Perspectives from this issue

In the third quarter, the overall sales of construction machinery at home and abroad weakened, 1-8 months, the main construction machinery products sold a total of 1.258 million units, down 1.8% from the same period last year, domestic sales fell for four consecutive months, export sales fell for two consecutive months, and infrastructure construction is closely related to excavators, loaders, etc. With the accelerated implementation of macro-control policies, the industry accelerates the transformation and upgrading to high-end, intelligent, green, international, and service-oriented, and major construction machinery enterprises accelerate the "expansion of foreign costs, reduce costs and increase profits, and the bottom of the construction machinery industry is expected to appear in 2024-2025.

Changsha construction machinery exports increased in price, 1-8 months, to Zoomlion, Sany Heavy Industry, Sunward Intelligent, Railway Construction Heavy Industry and other enterprises as the main body of the construction machinery industry export construction machinery 20.12 billion yuan, an increase of 29% year-on-year, accounting for 92.5% of the total export of construction machinery in Hunan in the same period.

A series of activities such as the 2024 Changsha International Construction Machinery Exhibition Southeast Asia Branch, the first construction machinery appraiser training course in Hunan, the advanced seminar on the improvement of the ability to transfer and transform the professional technology of intelligent manufacturing of construction machinery, and the second batch of pilot enterprises for the digital transformation of small and medium-sized enterprises in the construction machinery industry in Changsha City, such as the supply and demand docking roadshow of the second batch of pilot enterprises for the digital transformation of small and medium-sized enterprises in the construction machinery industry in Changsha City, have been successfully held.

Indonesia Jakarta International Construction Machinery and Mining Machinery Exhibition was successfully held; The National Standards Committee released the first batch of 7 national standards for electric construction machinery; China Construction Machinery Industry Association Remanufacturing and Recycling Branch was established; The preparation of the "15th Five-Year Plan" of the machinery industry is being closely deployed; List of the first (set) major equipment of five construction machinery enterprises in Xuzhou Province in Jiangsu Province.

Macro environment and industrial operation

According to Russia Machinery Network, the Ministry of Industry and Trade of Russia proposed to discuss a plan to increase the tax on the rebate of imported equipment by 2030, which is expected to take effect on October 1, 2024, and only the categories of equipment that Russia and Belarus have been able to produce will be affected by the indexation of the rebate tax rate. This coefficient will change as the production of certain types of machines is mastered and there is an opportunity to supply the market with the required quantities. Under this scenario, the rebate tax rate for certain equipment will almost double in the six years to 2030. For example, for a truck weighing 12 to 20 tons, the coefficient would be 17, compared to 9.57 currently, and for a truck tractor, it would be 29, compared to 16.4. For towed equipment, the coefficient is planned to be increased from 7.4 to 15.6. Since July 1, the tax rate of some categories of loaders and dump trucks has been raised. Tax on dump trucks and semi-trailers is now expected to increase by 70 to 85 percent by the end of 2024, followed by 10 to 20 percent per year. For construction machinery products such as DST (Road Construction Equipment), such as loaders, the rate increases by 15% every year. However, in some construction machinery categories, Russia's self-production rate is low, and the indexation of the recycle fee rate will also be postponed. For example, the tax on excavators will increase no earlier than 2026, and the tax on backhoe loaders will increase no earlier than 2028.

02 Domestic: Policies promote the industry to accelerate the transformation and upgrading to the "five modernizations".

Since the third quarter of this year, the implementation of macro-control policies has been accelerated, and the General Office of the State Council and the Ministry of Industry and Information Technology have successively issued the "Opinions on Promoting the High-quality Development of Service Trade with High-level Opening-up", "The Guiding Catalogue for the Promotion and Application of the First (Set) Major Technical Equipment (2024 Edition)" and "The Guide to Equipment Renewal and Technological Transformation in Key Industrial Industries", focusing on promoting the integrated development of service trade and construction machinery, the promotion and application of the first (set) major technical equipment, equipment renewal and technological transformation in key areas, and accelerating the industry to high-end. Intelligent, green, international, service-oriented transformation and upgrading.

