Recently, the antitrust storm in the automotive industry has intensified. The “joint antitrust enforcement departments” led by the National Development and Reform Commission (NDRC) have made an example in the auto sector. Luxury brands such as Mercedes-Benz and Audi have been investigated, and four BMW 4S stores in Hubei were fined over 1.6 million yuan. As the antitrust investigation into vehicle
prices continues to deepen, “sky-high” fines were also announced last week. Last Wednesday, the NDRC announced fines totaling 1.2354 billion yuan on 12 parts companies including
, and Nachi-Fujikoshi.
The original meaning of monopoly is exclusive possession, i.e., only one operator in a market. Antitrust law is a legal system that opposes monopoly and protects competition. It is a basic legal system of market economy countries. The “Anti-Monopoly Law of the People's Republic of China” was adopted on August 30, 2007, and came into effect on August 1, 2008.
prices, imported and luxury cars are indeed overpriced, and antitrust enforcement in the auto industry is imperative. The
industry has also long been said to have monopolies. Compared with the relatively mature auto market, the construction machinery industry, affected by factors such as industrial structure and macro policies, currently mainly manifests monopoly in
. Domestic construction machinery technology is backward, core components rely on imports, and the supporting system is not standardized. Breaking the monopoly still requires more effort and time to achieve the transition to a manufacturing powerhouse.
Among them, in the “2014 Global Construction Machinery Manufacturers Top 50 Ranking,” 11 Chinese companies are listed. Among the top 10, three Chinese companies,
XCMG Group,
Zoomlion, and
Sany Heavy Industry, ranked 7th, 9th, and 10th respectively.
However, it is worth noting that the frequent news of Chinese construction machinery launching independent innovation products to break foreign monopolies is both encouraging and a fact that there is still a huge technology gap. For China to transform from the largest country to a powerful one requires more time and the joint efforts of more construction machinery enterprises and researchers, especially in core components, where breaking the technology monopoly is most urgent.
Imported Parts Monopolize High-End Market: A Helpless Reality
The “sky-high” fine on auto parts is the largest fine imposed since China's antitrust enforcement. Eight Japanese auto parts manufacturers including Hitachi, Denso,
Furukawa, and Sumitomo, and four bearing manufacturers including Nachi-Fujikoshi, Seiko, JTEKT, and NTN, would regularly meet to set a price, then obtain orders from the Chinese market at that price, with no competition among them and no need to lower prices. This coordination was simply seamless! Hitachi and Nachi-Fujikoshi brought the employees involved in price negotiations and a large amount of evidence to Beijing to accept investigation, and thus the sky-high fine was issued.
Because global automakers are highly dependent on Japanese auto parts, Japanese parts account for a large proportion of China's parts market. Statistics
data show that in 2013, China's auto parts imports from Japan amounted to 9.58 billion USD, accounting for 27% of total imports. Meanwhile, Japanese parts companies adopt a closed supply chain model, which creates conditions for Japanese companies to monopolize parts prices.
China's high-end construction machinery parts rely on imports
The situation in China's construction machinery industry is similar. As is well known, China's construction machinery parts have low technical content. Compared with advanced international products, China's manufacturing technology for basic construction machinery parts is severely backward, unable to enter the mainstream market for key components, and highly dependent on Japanese parts. During the “12th Five-Year Plan” and for a considerable period thereafter, the focus of China's construction machinery industry will be on solving the problem of backward manufacturing technology for key components.
Currently, the engines commonly used in China's construction machinery products are mainly foreign brands such as Cummins, Deutz, Perkins, Isuzu, and
Yanmar, while domestic engine brands are mainly Weichai and Shangchai. The engines used in high-end products, export equipment, large-tonnage equipment, and
excavators are almost all foreign brands. The hydraulic components used in excavators above 20 tons in China are basically controlled by Japan's Kawasaki. This precisely shows that in the short term, China has no way to escape the control of foreign component suppliers, which also becomes a development direction for China's construction machinery parts industry in the future.
China's Non-standard Supporting System and the Auto “Parts-to-Vehicle Price Ratio”
The term “parts-to-vehicle price ratio” was probably only seen in textbooks before, but recently it has become one of the hot words on the Internet. The price of all parts of a car is generally 3 times the vehicle price, but Mercedes-Benz is particularly different: the price of all parts of a car is actually 12 times the vehicle price! It is estimated that Mercedes-Benz had not noticed this path to wealth before……
The existence of the “parts-to-vehicle price ratio” requires close cooperation between the complete machine and parts industries. Only by achieving dedicated supporting can the steady development of the parts aftermarket be ensured and the profits of enterprises in the aftermarket be expanded. However, the parts aftermarket in China's construction machinery industry is extremely non-standard, and the supporting parts market has not yet had a relatively standardized market system. Restoring China's supporting parts market to a healthy development state is a long and arduous process that requires the efforts and cooperation of multiple parties.
