According to KHL senior editor Neil Gerrard, new analysis of International Construction’s Top 200 construction companies illustrates just how rapidly Chinese construction companies have grown their shares in the global construction market. In the past decade, Chinese construction companies have almost doubled the share of all the revenue generated by the Top 200. While in 2012 Chinese firms accounted for 23.2% of total revenue, it has rose to 44% in just a 10-year time frame.
Most recently, China has faced a slowdown in its economy chariot. The end of 2022 saw a gradual decline in confidence among construction buyers, with the Purchasing Managers Index (PMI) dropping to a score of 54.4 in December from 58.2 in October 2022. China has also seen a slump in its housing market, as the country’s leaders tightened up regulations on borrowing to build. But the market is now expected to grow steadily in 2023, as China eases rules on purchase restriction and borrowing again in many cities facing challenges of real estate property price falling, in the hope of resting a decline in property sales. Meanwhile, the country has removed its strict containment measures and opened again to normalize the economic and social activities at best.
World Bank and OECD stated they expected China’s economic growth to accelerate to 5.6% and 5.4% respectively in 2023, from 3% in 2022. Moody’s forecast 10% annual revenue growth for Chinese constructions firms, although margins would tighten related to companies’ exposure to the struggling property sector.
The competition in the China MEWP industry both for manufacturing and rental is highly intense. A few local manufacturers in China are moving to a rental model themselves, where they rent units to rental companies rather than selling them. Leading local players also invest as shareholders in large rental houses to vertically integrate and facilitate equipment sales business. US-based manufacturers there remain commitment to retaining factories in China, but Genie is moving some scissor lifts currently being produced there to its new facility in Monterrey, Mexico, later in 2023 as part of a wider restructuring of supply chain.
On the other hand, Skyjack is moving production to China for the first time. Linda Hasenfratz, CEO of Linamar Group, the parent company of Skyajck, said: “The continuous rapid growth of the Asian market in recent years makes us believe that localized manufacturing is imperative and full of hope. We believe that this move will bring unlimited growth potential for Skyjack in the Asia-Pacific region. We will build a strong sales network while meeting the needs of customers in the region.” “The establishment of Skyjack AWP Asia’s first production base in Tianjin is an important step in our globalization strategy, and it also marks our Asian ambitions.” Skyjack Global President Ken McDougall emphasized: “I would like to pay tribute to the government of Tianjin government for their strong help and support on this project. Utilizing a more global production footprint will also better free up the capacity of our existing factories, ‘manufacturing locally for local markets’ will allow us to better serve those markets. The ever-increasing customer demand creates greater value for the industry in China.”
A new 400,000 square ft facility in Tianjin is under construction and is set to start full production in the third quarter of 2023. The factory will manufacture electric scissor aerial work platforms and boom aerial work platforms to serve customers across Asia.
There are now three China-based rental companies in the top 10 of Access International’sAccess50 listing of the world’s largest rental companies, compared to five years ago, when there were none. Total fleet size of the Chinese rental companies in the top 25 of the listing is between 200 – 250K units, compared to just below 150K in 2022 and zero in 2017. Overall, it is perceived the population of MEWPs in China is growing around 40% year-on-year, though from other opinions this likely will continue for another couple of years, then it will become overheated with excess supply then slow and level off.
Many stakeholders with profound experience in rental business suggest that competition between the major AWP rental players has helped to drive down rental pricing in the country to historic lows, which is one of the factors that indicates the country’s access market is not yet mature. Rapid expansion in the rental fleets large and small, also added to the challenges to sustain the rental pricing to its original level then gain profits as before in many regions in China.
The high management of generalist construction equipment manufacturer Guangxi Liugong Machinery, which just unveiled a full range of aerial work platforms, including the world’s first LT26JE new electric straight aerial work platform and LA20JE new electric articulating aerial work platform in APEC 2023, shared that the rental giants have the edge on manufacturers in China. Rental companies have more power than the manufacturers. They are driving the price down rapidly and asking for monthly payments in instalments over three to four years. They have the advantage to buy a large amount of equipment, which puts them in a good position for parts, payment, and service.
Another new dynamic between the large rental companies, and what appears to be a new business model, is the trend for rental companies to not buy their equipment from manufacturers but to rent it effectively. This means manufacturers retain ownership of the units by its dedicated subsidiary and receive monthly fees from their rental customers. “The manufacturer own those assets and the rental businesses are operated by large rental companies. So, this reduces big companies’ finance debts.” Shared by shareholders in the industry.
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Sources: Access International Magazine, Liugong News, The Paper, LMJX.net