What Signals Does The Year-on-year Increase In Excavator Sales Send

Just after the Spring Festival holiday, excavator manufacturer Lovol Heavy Industry's various intelligent assembly production lines are running at full speed, creating a bustling production scene on site. The company manager told reporters that since 2024, the company has had sufficient orders, with excavator sales achieving a good start.

At XCMG's excavation machinery manufacturing base, thousands of excavators are being shipped to the European, American, and Australian markets. Currently, the company is operating at full capacity and reaching full production capacity.

According to data released by the China Construction Machinery Industry Association recently, according to statistics from major excavator manufacturing enterprises, 12376 types of excavators were sold in January 2024, a year-on-year increase of 18.5%. This also means that excavator sales have finally turned positive after 12 consecutive months of negative year-on-year growth.

What are the reasons for the year-on-year conversion of sales to regular sales

As an important indicator of the prosperity of the construction machinery industry, the year-on-year increase in excavator sales is of great significance. It not only reflects the continuous recovery of China's construction machinery market, but also reflects the continuous increase in the operating rate of infrastructure projects.

The year-on-year sales of excavators have turned positive due to various reasons. Thanks not only to the contribution of overseas orders and the upgrading of equipment under the background of emissions, but also to the new demand brought about by the accelerated landing of infrastructure investment.

Since the beginning of 2024, various regions across the country have actively planned and laid out their strategies, striving to boost the economy, and accelerating project commencement and construction progress. The domestic construction machinery market has shown a positive trend. The production and sales of excavators are converted into workload, driving the pace of construction with the heat of the market.

In addition, starting from December 1, 2022, the National III emission standard for construction machinery will officially switch to the National IV emission standard. The relevant person in charge of Lovol Heavy Industry told reporters, "Due to the demand overdraft effect of emission standard switching, the overall construction machinery industry, including the excavator industry, will be affected to a certain extent in 2023.". But with the passage of time, as we enter 2024, the relevant influencing factors have faded away and are expected to return to a normal market supply-demand dominant state In addition, January 2023 was affected by the Spring Festival holiday, resulting in less construction time and a lower production and sales base, which was also one of the reasons for the year-on-year growth in excavator sales.

After experiencing high growth in the first two years, the sales growth in overseas markets may tend to flatten out. Nevertheless, Chinese construction machinery companies have enormous growth potential in overseas markets. With the promotion of the enterprise's "going global" strategy, the expansion of overseas markets will provide new growth points for related enterprises.

"In the long run, with the joint construction of the" the Belt and Road "and the deepening cooperation between China and the international production capacity, there is still much room for growth in overseas sales of construction machinery, and in this process, domestic leading enterprises will also speed up to the world." Hu Qimu, a special researcher of the China Enterprise Confederation, told reporters.

It is worth noting that new energy excavators are gradually entering the public eye, and electric technology has been preliminarily applied in the excavator field, which is expected to become a potential development direction for the future construction machinery industry. In recent years, the global electrification process of construction machinery has accelerated. Driven by environmental policies, the electrification of excavators has gradually become the mainstream trend of industry development. Electric excavators have not only become an important promotional point for enterprises, but also a new breakthrough point for enterprises to compete in the market.

How to interpret the future market

The commencement of construction machinery and equipment, represented by excavators, has always been regarded as a barometer of China's infrastructure. How will the future excavator market be interpreted?

Recently, investment plans have been intensively unveiled in many parts of the country, and major project construction has sparked a wave of construction. The latest data from CCTV Finance Excavator Index shows that the overall operating rate of construction machinery in China in January was 47.81%, higher than the 40.61% operating rate in January 2023, laying the foundation for a successful start to the economy in 2024. Major construction machinery manufacturers, including Sany Heavy Industry, Zoomlion Heavy Industry, Lovol Heavy Industry, Liugong, etc., have returned to work and production successively, and the first batch of orders have been delivered in the the Year of the Loong New Year.

The prosperity of one industry drives the prosperity of all industries. With the gradual manifestation of the effects of real estate infrastructure policies and the enhancement of stable growth expectations, it is expected to promote real estate investment and new construction projects to stabilize and improve. Infrastructure projects will accelerate the formation of workload, and domestic demand for excavators will gradually stabilize and rise.

March will enter the traditional sales peak season for excavators. With the increase in downstream project construction rates after the Spring Festival, the overall sales situation in China is expected to achieve growth in the first quarter of this year. Many industry insiders are optimistic about the overall trend for the whole year. However, some business leaders have also admitted to reporters that although a good start at the beginning of the year boosted market confidence, the following market situation is also affected by multiple factors such as domestic and foreign demand, and the volume of infrastructure projects.

Qiu Shiliang, Co Director of Zhejiang Securities Research Institute, said, "Currently, the domestic market is mainly driven by demand for excavator updates. According to the calculation of the 8th year of excavator updates as the peak period, the domestic excavator update demand is expected to bottom out from 2023 to 2024, and a new round of update cycle will begin."

In addition, the growth rate of overseas markets may continue to slow down this year, but overseas markets are still the focus of domestic top enterprises. The overseas market space of the construction machinery industry is twice that of the domestic market, and there is still a lot of room for improvement.

Although it is expected that the overseas market will continue to maintain a high momentum in 2024, institutions such as China Chengxin International believe that after experiencing rapid growth in the past two years, industry exports have entered a steady development stage, and the growth rate of export sales may further slow down. The high performance growth brought by the high overseas revenue growth in the early stage may gradually enter a bottleneck period.