According to statistics from the China Construction Machinery Association (hereinafter referred to as the Association), from January to February 2021, the average year-on-year growth of major products in the construction machinery industry, represented by excavators, reached 117%, and the growth of excavators reached 149% year-on-year. However, it is worth noting that while excavator sales continue to rise, excavator profits are declining. According to survey data, in 2020, the average gross profit margin of China's construction machinery dealer group was only 8.7%, and the average net profit margin was as low as 0.7%, with a worrying survival situation. Some provincial-level dealers of top-selling brand OEMs even voluntarily canceled their excavator dealer qualifications. To this end, the reporter interviewed Qi Jun, Honorary President of the Association, on the current economic environment's construction machinery industry market competition issues, how OEMs and dealers should create a good market environment, and the development situation of the construction machinery industry in 2021.


　　1. How do you view the competition in the construction machinery industry market? How should industry OEMs and dealers create a good market environment?

　　Qi Jun: Since the steady recovery of the construction machinery industry in August 2016, benefiting from the country's increased investment in infrastructure construction, by the first quarter of 2021, the construction machinery industry has shown a growth trend for five consecutive years. In 2017, the industry's operating revenue re-crossed the 500 billion yuan platform, and in 2019 it reached 668.1 billion yuan, a year-on-year increase of 12%, a record high. Especially in 2020, as the epidemic was effectively controlled and China's economy recovered rapidly, major projects started and resumed work, bringing broad market space for construction machinery. In 2020, the industry's operating revenue exceeded 700 billion yuan, a year-on-year increase of more than 10%.

　　However, while China's construction machinery industry is developing rapidly, there are also potential risks. Some industry enterprises have not made efforts in product quality, innovation, and user service, but blindly pursue market share and regard disorderly price competition as the only means of market competition, seriously affecting the healthy and sustainable development of the current construction machinery industry market.

　　Qi Jun stated that disorderly competition is overdrawing the market. In the bottomless price war, dealers are a vulnerable group. They not only have to bear the pressure of OEMs' market share assessments but also must comply with the OEMs' market strategic requirements, otherwise they may lose their dealership. Along with the price war, the threshold of business policies is further lowered, risks are accumulating, and the next step for dealers is insufficient profit support for after-sales service guarantees, falling into an unsustainable development model. Ultimately, users will not get good products or high-quality services.

　　In this regard, Qi Jun reminded OEMs to learn from the painful lessons of the market downturn from 2013 to 2015, and not to "forget the pain once the wound heals." The result of excessive competition is "no winners," because the systemic risks or debt crises formed by short-term "carnivals" take years or even longer to digest, and some enterprises have already paid a painful price for this.

　　Qi Jun emphasized that OEMs and dealers should strive for excellence in product quality and service, create a good market environment, and provide users with high-quality products and excellent services while ensuring reasonable profit margins.

　　2. How do you view the market situation of the construction machinery industry in 2021?

　　Qi Jun: The overall market development situation of the construction machinery industry in 2021 is positive. He believes that due to the negative impact of the COVID-19 pandemic on the national economy in 2020, the government increased infrastructure investment in the second half of the year, effectively driving demand for construction machinery. The GDP growth target for 2021 is set at over 6%. To promote economic development, the country will continue to increase investment in infrastructure, especially a series of measures such as western development, revitalization of Northeast China, Beijing-Tianjin-Hebei coordinated development, Yangtze River Economic Belt construction, Guangdong-Hong Kong-Macao Greater Bay Area construction, as well as new infrastructure construction such as 5G big data centers, urban rail transit, and livelihood security projects, all of which require the participation of construction machinery manufacturers. This is also an important driving force for the continued growth of China's construction machinery market.

　　In addition, under the background of the country's continuous increase in environmental protection efforts, on December 29, 2020, the Ministry of Ecology and Environment officially approved and issued the "Technical Requirements for Pollutant Emission Control of Non-Road Diesel Mobile Machinery (Release Draft)" (hereinafter referred to as "China IV"), which specifies the pollutant emission control technical requirements for the fourth stage of non-road diesel mobile machinery and the diesel engines installed on them. According to a letter from the Ministry of Ecology and Environment, the "China IV" emission standard will be officially implemented on December 1, 2022. The promulgation and implementation of this policy will force main engine manufacturers to make intensive preparations for the emission standard switch.

　　It is understood that currently in the construction machinery market, there are 10 million units of in-use construction machinery, most of which are China I and China II standard products still in use. As the country's environmental protection policy requirements become increasingly strict, these equipment that do not meet environmental standards are gradually entering the elimination stage, further accelerating the upgrading speed of the construction machinery industry.

　　It can be seen that China's economic development space is huge, the scale of infrastructure construction is large, and with the country's increasingly strict environmental protection requirements, the construction machinery market is still in an upward phase, driven by both stock renewal and incremental demand. Qi Jun stated that the growth pattern and tone of the construction machinery industry in 2021 will not change, and it will continue to maintain steady growth. He predicted that the overall growth of the industry this year will be over 7%.

　　Conclusion

　　Qi Jun emphasized that while opposing price alliances, he also firmly opposes disorderly price competition in the industry. He called on OEMs and dealers to maintain a good mindset, focus on the long term, grasp the present, assume corresponding social and industry responsibilities, consciously abide by the industry self-discipline convention, strive to cultivate their core competitiveness, solidly improve product performance, quality and service levels, formulate marketing strategies and business policies within a reasonable profit margin, and compete in an orderly manner. OEMs and dealers must strictly adhere to the bottom line, strictly control risks, coexist and win together, and cherish the hard-won good development situation of the industry.