China's construction machinery supporting system is non-standard, and the aftermarket is weak
According to the editor of China Construction Machinery Business Online, the aftermarket potential of a construction machinery equipment often exceeds the purchase cost of the equipment. Data shows that in mature markets such as the United States, Europe, and Japan, the ratio of construction machinery sales revenue to aftermarket revenue is 64:100, while in China's construction machinery market, this ratio is only 350:10.
Foreign construction machinery brands start planning and designing their profit models carefully at the product design stage, incorporating aftermarket operations into the overall business strategy. Foreign brands usually choose exclusive dealers and strictly control the parts procurement and distribution system to maximize effective control over original parts, avoid internal price competition, ensure dealers obtain substantial profits from the aftermarket, thereby greatly enhancing their viability and ensuring customers enjoy high-quality service.
Self-Salvation
Cultivate National Brands and Develop Our Own High-End Supporting System
The “12th Five-Year Plan for the Development of China's Construction Machinery Industry” also clearly stipulates that efforts will be made to improve the technical level and manufacturing level of key construction machinery parts, with emphasis on three aspects: first, enhance the power matching performance of construction machinery products; second, focus on the product development and high-precision, large-scale manufacturing of construction machinery hydraulic components; third, conduct systematic research on the reliability and durability of special transmission components.
At present, although the overall level of China's supporting parts industry has improved significantly, it still lags far behind that of developed countries. China's construction machinery industry must build its own unique national brands and promote the development of its own high-level supporting parts system. The development of China's construction machinery industry requires a supporting parts market that provides high-level products, and the primary task is to establish and improve the rules and regulations of the supporting parts market, providing a healthy space for rapid development.
At the same time, it has become mainstream for foreign complete machine enterprises to improve their own supporting systems. Foreign construction machinery giants such as Caterpillar, Komatsu, Volvo, and Doosan all have their own core component industries such as engines and hydraulic parts, greatly enhancing their competitiveness.
Cultivate National Brands and Develop Our Own High-End Supporting System
As is well known in China's construction machinery industry, its parts have always constrained the development of the complete machine industry. Now, China has gradually become the country with the largest production and sales volume and the most intense market competition in global construction machinery. This is also the golden period for the development of China's core supporting parts industry. During this period, the construction machinery parts industry undoubtedly bears the major mission of transforming China's construction machinery from a manufacturing giant to a manufacturing powerhouse.
China's construction machinery industry must increase industry integration, establish effective docking platforms, expand research and development efforts in the engine and hydraulic parts industries, and support the development of national brands. Complete machine enterprises should also learn from the development experience of foreign brands and actively expand the industrial chain. According to the editor, investment in hydraulics by mainframe industries such as construction machinery accounts for about 50% of total investment. A number of well-known construction machinery enterprises including XCMG, Sany, Zoomlion, and LiuGong have begun to invest in or merge and reorganize hydraulic enterprises; Sany, LiuGong, and other enterprises have also begun to develop and cooperate in the engine field.
Accelerate Internationalization and Integrate High-Quality Resources through M&A
Independent innovation is an important means of technological improvement, but while innovating independently, one cannot “build a cart behind closed doors.” Internationalization can enable more Chinese construction machinery enterprises to find more, better, and more promising markets for sustainable development, such as emerging construction markets in Russia, Brazil, Africa, and other regions, where construction is at its peak, and Chinese construction machinery products will gain broader markets.
Zoomlion Acquires Dutch RAXTAR in 2014
In addition, after “going global,” Chinese construction machinery enterprises can fully participate in international competition, thereby forcing China's construction machinery giants to embark on the path of transformation and upgrading through the pressure of the international market, especially to continue to enhance the technological content of construction machinery products. Many advanced foreign technologies are still blocked to China, but Chinese enterprises can, by borrowing ships to go to sea, through mergers and acquisitions and holdings, integrate advanced foreign technology and management experience into their own blood. Overseas mergers and acquisitions are indeed a way to obtain cutting-edge equipment manufacturing technology as soon as possible.
XCMG, Zoomlion, and Sany are the “three giants” in the domestic construction machinery industry. In recent years, the three companies have frequently made moves in “overseas expansion.” Zoomlion acquired Italy's CIFA, LiuGong acquired Poland's HSW, Sany acquired Germany's Putzmeister, and XCMG acquired Schwing, etc. Although the models are different, their ultimate goal is to integrate high-quality resources through cooperation, establish international platforms, and enhance corporate strength. Taking XCMG as an example, to overcome key technical challenges in core components, XCMG acquired companies in Germany and established R&D centers, cultivating high-end technical talent overseas. (Images in this article are from the Internet)
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