Construction machinery is a special member of it. In the domestic market, the cyclical changes brought about by the fluctuations in the real estate industry have made the construction machinery industry dormant at the bottom. However, the overseas market has a different look: data from the General Administration of Customs show that in 2023, China's exports of construction machinery products will reach 48.552 billion US dollars, a year-on-year increase of 9.59%, and the trade surplus will increase by 4.468 billion US dollars year-on-year, and double-digit growth has been achieved in Europe, South America, Africa and other regions.

Taking Zoomlion, which has the fastest growth rate of overseas sales in recent years, as an example, the company's overseas revenue will increase from 3.8 billion yuan to 17.9 billion yuan from 2020 to 2023, with a CAGR of 67%, and the proportion of overseas revenue will increase from 6% to 38%, and the proportion of overseas revenue will further increase to 48% in the first quarter of 2024, maintaining a high prosperity. Moreover, based on its "end-to-end, digital and localized" overseas business direct sales system, Zoomlion has achieved a balanced development of multiple competitiveness such as business expansion, risk prevention and localization.

China's construction machinery has gone through a long process of development.

According to data from SMM steel industry research, China's construction machinery has entered the stock stage after 2018, and the new space is limited. However, not only is the overseas stock market about twice that of China, but there is also a variety of machinery needs. As a result, China's construction machinery leaders have jumped away and entered the global market.

(Source: SMM)

Combined with the financial reports of various enterprises, from the perspective of revenue, Sany Heavy Industry will lead the way with overseas revenue of 43.2 billion yuan in 2023, XCMG Machinery's overseas revenue will increase to 37.2 billion yuan, and Zoomlion's overseas business will increase to 17.9 billion yuan year-on-year, and Liugong is also a force to be reckoned with. In terms of gross profit margin, Zoomlion ranked first with a gross profit margin of 32.23% of overseas revenue, reflecting more outstanding operational capabilities and market competitiveness.

It is worth noting that these achievements are not achieved overnight, but in the improvement of China's construction machinery, gradually realized.

Enterprises going overseas can be roughly divided into several stages, from small-scale exports, to foreign investment to establish overseas bases, to the balanced development of global operations, and finally to the stage of hyper-internationalization and global localization. Zoomlion, for example, is roughly in the process of development from the third stage to the final globalization.

This transformation stems from the transformation of enterprises from passive participation in the international division of labor and global value chain in the early stage, to domestic substitution in the later stage, and then to active global expansion, as well as the transformation from followers to one of the leaders of the global value chain. According to the company's report, Zoomlion has nearly 80% of its sales in the three "staple food regions" of the Middle East, Central Asia and Southeast Asia in the first quarter of 2023, but with the rapid growth of sales revenue in the three major developing regions of Latin America, Africa and India, as well as developed countries such as the European Union and North America, the proportion of the original "staple grain areas" has dropped to 60%, forming a diversified overseas regional market structure and realizing the upgrading of market layout and "grain production areas".

This is also due to the continuous enhancement of the technological innovation ability of China's construction machinery enterprises, from the state of insufficient technological development, to the creator and leader of advanced technology, to become the setter of international standards, with strength to win the world's recognition. For example, Sany Heavy Industry has achieved a number of domestic and world firsts in many fields of electric excavators. As of the end of May this year, Zoomlion has nearly 7,000 invention patents, creating a number of the world's largest and strongest records such as cranes and pump trucks.

Nowadays, with the continuous strengthening of the competitiveness of China's construction machinery enterprises, it is inevitable to enter the complex global network and face more challenges.

Customs data shows that in 2023, the top five regions of China's construction machinery exports are the Federation of Russia, United States, Indonesia, Japan, and Australia, which have different geographical environments, a wide variety of customer types, and many businesses are inevitably accompanied by risks.

Different companies have different growth models, which will form different business systems in different regions of the world, which in turn affects their awareness and prevention of risks. What's right for you is the best. Regarding the prevention and control of risks, we must first start from the business model of the enterprise.

Japan construction machinery giant Komatsu, United States Caterpillar, have relied on the agent system to expand the international market, their approach is to develop the corresponding agent management system, open up inventory, sales, service, finance, capital and other sub-modules, so that the headquarters and agents to achieve information exchange, better development. Among the domestic enterprises, Sany Heavy Industry and XCMG Machinery have adopted an agent-based model, while Zoomlion has adopted a direct sales model based on in-depth "end-to-end, digitalization and localization".

Among the various models, the risk prevention and control system formed by Zoomlion based on the in-depth "end-to-end, digital and localized" direct sales model is very in line with its business characteristics. With years of huge investment in digitalization and localization, Zoomlion has built a risk management and control system that directly reaches all parts of the world on the basis of the smooth flow of information globalization, thus helping it stabilize the margin of safety of its overseas business and empower growth.

The reason why Komatsu and Caterpillar's agency system needs to establish corresponding information modules and management modules is to solve these problems. Zoomlion has also tailored a set of risk management systems that meet the needs of deep globalization through the overseas business direct sales strategy based on "end-to-end, digitalization and localization".

