Why is the excavator industry standing out uniquely when the industry as a whole is declining?

Why has the excavator industry stood out?

The construction machinery industry has undergone a gradual, planned development process over the past two decades. Domestic brands have progressively localized and have gradually caught up with and surpassed foreign brands in terms of product quality and distribution capabilities. In the global competition of the future, manufacturing capabilities and cost-effective supply chain systems will become increasingly crucial. Currently, domestic construction machinery brands already possess global competitive advantages, particularly in terms of future-oriented costs and manufacturing capabilities. Furthermore, there is enormous potential for future demand for labor replacement.

Overall, the strong growth in small and mini-excavators, as well as the cyclical nature of large excavators, are well established. The future excavator market continues on a trajectory of high-speed, high-quality development.

In the second half of the year, with the continued economic recovery, increased investment, and the simultaneous progress of new and existing infrastructure projects, excavator sales are expected to continue growing.

Industry Outlook 2021

From a market cycle perspective, it is very likely that the industry will maintain positive growth in 2021, exceeding market expectations.

• •On the one hand, when reviewing the 28-year development process of the industry, each negative growth in industrial sales occurred in a context of stricter macroeconomic policies.
• •On the other hand, this year is the year of the pandemic, which has had a significant impact on the real economy. Coupled with the complex global political and economic situation, the world is expected to maintain a relatively flexible policy environment in 2021.

In the long term, the domestic construction machinery industry still has room to grow. Leading companies have significant potential to increase their market share both domestically and internationally. In the future, these leading companies will venture into more new product categories and further expand their domestic and international market share in product categories where they already have advantages.

According to the research, the higher-than-expected sales in the first half of this year are due to new demand generated by the increase in engineering projects. Replacement demand has not yet materialized. We believe that replacement demand will continue to be a key driver of stable industrial sales growth going forward.

• •Due to the different lifespans, domestic and foreign brands will update their products in a balanced way, ensuring a stable and continuous demand for replacement.
• •Compared to developed countries, emissions standards for non-road machinery in China are approximately 10 years behind, and stricter standards in the future are an inevitable trend.

In conclusion, the data on operating rates and investment in the downstream segment are mutually reinforcing, indicating that the construction machinery industry remains in a state of high prosperity. The excavator market is expected to maintain a relatively solid year-on-year growth trend in the second half of the year, although the growth momentum will be weaker than in the first half. Annual production and sales volumes for excavators could reach an all-time high.

Importance of construction machinery in the industry

Construction machinery is a key sector within China's machinery industry. Market demand for its products is heavily influenced by domestic infrastructure development. Its downstream customers are primarily concentrated in investment-intensive industries such as infrastructure and real estate, and demand is closely tied to the macroeconomic cycle. As 2021 enters the post-pandemic economic recovery phase, and the start of the 14th Five-Year Plan is expected to spur the launch of major engineering projects, infrastructure investment is likely to increase. Demand for construction machinery, such as excavators, will continue to grow, and the industrial chain is projected to continue its expansion.