The construction machinery industry will maintain stable growth in the next three years

In the first seven months of 2018, the sales data of various types of construction machinery showed a rising trend, and the highlight situation has been established throughout the year. Therefore, we will continue to look back to see how long the boom of construction machinery can last. Through the analysis of various research institutions, we can draw the conclusion that based on the six positive factors of the updating of the equipment stock, the new equipment demand and the enterprise's own development, the construction machinery industry is expected to maintain stable growth in the next three years.Update of stock equipmentAccording to research data, 80% of the future demand of the construction machinery industry comes from the upgrading and upgrading of equipment. This part of demand is relatively stable and the downside risk is small.Generally speaking, the life cycle of construction machinery products is 8-10 years. The last round of sales peak is around 2011, and 2017-2019 is the peak stage of construction machinery equipment entering the phase of elimination and renewal iteration. According to statistics, the current market of construction machinery industry has more than 7 million units, while about 2.4 million old equipment are facing obsolescence, which provides market space for new machine sales and further drives industry demand.At the same time, no matter the national or local requirements for environmental protection are becoming increasingly strict, most of the existing equipment in the market belongs to the national II and national III emissions, and even if it is less than the age of the machine, it may be forced to ban due to environmental protection considerations. Therefore, the environmental protection policy and the age of the aircraft have further expanded the demand for the replacement of construction machinery.Policy-driven infrastructure investment is expected to recoverIn the first half of 2018, China's investment in fixed assets grew by 6% and infrastructure investment grew by 7.3% year on year, which was significantly lower than expected, which also affected the overall development of China's economy to a certain extent. To this end, in late July, the State Council meeting and the Political Bureau meeting put forward the development keynote of "protecting infrastructure and promoting investment". The more active fiscal policy and the recovery of PPP project investment, coupled with loose monetary policy, have ensured the smooth progress of infrastructure projects in all aspects, and also alleviated investors' concerns about the slowdown of industry growth.According to many years of development experience, the sales of construction machinery in China is positively correlated with the investment in fixed assets. It is expected that with the implementation of various infrastructure projects in September, the construction machinery industry will bring a real increase in sales.Permeability of construction machinery continues to increaseIn recent years, with the increasingly serious aging of China's population, the shortage of labor, the significant rise in human costs, and the obvious trend of mechanical replacement. Previously, the expansion of roads, construction of farmland and construction of water conservancy facilities in China's rural market basically depended on labor, but now there is a lack of young rural labor force, and most young people are rarely willing to do this work. The labor cost has risen sharply, which has led to the trend of replacing labor with machinery. In the past, the per capita ownership of excavators in China was low, and the penetration rate of construction machinery is expected to continue to increase in the future. Moreover, not only in the field of construction machinery, but also in various industrial fields, the trend of machinery replacing others is very obvious.Mining investment recovery provides new growth impetusAfter the financial crisis in 2008, the global economic growth slowed down and led to a decline in demand for mineral resources. The global mining industry as a whole showed a trend of stagnant growth, declining investment and clearing capacity. Since 2017, the global mining industry has shown a warming trend.Taking China's data in the first half of 2018 as an example, the added value of industries above designated size nationwide increased by 6.7% year-on-year from January to June. Among them, the added value of mining industry increased by 1.6% year-on-year, with an increase of 0.3 percentage points; Investment in the mining industry increased by 0.2% year on year.Improve comprehensive strength and steadily increase exportsThe improvement of the overall level of China's construction machinery industry has not only increased the share of the domestic market, but also achieved remarkable results in opening up overseas markets. In terms of overseas market development, countries along the the Belt and Road have become important target markets for China's construction machinery enterprises. In the five years since the the Belt and Road policy was promoted, China's construction machinery and equipment have frequently appeared in the construction of China Laos Railway, China Thailand Railway, Hungary Serbia Railway, Ya'an Wanzhou High speed Railway and other international channels. Moreover, the emerging markets represented by India have low urbanization rate, poor infrastructure construction, and large demand for construction machinery, which is more conducive to the export of construction machinery in China. It is reported that 72% of XCMG's overseas income and 70% of Sany's overseas income are from countries along the the Belt and Road.Enterprise management is more prudent and risk control is becoming stricterThe lesson from the past is unforgettable. Considering the cold winter period of the industry for five years, even though the industry situation develops hotly, China's construction machinery enterprises still maintain a cautious attitude in production, sales and industry prediction.In the first half of 2018, China's excavator sales increased by 60% year-on-year, loader sales increased by 33% year-on-year, and truck crane sales increased by 74% year-on-year... The good development trend did not make enterprises forget themselves and blindly increase production capacity. On the contrary, most enterprises in the industry began to focus on strengthening cash management, purifying high-quality customers, and the production and sales methods of continuous flow also help reduce the risk of profit margin contraction and accounts receivable.To sum up, based on the assumption that the domestic economy operates smoothly and continues to transform and upgrade, China's construction machinery industry will not decline significantly in the next three years at least and can maintain stable growth.