BEIJING/TOKYO — Longshore men unloaded yellow excavators adorned with the insignia of China’s Sany Heavy Industry from a cargo ship at an Indonesian port on the island of Sulawesi. One of them yelled to colleagues, “Be cautious laying down that excavator!” According to Chinese media, over 600 Sany hydraulic excavators were sent to Sulawesi in the first half of May alone. Many nickel refineries are located on the island, with an estimated 70% of them supported by Chinese money. Nickel is an important component in the batteries used in electric vehicles. More than 5,000 Sany-made devices are thought to be in use in these refineries and other sites across Indonesia. Sany is boosting its push into Indonesia and other emerging Southeast Asian markets, long a stronghold of Japanese business Komatsu, as demand for construction machinery in China slows. Sany’s international excavator sales surpassed 1 billion yuan ($155 million) for the first time in March, helping the company achieve a 90 percent year-over-year revenue increase in the January-March quarter. Cheap rates — around 20% lower than Japanese competitors — and China’s Belt and Road infrastructure program have spurred the company’s expansion. China won the proposal to build a high-speed railway between Jakarta and Bandung in Indonesia, and more than 500 pieces of Sany-made equipment were used on the project.
Southeast Asia is expected to expand in demand, according to Komatsu. To ward off Chinese competitors, the Japanese manufacturer plans to introduce new excavators and highlight its service network. According to Reuters
Sany is pursuing prospects in Asia, Central America, and South America, according to President Xiang Wenbo, who spoke at an event in May to commemorate the company’s goal of being the world’s top excavator seller by 2020. The company has also set its sights on North America and Europe. By 2025, the corporation wants to triple its overall sales from 2020 to 300 billion yuan. Nonetheless, it aims to raise $10 billion from international markets over the next five years, quintupling foreign revenues. Sany’s ambitious worldwide push is fueled in part by domestic market uncertainty. In April, hydraulic excavator unit sales began to decline on a year-over-year basis, and in May, they fell by more than 20%. In 2021, some market watchers predict a 10% decline in unit excavator sales. “Sales are dropping faster than projected, and there’s a good likelihood the market will contract,” Komatsu’s chief financial officer, Takeshi Horikoshi, said. However, Komatsu forecasts construction machinery demand in Southeast Asia to increase by 10% to 15% by volume in fiscal 2021. This year, Indonesia, the region’s largest market for such equipment, is expected to see a boom in infrastructure spending, in part to help the country recover from the coronavirus outbreak. Sany had 21% of the Indonesian construction machinery market in January-March, just a smidgeon behind Komatsu’s 22%. “Sany has roughly the same market share as us,” stated Hiroyuki Ogawa, President and CEO of Komatsu. For the fiscal year ending March 2022, Komatsu expects a 73 percent increase in Asian sales, excluding China, to 240.4 billion yen ($2.17 billion), accounting for roughly 10% of total revenue and making Asia the company’s largest market after North America, Central and South America, and Japan. “To compete in Southeast Asia, which is a significant market for us, we need to take a variety of actions,” Ogawa added. Komatsu plans to introduce excavators developed exclusively for home and road construction in Indonesia and other markets, priced 10% to 15% lower than standard models, as cheaper Chinese competitors gain traction in the region. Parts exchanges and other profitable services account for a substantial chunk of the company’s revenue. “Our revenue from maintenance services will suffer five to ten years down the road unless we sell a specific volume of new devices,” Ogawa added. The Japanese firm also intends to emphasize the product’s durability as well as the quality of its maintenance services. During the peak of the pandemic, it opened a training facility for maintenance personnel at its dealerships in Thailand and overseas, as well as holding online seminars. Sany and other companies are growing their service networks as well. But, according to Tomohiko Sano of JPMorgan Securities Japan, “Komatsu is still ahead in terms of the number of service sites.” Services, according to Komatsu, are the key to accessing demand in nickel mines. Through local distributor United Tractors, it will open three new maintenance facilities in Sulawesi. Other Southeast Asian markets are seeing increased competition between Chinese and Japanese players. Chinese businesses are thought to have a 30 percent market share in Thailand, chasing Komatsu’s 50 percent market share. Indonesia and its neighbors will be a significant test bed for two rival emerging market strategies: focusing on mid-priced products with substantial client service, as Komatsu does, or balancing quality with low pricing, as Sany does./n
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