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M&A Analysis and Research on Excavator Industry


1. The Motives of M&A in China 's excavator industry

China 's excavator industry has been dominated by foreign company and joint venture that shared 95% of market prior to 2003. Number of domestic brands has taken a new shape with outstanding performance. The problem though is that the major parts of machinery such as engine and hydraulic components were come from overseas. With absence of system components as core competitiveness, the outlook of domestic excavator remains clouded. The high dependence on imported components puts the development in limits.

Imported core components for domestic excavator have put the feet of China 's manufacturers in the fire with problem in accessories supply cycle. Many of a professional foreign components suppliers has been met the huge demand from foreign companies while due to domestic production has been small in scale and long accessories supply cycle, China's counterparts have mist the demand peak which offers the golden opportunity to grab the market share.

China 's companies have made two or more suppliers available as to ward off risk from long accessories supply cycle. However, China 's companies have been making it dreadful to foreign ones with favorable market performance though the both sides were not on the same page yet. The friction in parts production is expected to be heated up when domestic sales is up to 5000 units or obtaining the bargaining position with foreign firms.

(1) Precision for the components hinges on working condition of excavator, especially the high demand to hydraulic components.

Excavator valve is the main high-pressure system components. It features precious structure with number of trenches and crossing within. The most daunting task is its openness measured by millimeter. Therefore, it's quality rather than design that is concerned in valve manufacturing. Many foreign brands such as Kawasaki and Komatsu are high in precision and low in break-down. By contrast, precision of China 's early products is less than one in ten let alone one in thousand or ten thousand. The fact that any problem especially in hydraulic system should not occurred in 24 hours work has thwarted the domestic excavator to meet the need of costumers.

(2) Engineering hurdles. Industrial level factors most in the quality of construction machinery components while craftsmanship in casting and assembly technique. Excavator valve as core part of accessories calls for well-controlled casting technology. Just as the main pump of hydraulic excavators, cavity is deadly defect under the high pressure along with clearance being major concern here. Unfortunately, manufacturers for casting in high-pressure pump and valve are few to number.

(3) Investment. There always has been a gigantic consortium behind manufacturers for internationally accepted accessories since the R&D for construction hydraulic components has been unrelenting for tremendous input of financing, researching and products revamping. With enough capital, accessory industry will take shape in China . However, foreign participation is

A. Capital operation and joint venture. As the world Fortune 500 having lowered their cost, foreign companies got swarmed in China with their technology to take advantage of its good economic performance. China 's parts manufacturers have been able to take part of accessories manufacturing with non-stream know-how as long as having bills as hands. However, such very investment constitutes kind of risk under globalization in that the lower cost than foreign ones through by this move remains unanswerable. At the same time, the foreign manufacturers have been looked down this way of joint venture instead of exclusives.

B. Cooperate with main part manufacturers. Some insiders believed that the ideal way to stir up excavator accessories manufacturing techniques is collaborative work between main part manufacturers and accessories ones. The problem has been that this way is not as technically as possible from poorly rendered domestic accessories producers within industrial chain cross the whole construction machinery sector while main part manufacturers desperately sought for capable partners.

Accessories manufacturing for small model of excavator will be the break-point in this sector based on what has been shown over the years. The fact that oil-cylinder, hydraulic accessories, oil pipeline, pump and valve for small model are east to make and widely acceptable to customers since this model shows pressure at 20 MPa and not critical for working condition while hydraulic pressure in 20 ton model enjoys 34.3MPa or so and 30MPa at minimum. At the same time, from the main part manufacturers' point of view, the performance is concerned them most though the well-controlled quality of hydraulic accessories is equally important. The problem is one year period for products property testing in real work. In that sense, domestic parts producers have been less profitable in number of targeted models. On the other hand, small one offered golden opportunity with low requirement for technology which caters to domestic parts producers. Hydraulic systems for pump, valve and main valve have been made in Zhejiang Province . Therefore, manufacturing for small model as enrich experience and know-how is way to produce high Cpressure hydraulic accessories. With growing production and sales in excavator domestically, more room will created to domestic accessories producers. In spite of the fact that it will take domestic hydraulic accessories producers five years to make difference, number of technology will be worked out in the near future.

2. The M&A trend in China 's excavator industry

From 2006, the market has been gaining momentum. Based on the figure from CEMA to China National Construction Machinery Association, as of 2006, the sales of excavator will be above 45,000 units.

Under national macro-control, the over all structure will develop vertically while push forward the M&A cross-the-board. The business model will enjoys leaps and bounds against current depressive stage in excavator industry can be seen in 2007 following improved demand and supply, reduced cost and the expectation for socialist new country side. The transformed mode features the scenario where big domestic machinery manufacturers take over small ones.

Exports volume and growth rate of China 's excavators from 2000 to 2006

The report is made with marketing research department in us , China National Construction Machinery Association, CEMA, State Information Center and National Bureau of Statistics of China along with voluminous data in excavator industry committed by us . The forecast and trend analysis is made upon deliberation through quantitive and qualitative research.

