The domestic construction machinery industry will continue to grow for 10-15 years

The growth of the industry depends on the growth of investment in real estate and infrastructure. Construction machinery is engineering construction machinery. The growth rate of demand for construction machinery depends on the investment in various projects, and various projects can be attributed to real estate development projects and infrastructure construction projects. Therefore, the growth rate of construction machinery industry depends on the amount of investment in real estate development. And the growth rate of investment in various types of infrastructure construction. At the same time, since the investment amounts of these two types of projects account for a large part of the fixed asset investment, it is basically possible to use the growth rate of fixed asset investment instead of the combined growth rate of the two.

In the first three quarters of 2007, the domestic construction machinery industry maintained a booming state. In the first three quarters, the investment in domestic real estate development and investment in various infrastructures maintained a rapid growth, making the market capacity of domestic construction machinery continue to grow rapidly, and domestic sales of domestic construction machinery companies grew rapidly. In addition, domestic enterprises’ exports continued to grow rapidly in the first three quarters. In total, the sales revenue of the industry continued to grow rapidly in the first three quarters, with a growth rate of 48.7%. In the first three quarters, the overall gross margin of the industry continued to increase, from about 18% at the end of 2006 to about 20%.

The domestic construction machinery industry will also have a high growth rate of 10-15 years. By examining the development experience of the Japanese construction machinery industry, we find that the domestic development environment of the domestic construction machinery industry is very similar to that of Japan in the 1950s and 1970s. We expect that the market capacity of domestic construction machinery may also increase at a high rate for at least 10-15 years. At the same time, it is expected that the share of domestic companies in the domestic market in the next 10 years is unlikely to decrease. Therefore, domestic sales of domestic companies are expected to maintain rapid growth over the next decade.

In addition, due to factors such as high cost performance, exports of domestic companies are expected to have high growth for many years. Therefore, it is expected that the high growth rate of the domestic construction machinery industry will continue for at least 10-15 years. The following figure is a brief logic of the industry's continued high growth:

Macro-control, fluctuations in steel prices, appreciation of the renminbi, merger of two taxes: macro-control, fluctuations in steel prices, appreciation of the renminbi, and merger of two taxes are the four most important factors (or risk factors) that currently affect the development of the industry. We believe that the impact of macro-control on the construction machinery industry is gradually weakening; the rise in steel prices is expected to be partly offset by rising gross margins and rapid expansion of production and sales volume; the short-term impact of RMB appreciation is extremely limited, while long-term is beneficial; the new corporate income tax law is short-term The impact is small and long-term effects may be greater.

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