During the early 1990s, China’s resale market was still very young and disorganized. After many years of development, the market volume has accumulated to such a large scale to drive a very active business. According to the statistics of the National Lease & Used Equipment Committee NELUEC, In 2006, China’s used construction machinery equipment business turnover reached 34 billion RMB, 48 billion in 2007, 80 billion in 2008 and this figure surpassed 100 billion RMB in 2009. An annual increase of over 20%. In China’s machinery industry, used construction machinery also became one of the 6th fastest growing industries. According to the China Custom record, only hundreds of second-hand excavators were imported to China in 2008. But now annualy imported used excavators amount to over 20,000 units, which is equivalent to 1/3 of the annual sales of the new excavators in China. The growing demand for used construction equipment cannot be ignored as opportunities and challenges both exist in such a market.
Firstly, international manufacturing giants are taking a much bigger share in the market. “There are obviously ‘strong international companies and weak domestic ones’ claimed Yu Xiaomei, the General Secretary of NELUEC. On the one hand, a few large international manufacturers have become the leaders in this market and become even tyrannical in some machinery. On the other hand, domestic players are comparatively very weak” The global manufacturing giants are taking the biggest market share and the rest are separated by many Chinese SMES. A recent questionnaire on China’s machinery rent market by CMRA (China Machinery Rent Association) showed that 70% of the rent companies have equipment amounting to less than 100 units. No more than half of rent companies have registered capital over 10 million RMB, which reflects the main players in China’s used equipment rent market are small private companies. With so many of these companies competing for such a small share, there is no doubt the competition is significantly fierce.
Secondly, as yet there is no law to regulate the used equipment market, which was in chaos once the market was born. The biggest challenge is reliability. Many small companies try to hide their equipment problems and try to present their stock “in good condition”. In addition, there are also few authoritive evaluation organizations in between to provide a fair price, with the exception of large companies such as Caterpillar who have their own reliable evaluation team. With much concern and doubt in mind and with limited evaluation experience, users are afraid to buy from unfamiliar channels, so they are more likely to buy from their own network. Some who were cheated are unaware of which organization or authority can provide help. In March 5, 2010, “Technical Standard for Used Construction Machinery Circulation—General Standard” was issued by NELUEC. A detailed standard for different types of equipment is expected to be published step by step. There is still a long way to go for these initial regulations to play an important role in the market control. However, this can be considered a good start to nurture a better market environment for used construction equipment.
Thirdly, the payment issue is another concern with used equipment companies. Because formal sales or rent invoice and contract is seldom used in the deal to avoid tax, and banks cannot get involved in such a deal, it is also hard for renters or sellers to protect their own interest once users have a problem with making payment . This common practice, which covers almost 80% of the deals in China, will not be good for the development of Chinese private used equipment companies.
From the above, we can conclude that Chinas used equipment industry is a fast growing market where challenges and opportunities both exist. The opportunities are likely to be seized by the companies with more capital, more experience and more advanced management home and abroad. We, Resale China, are dedicated to provide you consulting information and assistance about the new and used construction equipment market in China. For more information, please feel free to contact us.