Keep Alert about "Subprime Crisis" in Engineering Machinery Industry

BEIJING, June 15, 2011 /PRNewswire/ --

The entire engineering machinery industry continued rapid growth momentum in Q1 2011. As the first manufacturer to post its Q1 sales, Guangxi Liugong Machinery Co., Ltd. reported that both production and sales volume of its various engineering machinery exceeded 20,000 units, double the year-ago period. In particular, both production and sales volume for loaders, excavators and forklifts for a single month (March) achieved record results. The excavators sold by Xiamen XGMA Machinery Co., Ltd. in March totaled 1,389 units, but only about 2,800 units were sold in the full year of 2010. In the first quarter, the net profit of SANY Heavy Industry Co., Ltd. is expected to increase by more than 135%; the increase in net profit of Hebei Xuanhua Engineering Machinery Co., Ltd. is 497.85%~697.13%; the net profit of Zoomlion Heavy Industry Science and Technology Development Co., Ltd. increases by approximately 130%~170% year on year; and XCMG Construction Machinery Co., Ltd. announces its expected growth of 98%~117%, achieving profit of RMB 1~1.1 billion Yuan.

As the market becomes increasingly competitive, some companies provided special offers in some network platforms like cmb2b.com, including lucky draws of big household appliances to cars when buying their products, to expand their influence across the industry and win more market share. Today some companies are even implementing more explosive and attractive promotions, such as zero down payment mortgage to sell their products, excavator industry in particular. Now the most common sales policy in the industry is 30% down payment, but many excavator manufacturers actually permit "10% down payment plus 5% deposit when taking delivery of products"; namely, an excavator valued at RMB 800,000 Yuan can be driven home after paying less than RMB 120,000 Yuan. Now that 10% down payment exists, zero down payment isn't surprising at all. Some crane manufacturers even allow for "zero down payment, one-year free using right and payment starting on the second year".

Given the turmoil hampering the healthy development and sustainability of the entire industry, China Construction Machinery Association (CCMA) convened major industry media for an emergency exchange and communication meeting to discuss how to tackle the current situation. The attendees unanimously believe that such an enticing promotion in the industry has led to a multitude of behaviors to purchase engineering machinery irrationally. It will not only compromise normal market competition, but also pose great operation risks to manufacturers and their distributors.

At the meeting, President Qi Jun expressly stated that in terms of irrational promotions appearing in the industry, he doesn't support the mortgage sales mode with zero down payment. He believed that it is simply a suicide. It will evolve into a price war in the entire industry, which will, in turn, severely affect the fair market competition, hinder the improvement of products and service quality, and finally cause damage to corporate brands and images, provided that such a phenomenon can't be effectively reined. He urged companies to cherish their reputations and hard-won industry prospect, abide by the industry's self-disciplined pact, calmly analyze the market conditions, maintain a rational operation philosophy and consciously defend the industry's fair and normal market competition. They should aggressively win the market share by adopting market-oriented marketing modes, and building upon quality products, timely and effective after-sales services and constant technical innovations to conduct competitions.

SOURCE China Construction Machinery Association (CCMA)