Why do users prefer foreign used equipment over domestic new machines? Industry insiders say that foreign environmental awareness is strong, and there are strict controls on used equipment. A new general-purpose excavator, as long as its working hours exceed 5,000 hours, will be sent to the brand's service point for maintenance. However, many excavators, especially small ones, are mainly used for leveling soil and occasionally digging pits. Therefore, excavators in Europe, America, Korea, and Japan are very "fortunate"—they basically have never done heavy work!

 

      Secondly, most foreign construction machinery components have a long production history, mature technology, sufficient supply, high production concentration, and prominent brand effects. The development of components follows the development of host machines, and at the same time, the development of components in turn promotes the development of host machines. At the same time, host machine manufacturers are gradually developing into assembly enterprises, and components are gradually provided by suppliers. This trend is widely applied in the world's large construction machinery host manufacturers such as Caterpillar and Case in the United States, Komatsu in Japan, and Volvo in Sweden. Compared with domestic, construction machinery components production started late, with technology shortages, scattered production locations, and weak brand effects, which have become a bottleneck restricting the development of host machines. Therefore, some construction machinery equipment regularly eliminated in Europe, America, Japan, and Korea, especially 80% of Japan's eliminated equipment, flows to China.

 

      In addition, domestic users are mainly individual businesses, who prefer price and quality advantages. Exactly, foreign used machines have advantages over domestic products in quality and price, so they are widely welcomed by users.

 

      Chaotic trading market

 

      Due to the low price of used construction machinery or short-term needs of engineering construction, quite a few cities in China have gradually formed distribution centers for used construction machinery trading. It can be said that used equipment not only undertakes the two major businesses of construction machinery financial leasing and remanufacturing, but also relates to the cash flow, operational risks, and sustainable profitability of manufacturers and agents. At present, the sales channels of used construction machinery are generally divided into three types: first, digested internally by dealers' own channels; second, processed through used machine distribution markets such as Xushui, Qingzhou, Tianjin, and Shenzhen; third, auctioned through third-party platforms such as Yiji and Ritchie Bros. No matter which model is adopted, the pricing of used equipment remains the "deepest water" area in the industry.

 

      Because the domestic used construction machinery market is not standardized enough, the valuation and after-sales systems of used equipment are not perfect, and there are issues with the quality and life cycle of local brands, users do not fully recognize domestic used machines, which instead leads to a large influx of foreign used machines into the domestic market. A relatively reliable figure comes from customs statistics: in 2011, more than 30,000 used construction machinery equipment flowed into China; plus various debt machines and creditor's rights machines, although detailed statistics on used construction machinery are lacking, the quantity and scale should be quite "considerable."

 

      China currently lacks perfect evaluation standards for used machines, and can only judge based on information such as the machine's usage time, average annual usage time, overhaul cycle of engine and hydraulic pump, and operating conditions. This easily leads to various under-the-table operations for personal gain, thereby affecting the healthy and orderly development of the entire used machine market. In response to this situation, on the one hand, objective, fair, and honest third-party evaluation agencies should be established; on the other hand, foreign experience can be borrowed to vigorously promote open and fair auction models. At present, more than 80% of domestic used equipment transactions are private transactions. This situation is indeed worrying.

 

      Impact on domestic market

 

      Unlike the scattered institutions that previously handled domestic imports of used machinery, Ritchie Bros. Auctioneers is the world's largest industrial auction company, with offices in 25 countries. On April 18, 2013, Ritchie Bros. held its first unreserved public auction in China in Beijing. The consigned goods accepted by Ritchie Bros. came from all over the world, including a 2010 Kato HD820V hydraulic excavator and a 2009 Caterpillar 320D-E hydraulic excavator, etc. These foreign used machines were all sold at the auction. According to industry insiders attending the meeting, the prices of the used equipment auctioned were generally only 30% to 50% of new machines. The person believes that it is precisely because of the low prices that imported used machinery occupies a part of the market share. For example, in 2011, the total sales of excavators in the market were more than 170,000 units, with independent brand new excavators accounting for 39.11%, while imported used excavators accounted for about 14.25%. Some industry insiders believe that with Ritchie Bros.' global platform and leverage capabilities, as its business in China expands, more used equipment from around the world will flow into the country in the future.

 

      It is reported that the current domestic market保有量 of used construction machinery has exceeded 5 million units. By 2015, the annual sales volume of construction machinery will reach more than 1 million units. According to the life cycle of mechanical equipment, it is estimated that by 2020, the annual number of construction machinery scrapped will be as high as 1.2 million units.

 

      Although it is generally believed that the overhaul and replacement cycle of construction machinery is 5 to 8 years, in the past two years, with the shrinking of engineering volume and the trade-in business carried out by various manufacturers, a large number of 2- to 3-year-old equipment has also begun to enter the used market; customers who poured into the industry in 2009-2010 and purchased equipment by mortgage and financial leasing also began to enter the market in 2013. At the same time, used equipment imported from abroad also began to enter the domestic market on a large scale. In the Beijing market alone, there are currently 2,000 new excavators and 4,000 used machines. According to statistics from the National Equipment Leasing and Used Equipment Professional Committee, by the end of 2010, the transaction volume of used construction machinery equipment nationwide had exceeded 100 billion yuan, with a transaction volume of an astonishing 5 million units.

