Jun Jun: Difficulties in the construction machinery industry have not been met for ten years

"This year, the economic performance of the industry has shown a great contrast with the same period of last year. It is a difficult situation in the construction machinery industry that has not been encountered for many years." Recently, Jun Jun, president of the China Construction Machinery Industry Association, stated at the first conference on the survival status of end users of Chinese construction machinery.

The profit of production and sales declined sharply. Jun Jun said that since the beginning of this year, the production and sales volume of China's major construction machinery products have fallen sharply in the same period last year, including excavators, bulldozers, truck cranes, road rollers, and pavers. The cumulative sales decline in the first five months exceeded 30%, while the fluctuations of industrial vehicles, loaders, and motor graders were relatively small.

According to the situation in the first half of the year, the decline in the production and sales volume of main products of construction machinery has gradually narrowed. Taking an excavator as an example, the excavator sales volume in June was 8,227 units, a 20% decrease from the previous month, and a decrease of 16.6% compared with the same period of last year, and the decline was also narrowing.

At the same time, the efficiency of enterprises in the construction machinery industry continues to decline, and financial costs increase rapidly. Judging from the situation of the 10 enterprise groups that the China Construction Machinery Industry Association has focused on, the operating income of 10 companies from January to May was 152.7 billion yuan, down 9% year-on-year. Although the decline in operating income is far below the overall decline in the industry, the decline in profits is far greater than the decline in production and sales. From January to May, the total profit of the 10 companies was 13.805 billion yuan, a year-on-year drop of 20.3%, which was more than a dozen percentage points lower than operating income.

Financial expenses and interest expenses rose sharply. As of the end of May, the financial expenses of 10 key affiliates increased by 153.46% year-on-year, while interest expenses increased by 240.41%.

Junjun also said that according to his understanding, before March of last year, major manufacturers in the industry could apply for bank loans that were 15 to 20 points below the standard rate, but the loans they received this year have risen above the standard rate. 15 points. Although some companies still can apply for loans at the standard rate this year, basically no one can get a loan below the standard rate. In addition, the increase in financial costs is considerable. In the first quarter of this year, including the end of last year, from the financial statements of 23 listed companies in the industry, the financial costs are generally in a growing trend. The financial costs of Xiagong, Shantui, etc. have increased substantially, and the financial expenses of some listed companies are in the same year. The growth rate reached 200 million to 300 million yuan. The increase in financial expenses and interest expenses directly offset the company’s profits. Therefore, Jun Jun said that since the beginning of this year, the economic performance of the industry has shown a great contrast with the same period of last year. The situation of funds and profits of most companies is in poor condition. This is a difficulty in the construction machinery industry in the past decade.

Export growth remained stable From the perspective of the import and export of the industry in the first half of this year, exports continued to grow, while imports fell further.

From January to June, China's construction machinery import and export volume was 12.576 billion yuan, an increase of 5.01% over the same period of last year. Among them, the import of US$3.336 billion was 36.2% lower than last year; the export value was US$9.24 billion, an increase of 36.9% over the previous year; the trade surplus was US$5.9 billion, an increase of US$4.38 billion over the same period of last year.

From January to June, the growth rate of import and export volume was very small, only 5.01%, and the loss was mainly on imports. Why does the increase in imports fall much, only negative growth? Jun Jun analysis said that the main reason is the lack of domestic demand. For example, he said that the main components of domestic excavator manufacturers, such as hydraulic parts and engines, are almost 100% imported. Under the current economic situation, many excavator manufacturers have an inventor inventory of about 4 to 5 months, and some companies have an inventory of up to 6 months. As many manufacturers temporarily suspended the import of spare parts, the import fell sharply.

However, from the situation in recent months, the decline in imports has gradually narrowed. Affected by the domestic market, the import of construction machinery products in May was 655 million U.S. dollars, a year-on-year decrease of 16.8% and an increase of 29.6%. As a result, imports fell by less than 20% year-on-year in a single month.