Chapter 1 Macro-Economic Situation in 2008 
Section 1 World economy in 2008 
Section 2 Prospect of world economy in 2008
A. China¨s economic performance in 2008
B. Fix asset investment in 2008
Section 3 Macro-economic performance upon construction machinery industry in 2008
A. Economic performance on construction machinery 
B. the Response of companies to national macro-control 
Chapter 2 Prospect of Construction Machinery Industry in 2008
Section 1 Production in 2008 
Section 2 Market and sales in 2008
Section 3 Export and import in 2008
Section 4 the Development of construction machinery 
A. Split in profitability
B. Cycle in industrial development 
C. Inextricable linkage between construction machinery and infrastructure construction 
Section 5 Anatomy of construction machinery during 11th Five Year Plan
Section 6 the Regional market trend in construction machinery in 2008
Chapter 3 Profile of Excavator Industry in 2008
Section 1 the Development of excavator industry
Section 2 Industrial overview of excavator industry in 2008
Section 3 Existing problem in excavator industry
Chapter 4 The Development in Domestic Excavator Industry in 2008 
Section 1 Market performance in excavator industry
Section 2 the character of excavator industry
Section 3 Price change in excavator industry in 2008
Chapter 5 Overseas Excavator Industry in 2008 
Section 1 Profile of excavator industry worldwide
Section 2 the Development trend in excavator industry worldwide
Section 3 Forecast of domestic products in 2008
Chapter 6 Forecast on Over All Excavator Industry in 2008
Section 1 Demand for excavator in general
Section 2 Supply trend over excavator industry 
Section 3 Competition of excavator industry in 2008 
Section 4 Export and import of excavator in 2008
Section 5 Demand and supply of excavator in 2008
Chapter 7 Prospect of Crawler Excavators in 2008 
Section 1 The Status quo of crawler excavators in 2008 
Section 2 The Corporate strategy and development in domestic crawler excavators industry 
Chapter 8 Prospect of wheeled excavator in 2008
Section 1 The Technological development of wheeled excavator
Section 2 The Status quo of wheeled excavator industry in 2008
Section 3 The Current level and trend of wheeled excavator industry overseas
Section 4 The Prospect of wheeled excavator industry
Section 5 Potential comparison between crawler excavators and wheeled excavator
Chapter 9 M&A prospect of Mining Loader Industry in 2008
Section 1 Classification of mining loader
Section 2 the Status quo and trend of mining loader industry
Section 3 the Future development of mining loader industry
Chapter 10 M&A Trend in Small Model of Excavator in 2008
Section 1 Market performance in small model of excavator industry in 2008 
Section 2 Trend in small model of excavator industry
Section 3 Current level and developmental trend of small model of excavator industry overseas
Chapter 11 M&A Development of Other Kind of Excavator
Section 1 Mini-excavator 
Section 2 Huge hydraulic excavators 
Chapter 12 M&A Strategy of Excavator Industry in 2008 
Section 1 Imaging building campaign 
Section 2 M&A analysis
A. Classification and operational model 
B. the Existing problem and recommendation in M&A 
C. the Status quo of M&A in construction machinery 
Section 3 Marketing tactics 
Chapter 13 Leasing Market of Excavator Industry in 2008
Section 1 Domestic leasing market of construction machinery 
A. Domestic leasing market 
B. Regional character of domestic leasing market in construction machinery industry
C. the Impact of construction machinery upon manufacturer 
Section 2 the Prospect of leasing market in construction machinery industry
Section 3 Analysis of leasing market in excavator
Section 4 Lessons from overseas leasing industry in construction machinery 
Chapter 14 International M&A Strategic Analysis in Excavator in 2008
Section 1 Inevitability for internationalization and current problem in 2008
Section 2 International requirement 
Section 3 World regional market pattern and accessibility 
Section 4 Demand international market 
Chapter 15 M&A Strategy among Major Excavator Manufacturers in China in 2008 
Section 1 Doosan Infracore China Corporation
Section 2 Xuzhou Construction Machinery Group Co., Ltd.
Section 3 Chengdu Kobe Steel Construction Machinery Co., Ltd
Section 4 Guangxi Liugong Machinery Co., Ltd
Section 5 SANY Holding Co., Ltd
A. Productivity in 2008  
B. Business performance in 2008  
C. Problem and difficulty 
Section 6 Yuchai Engineering Machinery Company Limited
A. Business performance in 2008
B. Development of Yuchai
Chapter 16 Investment Possibility of M&A in Domestic Excavator Industry in 2008
Section 1 Industrial cycle in construction machinery 
A. the Economic cycle of industry 
B. Industrial cycle and scale in fix asset investment 
Section 2 Profitability of excavator industry in the future
Section 3 Barriers for entering excavator industry 
Chapter 17 Risk Analysis and Recommendation in Domestic Excavator Industry in 2008 
Section 1 Development trend in excavator industry 
Section 2 Investment possibility in excavator industry in 2008 
A. Medium size model facing saturated market
B. Small size model offering breaking point as national blockbuster
Section 3 Investment risk in domestic excavator industry in 2008
Section 4 Recommendation for excavator industry in 2008 
A. Engaging in R&D for new products upon analysis on market  
B. Identify the difference between industries home and broad
C. Excavator production with combined efforts of groups and big private sectors
D. Making sense of products mix and organizational structure
E. Cultivation of excavator market 
F. Combining effort in creating domestic excavator supporting system 
G. Export and import of excavator 
H. Agent system for excavator 
I. Harnessing the potential from joint venture in excavator industry

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