After experiencing a decline in the domestic market for three consecutive years from 2021 to 2023, excavator sales in China have finally shown signs of recovery in 2024. As we look ahead to 2025, industry experts anticipate that the sector will reach its cycle bottom, supported by increasing competitiveness in international markets, leading to optimistic growth expectations for the revenues of leading enterprises from abroad.

The recovery of domestic sales has been a significant highlightOn the evening of January 7, the China Construction Machinery Industry Association released statistics on major excavator manufacturersIn 2024, these manufacturers sold a total of 201,100 excavators, a year-on-year increase of 3.13%. Among these, domestic sales reached 100,500 units, marking an impressive year-on-year growth of 11.7%. However, exports showed a different trend, with 100,600 units being sold, a decrease of 4.24% compared to the previous year.

This marks the first instance since 2021 in which excavator sales in the domestic market managed to achieve positive annual growth

During the period from 2021 to 2023, the year-on-year figures for domestic excavator sales fluctuated significantly, with declines of -6.3%, -44.6%, and -40.8%. Notably, before the onset of this downturn in 2020, the domestic sales of excavators hit a peak, reaching 292,900 units with a remarkable growth rate of 40.1% compared to the previous year.

Looking further back, excavator sales started to see a return to positive growth beginning in March 2024. Analysts from Haitong Securities led by She Weihua noted that the sectors benefitting from high-standard agricultural development, farmland water conservancy projects, rural roads, and municipal engineering have significantly contributed to this uptick, particularly in the small excavator segmentThe sales of medium and large excavators are gradually recovering, a trend expected to positively impact the profitability of manufacturers and dealers.

The sales of excavators are known for their cyclicality

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During the first cycle from 2008 to 2016, the sector enjoyed a tremendous boost due to the government's "4 trillion yuan" investment stimulus plan, which greatly increased the production and sales of construction machinery, including excavatorsFollowing a peak in sales around 2011, the market faced a downturn starting in 2012, which led to an extended period of adjustment lasting five years.

Now, after three years of adjustment following a sales peak in 2021, the recovery in the domestic market in 2024 is seen as an indicator that the industry has reached the bottom of its cycle.

During a recent investor call, executives from XCMG Machinery (000425) expressed optimism regarding the industry’s recoveryThey identified positive trends emerging in domestic sales, especially for earth-moving machinery, which has seen months of consistent growthThe management pointed to massive investments in national infrastructure projects and ongoing government policies aimed at boosting equipment upgrades, deeming these factors crucial for stabilizing and reviving the industry

With the government’s two-step strategic plan focused on enhancing economic growth and confidence in the construction machinery sector, there is a sustained belief in the market's potential.

Aside from indicators of new demand stabilizing, She Weihua’s team also projected that the machinery industry is poised for a new wave of equipment upgrades by 2025, leveraging an eight-year lifecycle of construction equipmentAt the same time, Chinese manufacturers are increasingly investing in electrification in response to new environmental policies, thus continuously raising the proportion of electric machinery products in their offerings.

On the international front, the dynamics of machinery enterprises differ from past trends where reliance on the domestic market was paramountRecent years have seen companies robustly exploring global markets, which is expected to help flatten the industry's cyclical patterns and create additional avenues for growth.

Despite a slight decline in excavator exports, which dropped by 4.24% in 2024 to 100,900 units, it's noteworthy that the figure represents a significant increase of nearly 200% compared to just 34,700 units in 2020. In terms of sales scale, the balance between domestic and international sales has shifted dramatically, with related companies describing it as a “historical breakthrough.”

SANY Group has elaborated on its strategy for 2024, emphasizing the deepening of its globalization approach, which has seen its footprint expand across over 180 countries and regions

The company reported new highs in overseas sales, resulting in overseas profits constituting over 50% of its total revenue—reflecting a leap in its developmentSimilarly, Zoomlion Heavy Industry echoed this sentiment, revealing that they had also crossed a historic threshold where more than half of their business comes from international markets, facilitated by their local research and manufacturing bases, logistics networks, and financial mechanisms.

Overall, while the industry’s total external sales volume has seen a slight decline in 2024, professionals remain optimistic about the evolving international scenario for the new year.

XCMG further projected that the overseas market is expected to maintain a favorable trajectory, with international revenues continuing to grow robustlyThe overseas markets present a fertile ground for domestic brands, as consistent demand continues to emerge

Moreover, ongoing improvements in the quality of domestic products, enhanced channel strategies, and accelerated growth in after-sales service infrastructures are boosting the overall competitive edge of Chinese brands on the global stage.

As She Weihua’s team pointed out, with the continued interest rate cuts by the Federal Reserve and the push for infrastructure projects in the United States, North America is expected to stabilize by 2025. The European market is anticipated to show resilience from a low baseline, while markets in South America, Africa, India, and the Middle East are likely to experience steady growthThe continued enhancement of domestic brands' competitiveness in global markets suggests that international revenues for leading domestic manufacturers will progressively increase, with exports being an essential direction for the future development of the construction machinery sector.