Construction machinery industry companies have performed well in exploring overseas markets. Although this year's export growth rate has decreased compared to last year, the growth rate has remained stable. From January to June, exports increased by 36.9% year-on-year. From the monthly export situation, in January of this year, the export of engineering machinery products in China was 1.469 billion U.S. dollars, an increase of 37.78%; in February, it was 1,027 million U.S. dollars, up 43.3%; in March, the export was 1,600 million U.S. dollars, and the increase in April increased slightly, in May. Exports surged to $1.713 billion. In June, it exported 1.826 billion U.S. dollars, a year-on-year increase of 43.3%. From the perspective of export product categories, total exports of machineries totaled US$6.271 billion from January to June, an increase of 42.86% over the previous year, accounting for 67.87% of total exports; component exports were US$2.969 billion, an increase of 25.78% over the previous year, accounting for total exports 32.13%. In the first half of the year, the products with larger export growth included large-tonnage truck cranes, scrapers, crawler excavators, concrete mixers, forklifts, large horsepower bulldozers, rock drills, and loaders.

It is expected that the slow recovery in the second half of the year will bring the following problems to the current industry.

First, the basic R&D has been insufficiently invested by the companies themselves, the basic innovation is weak, and the backwardness of technology has not been significantly improved. China's construction machinery industry investment focus and competitive advantages are mainly concentrated in the entire machine manufacturing sector, the vast majority of core component technology is in the hands of foreign-funded enterprises, or rely on imports. In the future, the industry may face the constraints of technical barriers and measures in other countries.

Second, the low-price competition among domestic enterprises is still widespread. Sales of prizes, zero down payment, and low down payments abound, and the proportion of financial leasing in product sales is too large, the leasing company's threshold is too low, and second-hand equipment management is not in place, which disrupts the market order and increases the company's business risks. Jun Jun told reporters that according to his latest understanding of the operating figures of the 21 foreign companies in the industry in the first quarter, sales revenue and profits of 18 foreign companies increased year-on-year, and only 3 foreign companies declined. In contrast, in the first quarter, 70% of the domestic industry enterprises were in decline. At the same time, compared with the price wars that are common in domestic industry and enterprises, the prices of foreign-funded products have not been reduced, but they are still rising. This shows that the internal strength of domestic companies is still not well trained.

Third, business operations face multiple difficulties. At present, the social and corporate stocks are relatively large. The receivables of the manufacturers are high, and the company's funds are tight. This has brought great uncertainty to the operation of the company in the second half of the year.

For the prediction of the development of the industry in the second half of the year, Junjun expressed that his personal point of view was that first, if the country can stabilize the economic trend in the second half of the year, it will be conducive to the development of the construction machinery industry. At the same time, he also believes that because the impact of the policy will at least be delayed by 3 months, even if there is good policy, it will not immediately have an immediate effect on the industry. At present, the dilemma of many companies is not only the result of the control of the country’s macroeconomic policies, but also the result of the declining market demand. One of the important reasons is that its own problems have not been resolved. All along, the demand for particularly robust and even explosive growth in the market has overshadowed some internal contradictions within the company. For example, the technical level and reliability of products in some fields, inaccurate market positioning, and extensive economic growth methods have not been improved.

Second, at present, there are large stocks of society and companies, and there are many practical difficulties in the development of the industry. For example, a recent industry survey found that the sales of mining vehicles in a company in the industry have been very good. The sales growth from January to April was more than 40%. From May 10th onwards, it showed a declining trend, with a decline of 50% in May. This is mainly due to the sluggish operation of the coal industry. Yan Jun said that upstream industries such as coal, metallurgy and electric power will affect the sales of several major products of construction machinery, such as dump trucks, excavators, loaders, and bulldozers. According to other surveys, some 30-ton and 40-ton excavators just purchased by customers have been suspended soon, and a large number of sold equipment are idle. These factors will affect market demand and deserve attention in the industry.

Second, it is expected that exports will continue to maintain rapid growth. However, due to the low proportion of exports, such as excavator exports accounted for only 4.37% of the total, loader is 14.28%, so the role of exports is not obvious. It is expected that the industry will slowly pick up in the second half of the year, and most of the products will reverse the negative growth in the month and there will still be some growth in the whole year.

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