03下游：宏观投资增长放缓，开工率呈回升趋势

在工程机械市场整体需求中，基础建设与房地产综合占比超60%。房地产市场低迷，地产企业开工意愿较低，专项债发放缓慢等问题，直接导致工程机械设备开工率不足，设备需求端购买意愿下降，设备销量随之下滑。1-8月，基础设施投资（不含电力投资）同比增长4.4%，增速较前7月放缓0.5个百分点，连续五个月放缓；房地产开发投资下降10.2%，降幅与1-7月持平，房地产市场继续处于调整中；从开工率来看，2024年以来，3-7月全国工程机械开工率均弱于去年同期水平，整体市场仍处于下行通道，8月开工率有所上升，略高于去年同期水平。

 我国重点整机产品国内外销量整体走弱

从产品销量来看，据中国工程机械工业协会数据，1-8月，主要工程机械产品共销售125.8万台，其中，国内销售75.62万台，出口50.18万台，出口销售占比约40%。其中，升降工作平台、压路机、平地机出口销售量大于国内销售量，分别占总销量的50.58%、58.30%与85.73%；挖掘机、装载机出口销售量也占据较大比例，均达到49%左右；高空作业车1-8月出口销售量仅为84台，占总销量的3.54%。

从进出口贸易额来看，据海关数据整理，2024年1-8月我国工程机械进出口贸易额为364.03亿美元，同比增长4.55%。其中进口金额17.51亿美元，同比下降0.14%；出口金额346.53亿美元，同比增长4.8%。

05 The revenue and profit of overseas leading enterprises declined significantly in the second quarter

Among the three major overseas construction machinery leaders, in addition to Komatsu's revenue and profit that benefited from foreign exchange income, Caterpillar and John Deere's revenue and profit have declined significantly. Caterpillar's revenue in the second quarter was about $16.69 billion, down 3.6% year-on-year, and the company's net profit was about $2.68 billion, down 8.2% year-on-year. In North America, sales were roughly flat year-over-year, while sales in Europe, Africa and the Middle East (EAME) were down 27 percent and in Asia Pacific were down 15 percent. Caterpillar said the decline in sales was primarily due to changes in dealer inventory. In the Asia-Pacific region, adverse exchange rate effects also played a significant role, particularly in relation to the Japanese yen. Komatsu's revenue in the second quarter was about 0.96 trillion yen, an increase of 6.7% year-on-year, and its operating profit was about 0.15 trillion yen, an increase of 5.7% year-on-year. Excluding the impact of foreign exchange, the company's revenue in the second quarter was 0.80 trillion yen, down 5.7% year-on-year. In North America, Komatsu Construction Equipment sales increased 12.5 percent to 261.5 billion yen, and in Central and South America, they increased 12.8 percent to 165.7 billion yen, but sales in these two regions actually decreased when currency effects are not accounted for. In Asia, sales fell by 10.8% to JPY 98 billion due to poor performance in Indonesia, the largest market. In addition to being the world's leading construction machinery, John Deere is also a global leader in agricultural machinery. In order to exclude the impact of agricultural machinery, only the company's construction and forestry machinery business is considered. From May to July, the company's construction and forestry machinery revenue was about 3.24 billion US dollars, a year-on-year decrease of 13.5%, and the operating profit was about 450 million US dollars, a year-on-year decrease of 37.4%. With the exception of Central Europe & CIS, revenue declined in all regions.

06 Major construction machinery enterprises to speed up the "expansion of foreign countries, reduce costs and increase profits".

Construction machinery listed companies have released semi-annual reports, according to the statistics of 16 enterprises, nearly 6 percent of the company's revenue year-on-year positive growth. From the perspective of revenue, Weichai Power leads the entire industry with a revenue of 112.49 billion yuan, and is also the only enterprise in the industry with a revenue of more than 100 billion yuan, and the four major OEMs XCMG, Sany, Zoomlion and Liugong lead the whole machine enterprise with a revenue scale of 496.32, 387.38, 245.35 and 16.060 billion yuan respectively. In terms of revenue changes, Shantui led the industry with a positive year-on-year growth of 33.81%, and the revenue growth of Zhejiang Dingli and Aidi Precision was also more than 20%. In terms of net profit, Liugong performed the best, leading the industry with a year-on-year growth of 60.2%, while Weichai Power and China Lonking ranked second and third with positive growth of 51.41% and 49.19% respectively. From the perspective of overseas income, Sany Heavy Industry, Sunward Intelligence, and Weichai Power accounted for more than 50% of the overseas revenue, Sany Heavy Industry accounted for the highest proportion of overseas revenue, reaching 60.77%, and Zoomlion, Liugong Machinery, Shantui Co., Ltd., and XCMG Machinery accounted for more than 40% of the overseas revenue.

