In the process of Chinese excavator companies going global, there are two main modes: one is to directly transport domestically produced construction machinery equipment overseas, and the other is to establish factories and start production locally. Now, let’s take a look at the challenges encountered:
The first challenge is the incomplete upstream and downstream industrial chain and weak local supporting industries. For example, some companies need 60 components to produce overseas, but they can only find suppliers for 20 components locally, with the rest having to be supplemented by international supply chains, increasing uncertainty and service costs in the supply process. Therefore, the first challenge is the weakness of the basic industries. In many overseas regions, the basic industries are more fragmented rather than having the complete industrial chain like in China.
The second challenge is that the local labor quality is not as good as in China, and the labor productivity is relatively low. It is well known that one of the traditional virtues of China is hard work and diligence, and the labor productivity of Chinese workers ranks among the top globally. However, in many overseas regions, the productivity of laborers is relatively low. A good example is the return of Foxconn, where the qualification rate of Apple phones produced in Indian factories is only 50%. Additionally, due to the scarcity of talent, it is difficult to recruit suitable senior management and technical personnel for domestic brands in overseas companies, with more personnel being dispatched from China and other countries.
The third challenge is the inadequate infrastructure, which hinders the development of construction machinery in many overseas regions. In terms of infrastructure such as power systems and transportation systems, some regions are unable to meet their own normal needs, posing significant difficulties for us in selecting regions to enter the local market. Currently, we can only choose to develop on a certain scale in major cities in the local area, constrained by the inadequate infrastructure and unable to further expand and grow.
Although there are many shortcomings in overseas markets, China suppliers should not underestimate the development of the other party during external migration process. Currently, countries including Indonesia, India, Vietnam, Thailand, and the Philippines have economic policies and development patterns that are quite similar to the paths China has taken in the past. At present, in terms of construction machinery, China’s position in the international division of labor is far higher than that of Southeast Asia.
Chinese construction machinery can go global, but cannot give up the dominance of the entire industrial chain. In the construction machinery industry, in the early years, many American and Japanese companies entered China, but the key links were always held firmly in their own hands and not easily given up. China should also learn from some of their practices.
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