 

      At present, China's construction machinery industry has entered an era of medium-low growth, and the problems of destocking and overcapacity have begun to become prominent. The most severe problem in the construction machinery industry is still destocking. If no restrictions and supervision are imposed on the imported used construction machinery market at this time, domestic brand manufacturers may be impacted.

 

      Enterprises call for restricted supervision

      In fact, disputes over whether to strictly restrict the import of used machinery have appeared in China many times. Su Zimeng, Secretary-General of the China Construction Machinery Association, has also expressed concerns on multiple occasions. In addition, corporate executives such as Xiang Wenbo, President of Sany Heavy Industry, Long Guojian, Chairman of the Supervisory Board of Zoomlion, and He Qinghua, Chairman of Sunward Intelligent, have also from time to time voiced calls to restrict the import of used construction machinery equipment.

 

      Su Zimeng, Secretary-General of the China Construction Machinery Association, stated that the state should adjust the import management policy for used construction machinery, and in particular, strictly control the import of used equipment that is more than 5 years old, has serious excessive emissions, obviously excessive energy consumption, and potential safety hazards.

 

      Xiang Wenbo, President of Sany Heavy Industry, publicly stated on Weibo that if China continues to impose no restrictions or strengthen supervision on imported used construction machinery, China may gradually become a dumping ground for these imported used machines.

 

      Long Guojian, Chairman of the Supervisory Board of Zoomlion, stated that restricting and supervising imported used machinery is not only to protect national industry but also to safeguard the interests of domestic consumers. Imported used machinery is inferior to domestic new machines in terms of durability and applicability, and most importantly, after-sales service cannot be guaranteed. In addition, regulatory gaps have also led to many equipment that does not meet import standards flowing into the domestic market, especially high-energy-consumption and high-pollution equipment.

 

      Cai Guangyun, Board Secretary of Sunward Intelligent, stated that in a situation where the market is already oversupplied, further opening up the import of foreign used construction machinery will inevitably impact domestic brands and even delay the pace of recovery and development of domestic construction machinery enterprises."

 

      Wang Jizhong, Chairman of Great Wall Machinery, stated that users lack professional identification ability when purchasing used equipment. After merchants pass off inferior goods as good ones, customers find that hydraulic system components are severely worn, volumetric efficiency is reduced, and machine performance is greatly reduced. In addition, there is no after-sales "three guarantees" service. Once a failure occurs, maintenance costs and parts purchase costs remain high.

 

      Multi-pronged efforts to achieve standardization

 

      Facing the huge demand in the used market, a credible, formal, strictly supervised, well-supplied, and more transparent used construction machinery trading platform has increasingly become an urgent problem to be solved.

 

      Based on the chaotic trading of products in the current used equipment market and the mixed quality of imported equipment, relevant national departments have issued a series of regulations in recent years to standardize it. For example, the "General Rules for the Circulation of Used Equipment" was officially implemented on March 1, 2010. The "General Rules" put forward normative requirements for the relevant terms and definitions, classification, quality, appraisal and evaluation, evaluation process, and transactions of used equipment circulation.

 

      Up to now, four domestic trade industry standards, including "Technical Requirements for the Circulation of Used Excavators," "Technical Requirements for the Circulation of Used Loaders," "Technical Requirements for the Circulation of Used Concrete Pump Trucks," and "Technical Requirements for the Circulation of Used Mobile Cranes," have formed draft versions for review and have been submitted to relevant national departments for evaluation.

 

      Fifty-one domestic trade industry standards, including the "Management Specifications for the Construction of Regional Large-scale Renewable Resource Recycling Bases for Used Construction Machinery," have passed the review of the Ministry of Commerce. Among them, the technical requirements for the circulation of used forklifts, the technical requirements for the circulation of used asphalt mixing equipment, and the compilation rules for technical specifications of used asphalt mixing equipment will all be officially implemented on July 1, 2013.

 

      Such frequent introduction of industry standards and specifications shows the importance attached to the used construction machinery market. However, based on the various problems exposed in the current used market, mere attention is not enough to make the market develop healthily and orderly. For a market that is developing well, laws and regulations alone are not enough; there should also be relatively perfect quality appraisal agencies and professional practitioners to materialize the standards written on paper and standardize industry development through action.

 

      As early as 2006, the Nanjing Training Base of the China Construction Machinery Association began China's first training for used (hydraulic) excavator appraisers, from which China's first batch of used excavator appraisers was born. Although only 13 people obtained the appraisal qualification, this made a good start for the quality appraisal of used construction machinery. Now there is a great demand for professional used equipment appraisers, and various professional appraisal agencies are also increasingly popular.

 

      At the same time, the authority, fairness, and credibility of third-party appraisal agencies are also key points that need further standardization; the market access standards for the appraisal industry and the qualification appraisal for appraisal certification are also key issues that urgently need improvement.

 

      Conclusion:

 

      Although the domestic used machinery market has long been a piece of fat meat coveted by many domestic and foreign merchants, how to correctly guide its operation is still in the exploratory stage. Compared with developed countries, the development level of China's used construction machinery market still lags behind, the circulation order is relatively chaotic, and equipment quality is not well guaranteed with after-sales service. However, with the gradual improvement of the used market trading system and the continuous strengthening of national supervision over the used market, the used construction machinery market will surely develop more healthily and orderly. At the same time, domestic construction machinery enterprises should strengthen customer service and maintenance capabilities while strengthening existing technological innovation, better respond to customers, create convenience for customers, and strive to win customers. Relying solely on national protection and support has no future.