Two

Industrial development in Hunan

In the third quarter, the General Office of the Hunan Provincial People's Government successively issued the "Hunan Province Measures to Accelerate the Integration and Innovation and Development of Domestic and Foreign Trade" and the "Hunan Province" Two Industries Integration and Progress" Action Plan (2024-2027), which focuses on promoting the development of the after-market such as enterprise remanufacturing export and overseas after-sales service, and encourages enterprises to develop general integration general contracting and system solutions, equipment industrial design, equipment manufacturing and installation and commissioning, remote operation and maintenance, fault diagnosis, data processing and other related services.

02  省委书记沈晓明调研工程机械产业发展

7月23日，湖南省委书记沈晓明在长沙调研工程机械产业发展。晓明书记先后走访了湖南五新隧道智能装备股份有限公司、湖南国重智联工程机械研究院有限公司、三一智联重卡产业园、湖南华汛应急装备有限公司、长沙市桑特液压技术有限公司，察看生产车间、检测平台等，重点了解共性关键技术研发供给与成果转化、产业链上下游协同发展、产品市场拓展等情况。沈晓明指出，要坚持以科技创新引领产业创新，深化产业转型升级、提质增效，巩固湖南工程机械产业优势地位。要大力提升工程机械装备的自主配套和本地配套能力，加大关键零部件配套企业引进力度，着力补齐产业发展短板。要积极推进工程机械再制造产业发展，延伸产业链条，开拓市场空间，培育新的产业增长点。

03   本地工程机械出口量增价涨

2024年上半年，湖南工程机械主要上市公司实现营收717.17亿元，同比下降1.6%；净利润68.72亿元，同比上升5.7%；实现海外收入382.99亿元，同比增长12.4%，占总营收比例达53.4%，比上年同期上涨约6.7个百分点。三一重工、山河智能两家企业海外营收约达60%，分别为60.77%和59.16%，中联重科海外营收占比49.11%。

From the perspective of export trade volume, in the first eight months, Hunan construction machinery exports were 21.75 billion yuan, an increase of 24.1% over the same period last year. Among them, Hunan exported 2.76 billion yuan to the EU (27 countries), an increase of 99.9%, Hunan exported 9.69 billion yuan of construction machinery to other BRICS countries, an increase of 37.8%, and among the top five countries in the export of construction machinery, other BRICS countries Russia, Saudi Arabia, India and Brazil occupied four seats. Changsha exported 20.12 billion yuan of construction machinery, an increase of 29%, accounting for 92.5% of the total export of construction machinery in Hunan in the same period. The reasons are: first, the recognition of "Made in China" in overseas markets continues to increase; Second, the technical content and added value of Changsha construction machinery have increased; In addition, fluctuations in overseas tariffs and increased logistics costs have also pushed up the value of exports.

