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First-half data continues to climb steadily, and construction machinery is expected to maintain steady growth over the next three years.
Release date:
2018-08-29
Source:
According to the latest data, in July, the 24 major excavator manufacturers included in the statistics sold more than 11,100 excavators of various types, representing a year-on-year increase of 45.28%. This marked the third consecutive month that sales reached a new historical high for the same period. From January to July, cumulative excavator sales exceeded 131,000 units, significantly up from approximately 82,700 units during the same period last year—an impressive 58.65% growth. As a result, the likelihood of achieving a record-breaking annual sales figure has further increased compared to last month.
Generally speaking, the lifecycle of construction machinery products is 8 to 10 years. The last sales peak occurred around 2011, while from 2017 to 2019, the industry entered a critical phase of equipment淘汰 and renewal. According to statistics, the current market inventory of construction machinery exceeds 7 million units, with approximately 2.4 million older machines slated for淘汰—creating significant market opportunities for new machine sales and further boosting industry demand.
In the first seven months, cumulative excavator sales exceeded 131,000 units, a significant increase of 58.65% compared to approximately 82,700 units during the same period last year. As a result, the likelihood of achieving a record-high annual sales volume has further improved from the previous month.
In July, the 11 major domestic bulldozer manufacturers included in the statistics sold a total of approximately 480 bulldozers of various types, representing a year-on-year increase of 38.8%. From January to July, cumulative bulldozer sales reached over 4,950 units, up 36.89% compared to the same period last year.
In the first seven months of 2018, sales data across all categories of construction machinery showed a steady upward trend, signaling that the industry’s rapid growth this year is already well established. According to an analysis by a research firm, driven by six key positive factors—equipment stock renewal, rising demand for new equipment, and companies’ internal growth strategies—the construction machinery sector is expected to maintain steady expansion over the next three years.
Replacing and upgrading existing equipment
Research data shows that 80% of future demand in the construction machinery industry will stem from equipment upgrades and replacements—demand that remains relatively stable with limited downside risk.
Generally speaking, the lifecycle of construction machinery products is 8 to 10 years. The last sales peak occurred around 2011, while from 2017 to 2019, the industry entered a critical phase of equipment淘汰 and renewal. According to statistics, the current market inventory of construction machinery exceeds 7 million units, with approximately 2.4 million older machines set for淘汰—creating significant market opportunities for new machine sales and further boosting industry demand.
Meanwhile, both national and local environmental regulations are becoming increasingly stringent, forcing the phasing out of most existing equipment in the market—many of which still meet only China Stage II or III emission standards. Even machines that aren’t yet at the end of their operational lifespan may be mandated for retirement due to environmental concerns. As a result, both environmental policies and equipment age are further driving the demand for upgrading and replacing construction machinery.
Policy-driven infrastructure investment expected to rebound
In the first half of 2018, China’s fixed-asset investment growth stood at 6%, while infrastructure investment increased by 7.3% year-on-year—significantly lower than expected, which to some extent has weighed on China’s overall economic development. In response, both the State Council meeting and the Politburo meeting held in late July set a development tone focused on "safeguarding infrastructure projects and boosting investment." More proactive fiscal policies, coupled with a rebound in PPP project investments and supportive loose monetary measures, have collectively ensured the smooth implementation of infrastructure initiatives—and have also helped ease investors’ concerns about the industry’s slowing growth momentum.
Based on years of development experience, China's construction machinery sales have a positive correlation with fixed-asset investment. With various infrastructure projects expected to materialize in September, the construction machinery industry is poised for a significant boost in sales.
Construction machinery continues to increasingly replace human labor.
In recent years, as China's population continues to age rapidly, labor shortages have become increasingly severe, driving up labor costs significantly. Consequently, the trend of replacing human workers with machinery has become particularly evident. Previously, infrastructure projects in rural China—such as road expansions, agricultural land development, and water conservancy construction—largely relied on manual labor. However, today, young rural workers are scarce, and most of the younger generation is reluctant to take on these physically demanding jobs. As a result, soaring labor costs have accelerated the shift toward mechanization. Historically, China had a relatively low per capita ownership of excavators, but this is expected to change dramatically in the coming years as the penetration rate of construction machinery continues to rise. Moreover, the trend of replacing human labor with machines isn't limited to the construction sector—it’s now clearly visible across various industrial fields as well.
Mining investment recovery fuels new growth momentum.
Following the 2008 financial crisis, global economic growth slowed sharply, leading to a decline in demand for mineral resources and causing the global mining industry to experience stagnant growth, reduced investment, and an ongoing process of capacity rationalization. However, starting from 2017, the global mining sector has once again begun to show signs of recovery.
Take China's data from the first half of 2018 as an example: From January to June, the added value of industrial enterprises above designated size nationwide grew by 6.7% year-on-year. Among them, the added value of the mining industry increased by 1.6% year-on-year, marking an expansion of 0.3 percentage points; additionally, investment in the mining sector shifted from decline to growth, rising by 0.2% compared to the same period last year.
The recovery of the mining industry is crucial for boosting demand for mining equipment. Previously, mining equipment was largely dominated by foreign companies such as Caterpillar and Komatsu. However, in recent years, with the rapid development of China's construction machinery sector, domestic manufacturers like XCMG and Sany have steadily improved the competitiveness of their mining equipment, effectively breaking into the mining machinery market and paving the way for domestically produced gear to gain a stronger foothold.
Enhanced overall strength drives steady export growth
The overall advancement of China's construction machinery industry has not only boosted its market share in the domestic sector but has also yielded remarkable success in tapping into overseas markets. Among these international opportunities, countries along the Belt and Road Initiative have emerged as particularly important target markets for Chinese construction machinery companies. Chinese construction equipment has been prominently featured in the groundbreaking phases of major international projects such as the China-Laos Railway, the China-Thailand Railway, the Hungary-Serbia Railway, and the Jakarta-Bandung High-Speed Railway. Moreover, emerging markets like India, characterized by low urbanization rates and underdeveloped infrastructure, present significant growth potential for construction machinery, creating favorable conditions for boosting exports from China.
Businesses are adopting a more cautious approach to risk management.
Feeling the impact of a five-year-long industry downturn, Chinese construction machinery companies remain cautious—whether it comes to production, sales, or their outlook on the sector—even as the industry shows signs of renewed vitality.
The positive growth momentum in the construction machinery industry hasn’t led companies to become complacent or blindly ramp up production capacity. Instead, most firms in the sector have begun focusing on strengthening cash management and refining their customer base—prioritizing high-quality clients. This approach of steady, sustainable production and sales practices also helps mitigate risks such as shrinking profit margins and rising accounts receivable.
In summary, assuming the domestic economy continues to operate steadily and undergoes ongoing transformation and upgrading, China's construction machinery industry is unlikely to experience a significant downturn over the next three years and can instead maintain steady growth.
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