China's construction machinery industry to further increase the degree of concentration

The degree of concentration of the industry is not high enough. The issue that Mr. Jun Ji, the president of the China Construction Machinery Industry Association, seems to be looking at is somewhat contrary to the laws of the market and some people have to interfere in the “suspicion” of the development of the industry. In fact, this view is not alarmist, but the construction machinery industry has indeed developed to the point of large-scale mergers and reorganizations.

In fact, industry concentration is already an imperative practice. Because, a sharp problem hidden behind the industry blowout is the excess capacity. Although the construction machinery industry in China is developing rapidly, if the production capacity cannot be effectively released, it will endanger the health of the industry. In fact, the face of this problem is not a few products, but almost the entire field of construction machinery.

At present, due to the vigorous promotion of the domestic market, especially the construction of infrastructure, the market is showing a prosperous picture. So that most of the industry companies can sell as long as they can produce products. This has spawned a considerable number of small businesses that want to generate opportunities. In specific areas of certain products, there are often several companies that share more than 50% or more of the market share together, while the remaining number of companies have to share a small part of the market share. Even if these small companies join together, their production and sales scale cannot reach leading companies. Do these small businesses have value?

The answer does not seem to be optimistic. If an industry wants healthy development, small businesses should certainly have it, but this must not be a low-cost, low-tech duplicate construction. In fact, the current Chinese construction machinery industry seems to be deeply troubled by this type of development that should be abandoned.

The full prosperity of the market does not have a long-term nature, and the industry situation in the second half of this year will gradually become flat. After experiencing the financial crisis, Chinese companies have profoundly recognized the necessity of practicing internal strength. However, a considerable number of small businesses do not seem to have the strength to practice internal strength. In the final analysis, this has become a problem in the field of capital operations. Without corresponding strengths, it is impossible to obtain improvement. Then these enterprises must inevitably delay the industry.

It is not just small businesses that have these concerns and concerns. Some companies that are still in a good position are adjusting their product chain structure. The author once heard that in the loader industry, a company with the top 10 in terms of production and sales volume had once thought of selling the loader business. This is obviously to realize that the industry is not highly concentrated and that its own development will also be frustrated. If it cannot catch up with the first group in the short term, why should it continue to be maintained? If the excavator really impacts a sufficient amount of loader market share, then the top ten companies will also be at risk.

Although this news has not yet become a reality, such worries have been enough to alert companies of similar size in the industry, whether they are backwards or backwards, after all, it is up to the companies themselves to decide. Just worrying that some companies are clinging to their own "tastelessness" will not only be detrimental to the development of the industry, but also a very irresponsible behavior toward their own development.

Of course there are positive examples. In the field of forklifts, only Heli and Hangcha have occupied over 50% of the market. The second-tier companies cultivated in this sub-sector appear to be relatively stable. They both have their own living space and they also keep a distance with the industry giants. This is the most important role for the development of the industry.

When foreign capital enters China in large numbers and domestic companies are struggling to open up new product chains, we have reason to expect that after a few years, we will see a wave of mergers and restructurings in the industry.