04 Overseas exhibitions promote enterprises to accelerate their overseas expansion

On August 22, the Southeast Asia branch of the 2024 Changsha International Construction Machinery Exhibition kicked off in Kuala Lumpur, Malaysia, with nearly 100 well-known brand exhibitors of construction machinery around the world, such as Sany, Zoomlion, Liugong, Hyundai, JCB, Sunward Intelligent, Longgong, Shantui, Shandong Lingong, Tongli Heavy Industry, Shandong Qiyun, Wuxin Tunnel Installation, Hunan Youzuan, etc. On the same day, the signing ceremony of economic and trade cooperation was held at the 2024 China (Changsha) Construction Machinery Remanufacturing (Second-hand) Equipment Economic and Trade Matchmaking Conference (Malaysia). Hunan Construction Machinery Remanufacturing Equipment Export Industry Alliance signed a strategic cooperation agreement with Selangor and Kuala Lumpur Machinery and Hardware Merchants Association of Malaysia, and Changsha Jizhi Digital Union Technology Co., Ltd. signed a cooperation agreement with Chenggong Machinery (Malaysia) Co., Ltd. According to the agreement, China and Malaysia will focus on deepening cooperation in the export of construction machinery remanufacturing (second-hand) equipment and mutual recognition of standards, further enhance economic and trade exchanges between the two sides, and jointly create a new model for Changsha's construction machinery remanufacturing (second-hand) equipment exports to Malaysia and other countries in Southeast Asia.

05 Talent training activities empower industrial development

On September 10, 35 trainees of the first construction machinery appraiser training course in Hunan successfully obtained the qualification certificate. Hunan's first construction machinery appraiser training course by Changsha Manufacturing Development Promotion Center, Changsha Construction Machinery Industry Chain Office, Xiangtan Municipal Bureau of Commerce sponsored, Changsha Construction Machinery Industry Association, Hunan Construction Machinery Remanufacturing Equipment Export Industry Alliance undertakes, the training course aims to cultivate a group of high-quality, high-ability construction machinery appraisers, empowering the development of the construction machinery remanufacturing market. From September 18th to 22nd, undertaken by the China Construction Machinery Society, Hunan Association for Science and Technology, Changsha Construction Machinery Industry Association, Hunan Guozhong Zhilian Construction Machinery Research Institute, Hunan Mechanical Engineering Society, etc., the "Advanced Seminar on the Improvement of Professional Technology Transfer and Transformation Ability of Construction Machinery Intelligent Manufacturing" was held in Changsha, and more than 100 professional and technical personnel from the national construction machinery industry, scientific research and management personnel participated. Focusing on the new national strategic requirements and the characteristics of the construction machinery industry, this seminar offers training courses in the form of theme reports, seminars, academic exchanges, on-site teaching, on-site training, etc., so as to promote the technical personnel and management personnel in the field of construction machinery to improve their professional skills, improve their theoretical level, and help a new round of technology transfer and transformation in the field of construction machinery.

06 The second batch of digital transformation of small and medium-sized enterprises was launched

On September 14, the second batch of pilot enterprises for the digital transformation of small and medium-sized enterprises in Changsha's construction machinery industry held a roadshow for supply and demand docking. The event was hosted by Changsha Municipal Bureau of Industry and Information Technology, Changsha Enterprise Service Center, Industrial Development Bureau of Changsha Economic Development Zone Management Committee, Changsha Construction Machinery Industry Chain Office, Changsha Construction Machinery Industry Association, Hunan Guozhong Zhilian Construction Machinery Research Institute Co., Ltd., and co-organized by Sany Science and Technology City and Sany Zhongchuang Incubator. At present, the digital transformation of small and medium-sized enterprises in Changsha's construction machinery industry has formed a demand combing research model of "one enterprise and one table", and sorted out 69 needs, corresponding to 38 third-level scenarios. At the same time, more than 100 industry service providers have been brought together through the public service platform, and 159 digital solutions and products have been created. At the meeting, 6 integrated service providers in the construction machinery industry and 79 enterprises in the second batch of transformation implementation enterprises were accurately docked, and worked together to get through the pain points, difficulties and blockages in the process of digital transformation. At the event, 53 companies and service providers reached a contract of diagnosis intention.

