LiuGong gains new ground overseas

"It's not a question of whether Chinese construction companies will be successful in North America. It's really a question of how many," says Marc Dowdell, president of LiuGong Construction Machinery North America.

As head of the subsidiary owned by Guangxi LiuGong Machinery Co Ltd, headquartered in Liuzhou, Guangxi Zhuang autonomous region, Dowdell helped it achieve a profit for the first time in 2013. The achievement is seen as a breakthrough for LiuGong in the North American market since it started operations there in 2008.

Zeng Guang'an, president of the mother company, had expected 10 years of losses from the North American market before making a profit, saying that "going global is a long-term process, and it's unavoidable and necessary to pay tuition fees".

When he announced the company's encouraging performance in the North American market during the ConExpo-Con/Agg show in Las Vegas on March 4, standing on one of the company's large-size excavators on display at the booth, he was very complimentary to his team.

The company sold 500 equipment sets last year in North America with sales revenue of about $30 million.

The sales volume in Mexico was 700 sets worth $20 million, according to Luo Guobing, Liugong vice-president who is responsible for overseas sales and marketing.

Compared with LiuGong's total overseas sales revenue of $680 million last year, the company is still at a very early stage in the North American market, which has huge potential but is also very competitive, says Luo.

He predicted in the next five years the company will maintain an annual growth of 40 percent in sales revenue in North America.

Established in 1958, LiuGong has become a leader in China's heavy construction-equipment and material-handling industries.

Its major overseas markets are Latin America and Southeast Asia.

The company owns a factory in India and a 16,000 square foot (about 1,500 square meters) parts warehouse and office near Houston, Texas, for better after-sales service.

"The United States attaches huge importance to service in the machinery market. Without an after-sale service, it's pointless discussing the products," says Zeng.

As LiuGong's helmsman who has worked for the company for about 30 years, Zeng has long been an advocate for the company's expansion overseas.

Despite having a relatively small North American market share, he says the company is determined to develop it and will continue to invest there because it is the most important venue for machinery equipment manufacturers globally.

"Southeast Asia is currently our biggest overseas market but North America is the fastest-growing market for the company," he says. "We will maintain this high growth and profit increase."

From a long-term perspective, the North American market will account for 25 percent of LiuGong's total sales revenue in 10 years, according to Zeng.

"It is a must-to-do for Chinese companies to expand to overseas market when they have established their position in the domestic market," he says.

In the past few years, an increasing number of Chinese manufacturers started investing in foreign markets after facing rising costs, fewer orders and a smaller profit margin in the China market.

According to data from the China Machinery Industry Federation, the annual profit growth of the country's machinery industry has fallen from 55.6 percent in 2010 to 15.6 percent in 2013.

Cai Weici, vice-chairman of the federation, estimates the profit growth of the industry will continue to decline to 12 percent this year.

"Going global is not an easy thing to do. Chinese companies should fully prepare and do things step by step in foreign markets," he says. "Chinese companies used to give the impression of producing low-quality equipment with low prices in the international markets. However, this has changed. We have advanced technology and high-quality products, but it takes time to get others to learn about us."

In addition to LiuGong, Sany Heavy Industry Co, the world's sixth-largest manufacturer of construction equipment as ranked by International Construction magazine, and headquartered in Changsha, Hunan province, has been making efforts to expand its US market.

The company's American subsidiary headquarters in Peachtree City, Georgia, established 340,000 square feet of manufacturing space and 60,000 square feet of office space, providing products including crawler cranes, rough-terrain cranes, crawler excavators, container reach stackers and empty-container handlers.

With more Chinese companies entering the North American construction machinery markets, Douglas R. Oberhelman, chairman and chief executive officer of Caterpillar Inc, the world's largest maker of construction and mining equipment, says there will be one or two Chinese players that will stand out from the rest in the future.

dujuan@chinadaily.com.cn

(China Daily Africa Weekly 04/04/2014 page21)