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Chinese Heavy Equipment Manufacturers Aggressively Entering US Market

Chinese manufacturers are offering heavily discounted equipment as part of their overall strategy to build a new tier of heavy equipment in the US market.

[su_box title=”This graph shows the resale volume of three leading Chinese manufacturers, LiuGong, Sany, and XCMG, from 2012 to 2015.” box_color=”#ddd” title_color=”#000000″ style=”height: 100%;” ][/su_box]

Key Takeaways for Decision Makers

EQUIPMENT MANAGER: As Chinese equipment is making a presence in US markets, buyers now have the option to choose from value priced and low tech alternatives that are 30-35% cheaper than leading brands.

Chinese construction equipment manufacturers have been entering the US looking to penetrate the market similar to what the Korean and Japanese manufacturers did in the past few decades. Traditionally, Chinese companies manufacturer in China and then export their goods to the US. However, some leading manufacturers like LiuGong, Sany, and XCMG have started to take different market entry strategies, forming a joint venture and partnership, and building a manufacturing facility in the US.

LiuGong, the world’s 20th-largest construction equipment manufacturers by market share, acquired Polish equipment manufacturer Dressta’s bulldozer line and started to offer its own equipment along with Dressta dozers in US.

Sany, the sixth-largest heavy equipment manufacturer in the world, acquired German pump manufacturer Putzmeister and built a manufacturing facility in Peachtree City, GA to support sales in the US and reduce shipping cost.

XCMG, China’s largest construction equipment manufacturer, formed a merger with German concrete equipment manufacturer Schwing to improve market coverage outside of China and extend its product range in the premium segment.

These aggressive strategies will definitely help increase sales but require a much higher upfront investment and carries far more risk than exporting. The resale data, however, shows these investments are starting to pay off: LiuGong had a 1400% increase in resale volume and Sany had a 2400% increase in just two years. From the graph, LiuGong’s resale volume increased from 95 to 1371 between 2012 and 2014 while Sany’s resale volume increased from 10 to 244. Unlike these manufacturers, XCMG had a drop in sales between 2012 and 2014 but is gaining as its 2015 volume is nearly the previous year’s volume with only seven months of data.

As witnessed by the boom in resale volume, many would wonder if Chinese manufacturers will continue to grow and become a real threat to US manufacturers. Chinese manufacturers strongly believe they will be successful in the US and become global manufacturers. However, US manufacturers are not too worried about these new players as they are facing inevitable challenges as late entrants to the market.

The challenges include:

  • Lack of dealer networks/service centers
  • Lack of brand awareness
  • Lack of customer base/loyalty
  • Lack of business expertise in US
  • Lack of product variety
  • Demand uncertainty

Despite the challenges, Chinese manufacturers do have some definite advantages. Unlike the Korean and Japanese manufacturers, who were small or medium sized producers when coming into the US, these Chinese companies have already grown big and have enough resources to support different market entry strategies and handle some market adversity. Additionally, coming later to the market they can evaluate the success and failures of what other foreign companies did to launch in the US. And finally, they are offering significantly cheaper machines than other leading brands such as Caterpillar and Volvo. Rather than competing directly, they are attempting to create a new customer segment for “value technology” machines. To pave the way for this new segment of machines, they have acquired a few key companies and established partnerships and joint ventures to expand dealer networks, increase brand awareness as well as gain improved technology. All together this should make their entrance much easier than starting from scratch.

As the Chinese economy continues to fluctuate and slow down, it’s even harder to predict how Chinese manufacturers will do in the US market. We will keep track of resale volume of Chinese manufacturers and will update their activities by the end of 2015.

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