07 长沙工程机械领域新增3家“国家队”

9月4日，中小企业信息网公示了第六批专精特新“小巨人”企业名单。湖南有64家企业入围。其中，长沙地区的企业达到35家，占比约55%。此次长沙入围的企业，在新材料、新能源、集成电路、人工智能、生物医药等前沿产业占据主流，工程机械领域湖南蓝天智能装备科技有限公司、湖南中联重科应急装备有限公司、山河智能特种装备有限公司3家企业入选。

08 主要工程机械企业动态资讯

Three

Industry development and local dynamics

01 Indonesia Jakarta International Construction Machinery and Mining Machinery Exhibition was successfully held

From September 11 to 14, 2024, the Construction Indonesia & Mining Indonesia International Exhibition in Jakarta was grandly opened at the Jakarta Convention and Exhibition Center. Indonesia, as the largest economy and populous country in Southeast Asia, has invested heavily in infrastructure construction, real estate development and mining resources development in recent years, and the demand for construction machinery, construction equipment and mining machinery continues to rise. The exhibition is one of the largest and most influential industry events in Indonesia and even Southeast Asia. At the exhibition, more than 1,300 global mining equipment companies participated in the exhibition, including XCMG, Sany Heavy Industry, Zoomlion and other Chinese enterprises participated in the exhibition.

02 The first batch of 7 national standards for electric construction machinery was released

On August 5, at the on-site promotion meeting of the exchange of experience in the standardization and stability of electric construction machinery, the State Administration of Market Supervision (National Standards Committee) issued the first batch of 7 national standards for electric construction machinery, and the standards were implemented when they were released. This batch of standards covers all aspects of the industrial chain such as terminology, complete machine, energy consumption test methods, power battery safety, etc., and will focus on outstanding problems such as high energy consumption, high noise, and serious environmental pollution of traditional internal combustion engine construction machinery: on the one hand, it can standardize the technical requirements urgently needed for industrial transformation and development, unify upstream and downstream technical specifications, and open up the breakpoints and blocking points of industrial chain development; On the other hand, it also gives a unified technical basis and test specifications for the purchase and testing of equipment, which is conducive to accelerating the marketization process of electric construction machinery and laying a technical foundation for the upgrading of construction machinery and equipment.

03 China Construction Machinery Industry Association Remanufacturing and Recycling Branch was established

On August 31, the inaugural meeting of the Remanufacturing and Recycling Branch of China Construction Machinery Industry Association and the Construction Machinery Remanufacturing and Recycling Development Forum were held in Changshu, Jiangsu. More than 130 representatives from enterprises, institutions and scientific research institutes in the field of remanufacturing in the construction machinery industry attended the meeting. Su Zimeng, president of China Construction Machinery Industry Association, asked the remanufacturing and recycling branch to actively implement the circular economy promotion law and relevant system regulations after the establishment of the branch, give full play to the advantages, highlight the key points, strengthen the relevant standardization and level ability evaluation work, adhere to market leadership, accelerate collaborative innovation, and contribute to the further promotion of the development of circular economy.

04 The preparation of the "15th Five-Year Plan" of the machinery industry was launched

On September 13, the China Machinery Industry Federation organized a kick-off meeting for the preparation of the "15th Five-Year Plan" of the machinery industry in Beijing to deploy the relevant work of the planning. Xu Niansha, president of the China Machinery Federation, stressed that the preparation of the "15th Five-Year Plan" of the machinery industry should closely follow the characteristics of the times, one is to pay close attention to the changes in the international security environment and political environment, the second is to pay close attention to the profound changes in the global economic situation, and the third is to pay close attention to the changes in the global scientific and technological environment.

05 List of the first (set) major equipment of five enterprises in Xuzhou and Jiangsu Province

On September 19, the Jiangsu Provincial Department of Industry and Information Technology announced the list of the first (set) major equipment in Jiangsu Province in 2024, Xuzhou Xuzhou Dayi Heavy Forging Technology Co., Ltd., XCMG Construction Machinery Co., Ltd., Xuzhou Jing'an Heavy Industry Machinery Manufacturing Co., Ltd., XCMG Fire Safety Equipment Co., Ltd., Jiangsu Jitri Road Engineering Technology and Equipment Research Institute Co., Ltd. produced 20MN heavy-duty digital fast forging hydraulic equipment, XC9350 electric drive tire loader, TRD7095 chain knife wall-forming machine, XGS70K mobile lifting work platform and XZJ15120XGC (JTC400A) traffic cone collection engineering vehicle were selected.

