Off-Highway Research alerted market players early this year with a note of caution revolving around the entry of Chinese manufacturers in the mini excavator market citing a scenario that the market could arrive at a state of premature saturation. This note of caution comes alongside the objectives of Chinese OEMs for are bent on increasing market share rapidly by triggering a price war.
The price war is already underway for the most part based on the fact that the OEMs have reduced selling price by approximately 20% which has as expected increased sales enormously. Although sales volumes are fattening, this has put the squeeze on profit margin and as more and more machines fill the market, the balance is bound to switch to consumers who would have the final say on whom they prefer to buy from.
The report comes behind a survey on price mechanisms that compared yearly prices which made it evident that whilst the price of everything else was going up, the price of “Mini excavators have fallen by at least 20% in 2020 and international manufacturers such as Kubota, Komatsu and Caterpillar have felt the pinch as their market share shrunk as these well-established market players were unable to compete at that level due to their high-end specifications.
However, in response to what has transpired, industry leaders are aiming to launch machines that are of lower price in future which might see these industry leaders clawing back some of their lost market share, but what is inevitable is the fact that the market will be filled to the brim with lower priced machines.
According to Shi Jang a prominent industry observer, “The low price has had its pros and cons, for instance it has attracted new customers to buy mini excavators, especially sub-cons that hire mini excavators, nevertheless when too many machines fill the market and there simply is not enough work to go around, the market will ultimately fall and the squeeze on profits will not cease despite good sales.
As it is currently, the industry is looking healthy based on the report by XINHUANET (www.news.cn) which indicated that China’s 26 leading excavator manufacturers managed to cross the 120,000 machine threshold as of April this year which is an 85 percent increase year on year.
The reports collated from 5G big data centers revealed that the presence of construction machinery manufacturers is a critical factor in the scheme of things and will remain crucial for a long time as it is a critical component towards sustained growth of China’s construction machinery market.
Although this growth has thus far only been focused inwardly on domestic markets, eventually when internal markets are worn, these manufacturers will seek external markets and this is when the big global boys will be affected and a vicious cycle will form that would drive the market every which way – but lose.
Chinese mini excavator manufacturers are also objective about their expansion path as they seem to have specifically segmented the ‘mini excavator for hire’ scene as their marketing operatives prefer the ‘bulk’ market which rides a bigger ‘money gun’.