China construction machinery industry expects sales to rise 15%

Shanghai

CHINA'S strong construction machinery sales are expected to continue until at least early next year but could be hobbled by any slowdown in Beijing's recent infrastructure investment drive, industry executives said.

Construction equipment makers have experienced unexpectedly robust sales in China this year, especially for excavators, after the country embarked on a fresh building spree to bolster the economy following the emergence of the Covid-19 pandemic.

XCMG Construction Machinery said its sales in China had jumped by over 20 per cent this year versus 2019, although overseas sales have been hit by the global spread of the virus.

Rivals such as Japan's Komatsu have similarly said they have seen a recovery in demand from China.

"Our original forecasts were not for such high-speed growth especially since it's the last year of China's 13th five-year plan," said XCMG's chairman Wang Min in an interview on the sidelines of the biennial Bauma China fair. The industry traditionally sees fewer new construction projects starting in such a year.

China's 14th five-year economic plan will be revealed at the annual parliament meeting in early 2021, with a focus on technology and domestic demand.

Overall, the industry is expected to see a 15 per cent or more year-on-year jump in China sales this year, according to consultancy Off-Highway Research, which had previously forecast sales to fall 8 per cent prior to the Covid-19 outbreak.

"We will definitely see growth in the first half of next year, but the second half, whether expectations will change, we have to see what policy decisions the National People's Congress make," Off-Highway's director of research Shi Yang, referring to the country's parliament. The consultancy is currently forecasting a 10 per cent sales decline for 2021.

Rosy sales in China have not necessarily translated to profit jumps for equipment manufacturers, as more players join a lingering price war, he added.

US-based Caterpillar Inc, the world's largest equipment maker, unveiled a new range of cheaper, 20-ton "GX" hydraulic excavators for the Chinese market at the fair, which attendees said were being advertised by dealers for as low as 666,000 yuan (S$136,000). Generally, Caterpillar's excavators sell for about one million yuan, they said.

A Caterpillar spokeswoman said the new series enabled it to offer equipment at a lower low price point and cost per hour.

"Competition in China is very fierce, the prices for some standard products have fallen to levels where they can't really go any lower anymore," XCMG's Mr Wang said. REUTERS