Expert opinion

Goldman Sachs predicts that the domestic construction machinery market is expected to bottom out in 2024-2025

Recently, Goldman Sachs released a research report focusing on the capacity cycle of seven major industries: photovoltaic, lithium battery, new energy vehicles, air conditioning, steel, power semiconductors and construction machinery. These seven industries represent not only China's manufacturing industry (accounting for 6.6% of GDP in 2023), but also excess capacity (contributing 21.9% of GDP growth in 2023), and are also typical examples of manufacturing going overseas (the average share of overseas markets has grown rapidly from 27.0% in 2020 to 37.0% in 2023).

This research report comprehensively analyzes the operating status and development trends of the seven major industries from the aspects of the balanced relationship between market supply and demand, the average capacity utilization rate of the industry, cash flow, profit margin, debt ratio and capital expenditure. It also regards more than 50% of the enterprises in the industry as a "tipping point" for the industry to see the profitability and debt pressure (EBITDA interest coverage multiple less than five times) reaching a period when it cannot drive capital acquisition and expansion, and combining with the changing trend of the demand-side market (asset expenditure/sales) as the industry has bottomed out.

Analyzing the current construction machinery industry with this analytical framework, the research report believes that:

1. Market supply and demand: In 2023, the production capacity of construction machinery will be about 7.2 times that of domestic market demand and 1.1 times of global demand, and the capacity utilization rate will be about 30.0%.

2. Business status: In the first quarter of 2024, the price of construction machinery products will be flat year-on-year, and 74.0% of enterprises will have zero or negative operating net cash flow.

3. Enterprises going overseas: In 2023, the supply of China's construction machinery products will account for 33.0% of the world's total supply, and the export volume will account for 53.0% of the production capacity; Compared to 2020, exports in 2023 have doubled, and the overseas market share has increased from 11.0% to 21.0%, of which 21.0% of products are sold to the United States and the European Union.

4. Overseas market competitiveness: the production cost of domestic construction machinery is 8.0%~46.0% lower than that of overseas counterparts on average;

5. Industry development prospects: With the stabilization of new real estate starts and the industry entering the equipment renewal cycle, the domestic market demand is expected to bottom out in 2024-2025. However, with equipment replacement being the only supporting factor, the level of normalization demand is likely to be lower than in previous years. Structural oversupply will continue.

Brief comment: The domestic market demand for construction machinery will bottom out in 2024-2025, which is already the consensus of most practitioners in the industry. From January to July, the domestic sales of excavators were 59,600 units, a year-on-year increase of 6.23%; The domestic sales of loaders were 33,400 units, and the year-on-year decline narrowed to 0.36%. Obviously, from the domestic sales data of major products such as excavators and loaders, the domestic market demand for construction machinery has bottomed out.

Ye Jingsheng: The future service model of construction machinery

The economic downturn, overcapacity, and the adjustment of the real estate industry have led to the shrinking of the construction machinery market, the price war has intensified, and the loss of customers in the market after the service is serious.

On the one hand, OEMs can rely on data to understand customer behavior, reach users more easily through apps and social media, and further reduce their dependence on agents. On the other hand, electrification has further shrunk the aftermarket potential, and there is less room for single-brand agents to survive. After electrification, the price war is more fierce, and the demand for services is reduced, so OEMs have to ask themselves a heart-wrenching question: "What value can dealers bring to us?" ”

That's right, service is an important reason why OEMs need dealers. Unfortunately, Chinese agents generally do not pay attention to service, and the characteristics of service fragmentation and inefficiency make it extremely difficult for the service to break even, let alone expect the aftermarket to make money. Due to the scattered construction and remote location, it is often a few hours on the road and a few minutes of maintenance, if it is not possible to take into account the timeliness and profitability, it is difficult for a single brand agent to bear the high cost of service, and the customer cannot afford the high price of service.

In the future, multi-brand services can increase revenue, improve the problem of fragmentation and inefficiency to a certain extent, and are the sustainable development of customer service. From 2016 to 2017, the author started a business on the "Started" service platform, and did more than 50 brands of excavator maintenance services, and achieved good economic benefits.

In addition, the use of the Internet platform combined with the remote service support system can ensure the timely response to customer needs, through the automatic matching of accessories and technicians, to find local resources at the fastest speed, and to provide services in the most economical way to meet customer needs.