After five years of positive growth, China's construction machinery industry has entered a downward cycle since the second half of 2021. The market demand is no longer, the peak season is not busy, and the industry chain is bleak. Everyone is guessing, when will the construction machinery industry get out of the down cycle?
Recently, Zheshang Securities analyzed that the sales of excavators are expected to bottom out in 2023, and the industry will gradually bottom out, with expectations improving.
Since the beginning of this year, the excavator export market has continued to grow rapidly, and its contribution to excavator sales has increased from 20% in 2021 to 40%-50% today. The domestic market performed mediocre, with sales continuing to decline year-on-year. However, with the official implementation of non-road China IV standards on December 1 this year, domestic new demand has slowed down, renewal demand has dominated, and replacement demand has existed for a long time. It is expected to gradually bottom out in 2023.
Since the second half of this year, the overall sales of excavators have turned from negative to positive. Moreover, according to grassroots research, the issuance of new special bonds in 2022 has basically been completed. Since October, there have been signs of improvement in the start of construction in various places.
The export business of construction machinery leaders is strong this year, and domestic coal mining machinery and other businesses have driven the growth in demand for parts and components. It is learned from a person in the supply chain that the order of his company in October has reached a record high, mainly due to the surge in demand for parts and components supporting Sany and XCMG. An insider of a construction machinery company in Hunan revealed that the market is currently in the bottoming stage, and the worst time has passed. In terms of infrastructure, the demand for steady growth in infrastructure investment in the fourth quarter increased, and in November, infrastructure investment accelerated again. It is expected that the cumulative year-on-year growth rate of infrastructure investment for the whole year will reach about 12%. Some experts predict that infrastructure investment will remain strong in 2023, and the high base will cause the growth rate to drop slightly to 8%, but the two-year average growth rate from 2022 to 2023 will still be around 10%. The real estate market has also ushered in a number of favorable policies recently. The People's Bank of China and the China Banking and Insurance Regulatory Commission recently issued the "Notice on Doing a Good Job of Financial Support for the Stable and Healthy Development of the Real Estate Market", proposing 16 specific measures to support the stable and healthy development of the real estate market.
Calculate the domestic inventory based on the 10-year life of the excavator. The domestic inventory in that year is the sum of the demand for the previous ten years. The equipment replacement cycle is generally 5-6 years. The inventory will drop by about 3% in 2021, and the inventory will drop by 7% this year. There are about 2 million units in the market, and nearly 200,000 units are replaced every year. Moreover, it is expected that the national three models will be intensively updated in the next five years, with an annual increase of 30,000 new update needs.
Can growth and cycles dance together? Domestic new demand is in a downward cycle, and growth is slowing down. It is expected to bottom out in 2023. While update demand dominates, and alternative demand exists for a long time, update demand and overseas demand are the key points of growth. According to the analysis of Zheshang Securities Research Report, the sales volume of excavators from 2022 to 2025 will be 280,492 units, 256,589 units, 340,930 units, and 404,177 units respectively. Taiwan, the growth rates were -18%, -9%, 33% and 19%, respectively, and the export sales growth rates were 50%, 30%, 20%, and 10%.
In recent years, the market share of domestic excavator brands has increased significantly. Sany's market share increased by nearly 20%, XCMG increased by nearly 5%, and Zoomlion re-entered the excavator market in 2020, with a market share of 2.3% that year. Caterpillar is the only foreign brand whose market share has increased by 4% in more than 10 years; Komatsu, Hitachi, Doosan, and Kobelco are the four foreign brands with the most serious decline in market share. The industry concentration of excavators is also increasing: CR2 increased from 28% in 2010 to 44% in 2020, an increase of 16%; CR5 increased from 56% in 2010 to 70% in 2020, an increase of 14%.
The demand in the domestic market is slowing down, and the overseas market has become the next main battlefield for Chinese excavator companies. In 2010, my country exported only 2,972 excavators. From January to November 2022, the total sales volume was 244,477 units, and 98,739 units were exported, accounting for 40.39%. Export sales are gradually approaching domestic market sales.
Looking at the international market, Chinese excavators have already competed with the world's excavator giants. Sany Heavy Industry, which demonstrates China's excavator manufacturing strength, will rank first in the world in 2021. XCMG excavators, which are installed in listed companies and plugged in with capital wings, will surely get greater help. Zoomlion, a new dark horse in China's excavator industry, is in an outbreak In the eve and accumulation stages, Liugong, which has long been among the top three in the domestic excavator market, has been moving forward steadily, and is still working with Volvo’s Lingong to firmly grasp the mid-end market; the growth rate of Lovol excavators, which started from agricultural machinery, once caught up Chao Sany Heavy Industry. There are also new and old "players" of excavators such as Lonking, Shantui, Shanjian, Xiagong, etc., all of them are gearing up for their debut. In the future construction machinery market, "Which excavator manufacturer is strong" is not an easy question to answer
