CHINA REPORT
CNH Industrial Group says it is stopping the sales of construction machinery and equipment in the Chinese market after Dec. 31, 2022. This is another significant development by foreign brands in the Chinese market.
John Deere withdrew from the Chinese market after the original industrial structure was changed by the merger of the Chinese plant of Kobelco Construction Machinery Co., Ltd. At the same time, Hitachi Construction Machinery also made changes to Hitachi Construction Machinery (Shanghai) Co., Ltd., which is responsible for sales and services in China, and set up a new sales and service company, “Hitachi Construction Machinery Sales (China) Co., Ltd.”, which began operating Nov. 1, 2022.
On Dec. 29, 2020, the Ministry of Ecology and Environment announced that from Dec. 1, 2022, all off-road mobile machines below 560kw (including 560kw) produced, imported and sold and their diesel engines installed shall meet the requirements of the Chinese IV emission standard. The implementation time of Chinese IV emission of off-road mobile machinery above 560kw and its installed diesel engines has not been announced.
Domestic brands caught up with and surpassed foreign brands in 2017, becoming world leaders, in many cases. Product quality and price, as well as channel and service are steadily improving, and market share is growing.
With the development of domestic brands, the gap between domestic brands and foreign brands has gradually narrowed, and the absolute technical advantages of foreign brands have also been slightly reduced. Now, in the face of domestic brands with high performance-price ratio, loyal users of foreign brands are gradually changing to domestic brands, and the market share of foreign brands in China is shrinking.
Source: hc360 Read The Article
PSR Analysis: In recent years, China’s construction machinery market has been in a period of deep adjustment, which has brought a lot of pressure to foreign and domestic brands. At the same time, COVID-19’s superimposed impact on China’s economy and infrastructure has doubled the pressure on many companies.
Meanwhile, the upgrading of emission standards has increased product costs, and the growing trend of electrification is requiring companies to spend additional funds to develop new products and to meet the environmental protection emission standards. These developments have posed great challenges to foreign-funded construction machinery products.
With the improvement of the strength of local brands, the technological advantages of foreign brands have been gradually reduced. Compared with the improved service system of domestic brands, the advantages of service speed and maintenance quality of foreign brands has been reduced. Based on the successful experience of Caterpillar in China, it is very important to develop and produce localized products and have powerful agents to achieve a win-win strategy.
Southeast Asia has been supported by policies such as the “One Belt and One Road” and the RCEP agreement. The Regional Comprehensive Economic Partnership (RCEP) is an agreement between the member states of the Association of Southeast Asian Nations (Asean) and its free trade agreement (FTA) partners. The pact covers trade in goods and services, intellectual property, etc.
Many foreign brands have begun to establish new factories in Southeast Asia, made new infrastructure investment, and implemented major projects such as railways and roads. These moves have promoted the local demand for construction machinery products, and sales are rising steadily. In the future, the Southeast Asian market will become a competitive market for foreign brands and domestic brands. PSR
Jack Hao is Senior Research Manager – China for Power Systems Research
