a negative impact on China's construction machinery exports.
Sino-US Trade War
In 2017, China exported 2.772 billion US dollars of construction machinery to North America, accounting for 13.8% of total exports. With the outbreak of the Sino-US trade war, the possibility of the US government increasing tariffs on construction machinery from China is increasing, because some products are closely related to Made in China 2025. CRI believes that if the Sino-US trade war continues in 2019, it is expected that a considerable portion of China's construction machinery exports to the United States will be increased tariffs, leading to a sharp decline in China's exports to North America in 2019.
Transfer of Construction Machinery Industry in China
According to CRI's survey of some construction machinery manufacturers in the Chinese market, if the Sino-US trade war continues, these enterprises may gradually transfer their factories to Vietnam and other places in Southeast Asia to avoid the increased tariffs. If there is a large-scale transfer of enterprises, it will obviously continue to weaken the strength of China's construction machinery industry.
Future opportunities
The development status of the whole area and the amount of investment driven.
Since the export data of China's construction machinery for the whole year of 2018 have not yet been released, CRI temporarily uses the data of 2017. As we all know, the investment entities of the "one belt and one road" are mainly state-owned enterprises under the Chinese government. Therefore, the infrastructure construction related to the "one belt and one road" will give priority to the construction enterprises in China and the construction machinery produced in China. In 2017, Chinese enterprises signed new contracting projects in 61 countries along the "one belt and one road". The number of new contracts was 7217, with a contract value of 144.32 billion US dollars, an increase of 14.5%, CAGR reached 24.8% in 2015-2017, revenue reached 85.53 billion US dollars, an increase of 12.6% over the same period, and CAGR reached 11.1% in 2015-2017. In 2017, China's construction machinery exported 8 billion 765 million dollars to the countries along the belt and road, an increase of 18.3% over the previous year, accounting for 43.6% of the total export volume. It can be seen that along with the promotion of "one belt and one road", it is beneficial to the export of Chinese construction machinery.
China's construction machinery manufacturing enterprises include OEMs's strategy of "one belt and one road".
As China's construction machinery industry continues to increase its exports to the "one belt and one way" country, China's construction machinery manufacturing enterprises, including OEMs, are becoming more and more important. According to the "Research Report on China" s Construction Machinery Industry, 2018-2022 "shows that China's construction machinery manufacturing enterprises, including OEMs, aim at the market strategy of the countries along the" one belt "road, including the following points: (I) setting up branches, offices, etc., to strengthen market expansion in these countries (II) and to undertake a large number of projects in the countries along the belt and road. China's construction enterprises have established cooperative relations to sell their construction machinery products (III) to the local construction machinery manufacturers or directly set up factories along the "one belt and one road" line, so as to achieve localized production. For example, Sany Group has set up factories in Turkey, Indonesia, Russia and other countries, and ZTK has set up factories in Italy, Germany, India and other countries.