The construction machinery industry still needs after-market support

The aftermarket of construction machinery refers to the various derivative services surrounding the use of the equipment after the equipment is sold. It covers the whole process of equipment from sale to scrap, and various follow-up services around equipment after-sales service and use of customer needs, resulting in a general term for a series of transaction activities. The construction machinery aftermarket mainly includes: repair, maintenance, spare parts supply, financial services, insurance, leasing, second-hand equipment, overhaul and remanufacturing, etc.

The construction machinery market is severely affected by global economic conditions and construction volume, while the business of the construction machinery aftermarket is mainly affected by equipment ownership and operating rate. The overall market is much less volatile than the complete machine sales market, and the market volatility is relatively large. After the development of the construction machinery market, it can effectively enhance the enterprise’s ability to resist risks and ensure the survival and balanced development of the enterprise. In Europe and North America, companies in the construction machinery industry attach great importance to the development of the aftermarket. In this way, when the new machine sales market declines, the aftermarket revenue becomes an important guarantee for the company to "live".

According to international experience, for the mature construction machinery market, generally two-thirds of the profit comes from the aftermarket, and one-third comes from the sales of new equipment. However, the profitability of my country's construction machinery aftermarket business is low and the development is relatively primitive. According to the survey data of China Construction Machinery Industry Association, in 2020, my country's complete machine sales business will contribute an average of 64% of the operating profit of agents, and the aftermarket business profit will account for 36%, including the sales of accessories, which has a higher contribution value of 19.9% , And the second mobile phone sales business is at a loss (as shown in Table 1). After the overall weakness of the market, my country's construction machinery industry has been greatly affected by the market. Since 2011, it has experienced five years of continuous decline and continuous lows. A large number of manufacturers have shut down and reorganized, which has brought a fatal blow to the industry.

In terms of historical development, my country's construction machinery aftermarket is unique. Looking back at the changes in my country's construction machinery market in the past 20 years, since 2000, my country's development demand has been strong, and the sales volume of construction machinery has experienced a surge in the past 10 years. Construction machinery complete machines have gradually moved from importing foreign brands to buying domestic brands. Only from the changes in the excavator market, the market share of domestic brands has been rising, from less than 10% at the beginning to more than 60% today. In this process, in order to compete with foreign brands for the market share of the whole machine, domestic brands voluntarily gave up the aftermarket and launched the "buy the whole machine, send parts, free service for life" model. The result is the working hours of all brands in the Chinese construction machinery market. There are many difficulties. The service income of most agents is not even enough for technicians.

At the same time, with the rise of China’s manufacturing industry, my country’s construction machinery parts manufacturers, suppliers, and after-sales warranty services are gradually being replaced by lower-priced and more flexible small and medium-sized enterprises. The post-market fragmentation of the construction machinery industry is obvious. As a result of this transformation, the profit rate of the post-market has dropped significantly.

Under the existing market competition pattern, the development of the post-market of my country's construction machinery industry is difficult to reduce profit margins again, and to grab the market at low prices, a new track must be opened to obtain more market opportunities through innovation.