Short-term demand fluctuations for excavators are expected to remain stable in the medium and long term

Recently, we have focused on surveys of excavator dealers in East China, South China, and Southwest China. We believe that due to the impact of the epidemic in the short term, industry sales will still fluctuate at the bottom. In the fourth quarter, the seasonal rebound from the previous quarter will increase. The sales of excavators throughout the year will increase by about 10% year-on-year. To 360,000 units. In the medium term, it is expected that the overall sales volume of the industry will remain high and stable in the next 2-3 years, and the concentration of industry leaders will continue to increase.

The demand side was still under pressure from July to August, and there was a certain lag in policy transmission. From July to August this year, affected by the rainfall and the epidemic, the industry market did not expect a significant decline, but fluctuated at a low level. In August of this year, southern and eastern China improved this month and last month, while southwestern China maintained a double-digit year-on-year decline.. The impact of the earlier reduction in the RRR and the accelerated issuance of local government special treasury bonds at the end of the project There may be a certain lag. Looking to the future, we expect 4021 industry demand to be "tail", and sales of excavators in 2021 are still expected to maintain a positive growth of about 10%. The growth reached 360,000 units.

Price competition has slowed down and commercial terms have become stricter. With the continuous price cuts of small and medium digs in the past two years, it is difficult for dealers to have a "profit effect" in selling small and medium digs; only large digs still have a positive price difference. Although the price increase advocated by the industry association in June has not been finalized, the current terminal sales price of the industry is basically stable; most manufacturers implement a stricter down payment ratio, the payment cycle is generally about 2 years, and risk control is in place.

Original equipment manufacturers increase support for distributors. Due to the large price cuts in the early stage, most of the profits contributed by the spreads of excavator dealers are currently limited, mainly relying on the reward and rebate policy after the market share assessment reaches the standard. Since the second quarter, in order to ensure the ecological stability of the upstream and downstream of the industry, OEMs have increased their support to dealers. Distributors are increasing digital capacity building, improving human efficiency and resource conversion efficiency, and further enhancing mid- to long-term competitiveness.

Overseas markets provide medium and long-term growth drivers. In June/July 2021, overseas export sales accounted for 26%/29% of the month's sales respectively, and the contribution rate of overseas markets continued to increase. In the medium and long term, we expect that the overseas market share of Chinese companies is expected to continue to grow, and the export sales of Chinese excavators are expected to reach more than 100,000 units to ensure the long-term stability of the industry-long-term demand.

The long-term industry will show "weak cycle" characteristics, and the leading share will continue to increase. Distributors generally believe that the excavator industry sales volume may decline slightly in 2022, and will remain relatively stable after that, without the cliff-like decline in 2012-15; among them, industry leaders will continue to rely on digital capacity building and overseas market expansion. The growth trend is stable.