After years of unremitting efforts, Chinese construction machinery enterprises have gradually established a good image overseas and started to plan their layout through continuous product upgrading, quality improvement and service enhancement. So, how big is the development space of the overseas market? Where are the future overseas opportunities?
(I) Overseas layout of domestic construction machinery
The CAGR of overseas revenue in the past five years is 34%, and the current proportion of overseas business is about 35%. The overseas market has become a major growth driver.
Domestic manufacturers have continuously launched the development of overseas markets through mergers and acquisitions, overseas plant construction and other ways. The export amount of construction machinery in 2021-2022 was 57.2 billion yuan and 92.9 billion yuan, respectively, an increase of 91.87% and 48.80% year-on-year, maintaining a high growth trend in the past two years. The CAGR of overseas revenue of domestic construction machinery in the past five years was 34%, and the current proportion of overseas business was about 35%. In addition, the gross profit margin level of the overseas market is significantly higher than that of the domestic market, and the profit space is considerable. The overseas market has become one of the main growth drivers for the domestic construction machinery industry in the future.
(II) North American market
Real estate and oil and gas investment drive high demand for construction machinery. Referring to the market share of more than 60 billion yuan of Japanese and European manufacturers, domestic manufacturers have a large room for improvement.
1) Market space: North America is the largest regional market for construction machinery in the world, with a market space of more than 300 billion yuan in 2022. The immigration country attribute of the United States makes its real estate demand continue to grow. The future oil and gas capital expenditure is expected to rise, which may drive high demand for mining equipment.
2) Entry path: Although there is still a 25% tariff barrier for domestic construction machinery products exported to the United States, domestic products have obvious cost advantages, and head manufacturers still have a large profit margin. In addition, the production capacity of domestic manufacturers in the United States and Latin America has gradually been released, which can effectively avoid tariff restrictions. Although American manufacturers dominate North America, referring to Japan and Europe's more than 60 billion yuan market share in North America in 2022, domestic construction machinery enterprises still have a large room for improvement in market share.
(III) European market
The demand mainly comes from the Western European construction market and the Eastern European resource market. The share of construction machinery is relatively balanced, and the entry resistance of domestic manufacturers is small.
1) Market space: The European construction machinery market size was about 120 billion yuan in 2022, close to that of China; the main demand came from the construction industry in Western Europe and the resource industry in Eastern Europe. The real estate value added of Western European countries is about 1.5 times that of China, basically maintaining stable growth; Russia's downstream mining industry, construction industry, oil and gas exploration industry investment amount is about 30% of China's, contributing a certain market space.
2) Entry path: In the long run, the distribution of European construction machinery share is relatively balanced, and the resistance for domestic manufacturers to expand their business in Europe is expected to be significantly lower than that in North America; in the short term, the Russo-Ukrainian war has little impact on Russia's domestic investment amount, and Russia's market is open to Chinese enterprises, which is expected to provide strong growth momentum.
(IV) Emerging market countries
The downstream market size is more than twice that of China. Domestic manufacturers have regional advantages and tariff advantages. They can expand their prospects by hitchhiking overseas + building overseas factories + going out independently.
1) Market space: The sum of GDP of mining industry and construction industry in emerging market countries is more than twice that of China's, even without considering the GDP of mining industry in Middle East, it is also more than 1.4 times that of China's, and it has maintained a high growth rate in the past decade, bringing a broad space for going out.
2) Entry path: The trade cooperation relationship between Belt and Road Initiative countries has become increasingly close, and China's foreign investment and contracted engineering amount have been increasing; in Southeast Asia region, domestic construction machinery manufacturers have obvious regional advantages and tariff advantages compared with European and American manufacturers. Hitchhiking overseas + building overseas factories + going out independently, domestic construction machinery enterprises have considerable prospects for expanding in emerging markets.
(V) Overseas mining equipment
The global mining equipment market size is about 280 billion yuan, accounting for 32% of total demand. The overseas mining equipment market has a broad space.
China's construction machinery downstream mainly relies on infrastructure and real estate, and the proportion of mining industry investment is small, while the strong demand of overseas mining industry supports the construction machinery.
The proportion of mining industry in Southeast Asia and South Asia, Latin America is about 40%-50%, the United States is about 30%, Europe is basically between 20%-30%, and the Middle East is more than 80%.
According to our estimation, the global mining equipment market size was about 280 billion yuan in 2022, accounting for 32% of the total construction machinery size.
Analysis of Overseas Construction Machinery Market: the market potentiality and opportunity in Europe, the United States, and emerging countries