End-to-end, the essence is to manage global business with a digital flat architecture, which means that their "troops" are on the front line and are in direct contact with the market and customers. Zoomlion has transplanted its experience in directly managing the team from the headquarters in China to the overseas market, although it will also set up local overseas subsidiaries at the administrative level, but it will be directly commanded, controlled and managed by the headquarters backstage. The activities of front-line business personnel are known in real time by the back-end of the headquarters, and the operation team of the back-end will do real-time control and tracking guidance on the front-end, so as to truly achieve the direct connection between the enterprise and the client. In terms of management, such a flat structure can be achieved thanks to the long-term end-to-end management experience of the company's business platform and the support of digital technology.

So, how do you ensure that the team is well integrated into the local market? Zoomlion has established a two-tier structure of "airport + ground force", the former is similar to a regional product line service platform, and the latter is a local front-line employee, and the two work together. Zoomlion uses "localization" to solve the challenges brought by local culture, religion, laws and regulations in the process of overseas business development, from front-end R&D to mid-end sales to back-end services, which can better understand and be close to the local market and user needs. The overseas employees dispatched by the headquarters are mainly concentrated in key management positions such as country managers, finance, capital, and risk control.

The radius of management is not only people and teams, but more importantly, information. In this regard, Zoomlion's digital construction has set the "unified IT architecture", "unified management process" and "unified data standard", and realized the digital control of the whole process of the enterprise through the industrial Internet platform - the personnel, finance and materials of the overseas business department are no exception.

In terms of risk management in specific regions, Zoomlion has established a more detailed and comprehensive layout. For example, in terms of credit review, Zoomlion has built a global and localized credit review team, established a 360 credit model for global customers, realized the docking of customer credit information platforms in key countries, continuously improved customer credit risk identification capabilities, and achieved targeted risk management and control for global market segments. At the same time, it can also use digitalization to solidify rigid bottom-line rules, refine and solidify the down payment, account period, order profitability, etc., according to the risk level of different regions and different customers, and set bottom-line rules, so as to ensure that the absolute red line is maintained and the quality of business is guarded.

For trading orders, the digital system will intelligently identify them according to the established rules, and warn or brake the risks. For customer information and asset security, digital technology has helped improve the management of customer contract files, warrants and mortgage assets, and timely tracked and regularly updated the path and work of customers' purchase of equipment, as well as customers' credit and cash flow, to ensure that the company can grasp the assets and customer credit status in the first time.

With the support of this system, overseas business information, transaction links, and asset security are all fully presented in the system, and risks are not hidden. The flexible use of information + personnel + business tools has also greatly improved Zoomlion's risk control ability and adapted to the needs of global development.

Relevant data show that the first-year contract collection rate of Zoomlion overseas is nearly 70%; Overseas business accounts for nearly 60% of the total amount of full payment and quasi-full payment business; The average accounting period of key countries has been shortened from 15 to 13 periods; The contract collection rate in key countries such as Turkey was as high as 95% that year. The margin of safety of operation has been significantly consolidated.

Managing overseas risks and improving the level of localized operation are all in order to better participate in global competition. Since 2003, United Kingdom KHL Group has announced the list of the top 50 global construction machinery every year. The market share of Chinese brands has been increasing overall.

(Source: Founder Securities)

Zhongtai Securities pointed out in the research report that in 2024, there will still be large structural opportunities for China's construction machinery. For example, in the North American market, China will export about 2.72 billion US dollars of construction machinery and equipment to North America in 2023, accounting for only about 6.1% of the North American market, with great potential for improvement. In the Southeast Asian market, the demand for local mines and infrastructure is stable, which is suitable for domestic equipment to increase market share in a rhythmic manner.

For example, Zoomlion's "end-to-end, digital" direct sales system is essentially to compress the industrial chain with the support of digital technology, and give back the intermediate costs that were originally allocated to the dealer system to OEMs and customers. Relevant statistics show that if the dealer system is adopted, the concession of the channel link is 10%-15% in China, and more than 20% in overseas, and the direct sales system significantly compresses the cost.

Not only that, but it also refers to a series of digital system construction carried out by Komatsu in order to better understand the market situation. It is not difficult to find that under the management of the global market by the digital system, construction machinery enterprises can face the real needs of global customers, so as to obtain nutrients that feed back the company's R&D innovation, product iteration, delivery capacity, and risk management improvement, and achieve deeper localization.

Zoomlion's thinking is also the same, it emphasizes the in-depth layout of "localization" from the source of R&D, including follow-up sales, services, etc., allocating half of R&D resources overseas, according to local working conditions, needs, regulations, targeted development and services, and shaping the corresponding business processes. By the end of 2023, Zoomlion has built more than 30 first-level business outlets and more than 350 second-tier outlets overseas. There are more than 5,000 overseas employees around the world, and more than 80% of its overseas sales channels are localized.

Founder Securities pointed out in the research report that the increase in the market share of Chinese brands such as Sany Heavy Industry, XCMG Machinery, and Zoomlion is often accompanied by "the recovery of growth after the 2008 financial crisis, the supply-side reform in 2017, and the opportunity to make up for the shortage of the global supply chain during the epidemic". When China's construction machinery brands face risks, they can often burst out of their potential. The underlying reason lies in the fact that they have established a deep and far-sighted anti-risk system and a global methodology.