Construction Machinery Industry “Going to the Sea” Requires Careful Investment Advantages and Disadvantages

On April 27, Sany Heavy Industry issued an announcement saying that the company intends to reach an investment intention with the Ministry of Industry of the Republic of Indonesia and invest USD 200 million in the country to build the 31 Indonesia Industrial Park. The first phase of the investment will be 50 million USD. As one of the largest construction machinery manufacturers in China, Sany Group has so far built production bases in four overseas countries.

The construction machinery is hot to the sea. In fact, the establishment of Sany Heavy Industry overseas is just the tip of the iceberg for offshore investment in the construction machinery industry. Since the beginning of this year, many construction machinery companies have taken aim at overseas markets and accelerated the pace of opening up overseas markets. Prior to March, Tao Yongsheng, deputy chief engineer of Xugong Machinery's technology branch, disclosed to the media that Xugong would immediately establish its own road-building machinery product manufacturing base in Brazil and develop the local international market. This will be Xugong’s The first production and manufacturing base established overseas.

In addition to large companies such as Sany Heavy Industry and Xugong Machinery, Shantui also plans to set up factories overseas. Wang Wenchao, deputy general manager of Shantui Shares, revealed that Shantui wants to establish branches in Brazil, Russia and South Africa.

Relevant data show that in the past five years, the pace of Chinese companies going abroad has been accelerating, cumulative foreign direct investment has reached 220 billion US dollars, the global ranking has jumped from the 18th to the 5th, more and more places have appeared in China. Business figure.

Why do construction machinery companies favor overseas markets? An interview with the reporter found that the wages of Chinese-made workers are much lower than those of American-made workers, and that Chinese wages are usually only one-tenth that of the United States.

According to a report by the Boston Consulting Group (BCG), wage costs in China's manufacturing industry will increase by 17% each year over the next five years, while wages in the U.S. manufacturing industry will rise by only 3%.

“It is an inevitable trend for construction machinery companies to set up factories overseas. The establishment of independent brands overseas and the employment of local labor can not only effectively reduce labor costs, but also make better relations with local governments and achieve localized production.” Hu Chi, deputy director of the Entrepreneurs Association and the China Enterprise Confederation, told reporters.

“In the case of a continuous appreciation of the renminbi, localized production can effectively avoid the loss of profits from exchange rate changes. Every one percent increase in value, corporate profits will be reduced by one percentage point. In the fierce market competition, if the renminbi continues to strengthen, engineering The export of the machinery industry will be seriously affected," a person who has long been engaged in the import and export of construction machinery told reporters.

In fact, setting up factories overseas is also an important strategy for corporate restructuring and avoiding market risks. In recent years, foreign trade frictions in the construction machinery industry have been constantly escalating, and direct export methods have been subject to various restrictions such as anti-dumping, technical barriers, and green barriers.

It is understood that for the diesel engines with a non-road mechanical power range of 130kw to 560kw, the European Commission started to implement the IIIB phase emission standards from January this year. EU IIIB emission standards have imposed stricter restrictions on the emission of particulates from the engine, from the original 0.2g/kWh to 0.025g/kWh. To meet this limit, diesel engines must be equipped with particulate filters to solve this problem.

Wang Jinxing, director of the comprehensive office of the China Construction Machinery Industry Association, said that the continuous improvement of foreign emission standards will further increase the export threshold of Chinese construction machinery. Liu Gong, secretary of the Dong Zhu Mi-Guang said that because the domestic engine is still not up to export requirements, Liugong can only purchase foreign brands of engines.

Industry insiders believe that whether China's construction machinery products can enter the international market in large quantities is the key to responding to trade barriers. During the 2011 Las Vegas International Construction Machinery Exhibition, there were pros and cons of overseas investment. He Wenjin, vice president of Zoomlion and general manager of the overseas branch, publicly stated that Zoomlion’s stepping out of the country is an unrelenting strategy and not in China’s competitive position. Only in the global market for China's status.

Davis, Minister of the Ministry of Industry and Trade of South Africa stated that African countries including South Africa must vigorously develop manufacturing industry, and China, a world manufacturing power country, has set an example for African countries in developing their own manufacturing industries. At present, the products exported by Africa are mainly concentrated in the fields of primary raw materials and mineral resources. The commodities exported by Africa lack diversity. Therefore, Africa needs to learn from China, take a new road to industrialization, increase its ability to innovate, increase its position in the international division of labor, accelerate the development of equipment manufacturing, and focus on optimizing the distribution of industries in the region, and guide the development of industrial clusters.

It seems that the construction of overseas construction machinery companies is not only good for their own development, but also for the manufacturing of overseas countries, especially in Africa and other backward countries.

“But the construction machinery companies are not completely plain sailing, and they must be rational when formulating overseas expansion strategies,” said Hu Chi. During the two sessions this year, Feng Jun, president of Huaqi Information, a member of the National Committee of the Chinese People's Political Consultative Conference, also stated that Chinese companies should not go abroad to build factories. They must be cautious when building factories. It is better to build offices and go overseas to serve and brand. Do reputation.

He Zhen, vice president of Sany Heavy Industry, said that at the current stage, Sany still believes that the cost of enterprises located in the middle of the industrial chain to build overseas plants is lower than the cost of mergers and acquisitions and integration, so Sany will still insist on building overseas plants. Development model to expand overseas business.

Zoomlion believes that Chinese companies are going overseas. Judging from the current situation, there is still a certain gap between the brand awareness and European and American companies. Most domestic companies can only adopt differentiated strategies. Therefore, it is particularly necessary to strengthen the construction of after-sales service bases, including the construction of accessories bases.

“It is not just new production capacity in overseas markets. The entire production operation model and operating system must be organically integrated into each other’s social economic system and legal system.” Insiders generally believe that when domestic companies go overseas to build factories, To fully realize the risk of investment, its own strength must be combined with the local political and economic and cultural environment, investment environment, foreign exchange policy, laws and regulations, market demand and potential, labor costs, purchasing power, and resource advantages. Only this can be invincible.