Earthquakes in Japan Give Opportunities and Challenges to Excavators

The Japan earthquake was one of the most notable recent international events. On March 11, a 9.0-magnitude earthquake struck the East Coast of Japan, triggering a tsunami of up to 10 meters. Japan's post-disaster reconstruction contains huge business opportunities, and Japan's earthquake and tsunami is a major problem for Chinese construction machinery companies. In general, the advantages outweigh the disadvantages.

The opportunity report stated that Japan’s reconstruction investment is conservatively estimated to exceed 30 trillion yen (approximately RMB 2.4 trillion), and the huge infrastructure demand will inevitably drive the demand for construction machinery in Japan, while Japan’s domestic construction machinery will not be able to break the capacity bottleneck for a time. Will pull China and Southeast Asia Japanese brand construction machinery back to Japan. Due to the suddenness of the incident, the Japanese brand's production capacity in China has not yet been upgraded. The above factors are expected to lead to a significant decline in the competitiveness of Japanese brands' core engineering machinery products in China in 2011, which may be conducive to the development of domestic brands.

Construction machinery is the pioneer equipment for earthquake relief and the main equipment for post-disaster reconstruction. In the early stages of disaster relief, a large number of construction machinery products such as excavators, bulldozers, loaders, and cranes are needed. In the post-disaster reconstruction work, a large number of infrastructure such as houses, roads, and bridges need to be rebuilt, which will drive the growth of demand for construction machinery such as excavators, bulldozers, cranes, loaders, concrete machinery, and pile-driving machinery.

Japan is currently the largest exporter of construction machinery manufacturing in China. According to the data from the State General Administration of Customs, the total export value of China's construction machinery manufacturing industry in 2010 reached US$5.25 billion, of which US$420 million was exported to Japan, accounting for 8% of total exports. China exports a small number of construction machinery products to Japan. The main export products are construction machinery parts and components. "We think that in the short term, the export of Chinese construction machinery parts to Japan may increase."

Challenges With the gradual entry of China's excavator parts manufacturers in recent years, Chinese excavator companies are quickly catching up with foreign companies. Currently, in addition to Doosan Heavy Industries, Caterpillar, Hitachi Construction Machinery, Kobelco, Volvo and other overseas investors, there are Xiagong, Sany Heavy Machinery, Liugong, XCMG, Zoomlion, and Shandong Lingong. excavator.

In the first quarter of this year, domestic excavators sold a total of 74.214 million units, a year-on-year increase of 59%. In March alone, 24 excavator manufacturers sold about 43,000 units. In the first quarter of this year, the domestic excavator production capacity has exceeded 300,000 units. Last year, the excavator sales volume in China was about 160,000 units, which means that this year, if the companies do not expand their production capacity, the sales volume will double. Drop this excess capacity.

Industry insiders believe that it is unlikely that the excavator market will achieve sales of 300,000 units this year. According to the forecasts of the excavator branch of the China Construction Machinery Association, the total sales volume of excavators this year is about 190,000 units, between 2012 and 2014 between 218,500 units and 302,000 units.

“In the short term, the production capacity of excavators may be passively reduced due to the impact of the Japanese earthquake.” At present, the supply of hydraulic parts companies such as KYB and Kawasaki Heavy Industries is not stable, and these companies’ own parts are also in short supply, so in recent months, Domestic excavator capacity expansion will slow down. However, many companies have invested a lot of manpower and material resources, so they will not easily give up this part of the market.

In the future, the excavator market will face an overall price war and a sharp drop in profitability.