Chinese forklift industry aims high

Feature Article
- 28 Jul 2011 ( #524 ) - China
7 min read
Isa Zhang, marketing manager for Zeijiang Hangcha
Isa Zhang, marketing manager for Zeijiang Hangcha
While the rest of the world continues to ride post-recession choppy seas, China has managed to glide through them relatively unscathed. While losing some ground early in the recession, China has not only recovered quickly, but has continued to grow in most industrial sectors, including forklift manufacturing and sales. Melissa Barnett looks at what the Chinese forklift industry is doing in 2011 and how it plans to take Chinese forklifts to the world.

In 2010, China outpaced Japan to become the world's second-largest economy. A recent report from market research company Research and Markets noted that forklift sales had increased in all Asian countries, with China leading the way with 62% growth since 2009. The report went on to say that government stimulus packages had injected capital and confidence into the forklift market, sparking a recovery by the second half of 2009. It also pointed to "explosive" growth in the Chinese forklift market in the first eight months of 2010 to a peak of 68.34%.

In mid-2010, Chinese website reported that forklift sales in China had doubled in the first half of the year, with 90,000 units sold, up nearly 113% on the previous year's figures. The article went on to suggest that if current growth continued, China would soon out-distance the US as the world's biggest forklift manufacturer. News has been unable to source sales figures for 2011.

Influences on Chinese forklift market

A significant driver of a strong Chinese forklift market is the increasing cost of domestic labour; this has meant that more forklifts are being employed on factory floors and in warehousing to minimise costs. Warehousing, in particular, has radically changed its traditional mode of operation from small enterprises servicing local businesses to highly sophisticated automated operations covering vast floor spaces.

KW Logistics is a B2C (business to consumer), third-party logistics provider which services the online sales sector, a new and growing retail sector in China. KW recently opened a 20,400 sqm (220,000 sqft.) warehouse facility, one of four such facilities in Shanghai. In a growing trend, the company outsourced its warehouse management needs to an overseas company, US-based Manhattan Associates. Manhattan Associates, a warehouse management solutions provider, has supplied KW Logistics with its SCALE (supply chain architected for logistics execution) solution. SCALE implements a number of critical warehouse management tools including order fulfilment, specialised forklifts for receiving and picking and processes for sorting and packing.

Another factor influencing sustained forklift sales is the strength of Chinese goods manufacturing in general. Chinpong Quek, chief executive officer of Linde (China), notes that "the fast pace of mechanisation and automation amid rising labour costs have buoyed demand for forklifts". He points out that even the privately owned small manufacturing businesses such as brickyards are now using forklifts instead of manual labour to handle goods.

Construction is one of the few industry sectors to have slowed in China in the past few years. This has meant that companies traditionally involved in construction equipment manufacture have turned their considerable resources to forklift manufacturing. Companies such as LiuGong Machinery Corporation and Lonking (Shanghai) Forklift Company are aggressively expanding their marketshare in materials handling. Deng Tao, sales director for LiuGong, explained shortly after exhibiting at CeMat 2011 that the company needed to expand into the lifting and handling arena. "LiuGong has been very strategic in preparing to tackle two of the world's most exciting markets, materials handling and heavy lifting, that demand a broad variety of machine," he said.

LiuGong's 2010 first-half trading reached 2,740 units, up 125% from the same half in 2009. Lonking (Shanghai) Forklift's trading figures looked even better, with sales of 5,100 units, up 132%.

Lured by increased forklift demand and a freeing up of banking and leasing protocols since 2005, the number of foreign-owned forklift companies and those in partnerships with existing Chinese forklift manufacturers has increased substantially in the last few years. Toyota, KION, Linde, Jungheinrich, NACCO Industries, Mitsubishi Caterpillar Forklift and Komatsu Utility Co Ltd all have a presence in China.

The domestic market

There has always been a strong market in China for home-grown brands. It is estimated that approximately 80% of forklifts manufactured in China are destined for the domestic market.

Barry Su, general manager of Maximal Forklifts, believes that Chinese brands are always the product of choice in the domestic market. He believes the main advantages are price, quality assurance and geographic proximity. Isa Zhang, marketing manager for Zhejiang Hangcha, agrees that price and after-sales service are major advantages of Chinese brands. "Chinese buyers are more focused on the cost performance," she says, but warns that this is also the reason the price of foreign brands is currently going down.

Jerry Hu, president of Hytsu Group, believes that the price war between domestic brands is not sustainable or good for the long-term Chinese market. Hu argues that that the only way that Chinese brands can succeed in any market is to improve overall forklift quality.

Sang Tian, vice-president of E-P Equipment, believes that there is too much concentration and therefore competition in the 2-3 T diesel range. She says that this, as well as low pricing, is unsustainable in the long term.

Zhang Jie, secretary of CITA
Zhang Jie, secretary of CITA
Diesel forklifts, according to Linde's Quek, still make up 80% of forklifts manufactured in China. However, he believes strong growth in food and beverage, logistics, retail and the railway industry will see changes in manufacturing over the next few years towards electric and specialised warehouse equipment. Zhang Jie, spokesman for the China Industrial Truck Association (CITA), agrees and sees a shift towards electric and "new energy" forklifts. Zhang notes that "raising the benchmark for environment protection in the world, (will see) the proportion of 'new energy' industrial vehicles and efficient electrical industrial vehicles gradually grow in the Chinese market."

AnHui Heli continues to rank at the top of the domestic performance list, posting sales of 270,000 units for the first half of 2010 and an expected year-on-year growth of 79.8%. Relative newcomer We Can Forklifts of Shandong Guangming Machinery Company Ltd earlier this year made it onto China's top 10 forklift manufacturers ranking. The status reflects We Can's annual sustained growth of over 50% for three successive years.

CITA believes that the Chinese government's urbanisation development policies, particularly in the mid-west of the country, will have a positive impact on the development of the industrial truck industry and forecasts increased demand in the Chinese domestic market in the future.

Watch out world

Jerry Hu, president of Hytsu Group
Jerry Hu, president of Hytsu Group
The question everyone is asking is what role will Chinese forklift manufacturers play in the world market in the future. China already has three forklift manufacturers in the world's top 20 forklift suppliers. According to Modern materials Handling's 2010 list of top twenty forklift manufacturers. Ranked highest, in eighth place, is Anhui Heli with total global sales in 2009 of USD668 million; 15th is Zhejiang Hangcha with sales of USD251 million, and 19th is Hytsu group with sales of USD86 million.

Questions of quality and service are being rapidly addressed by all the major suppliers, with many bringing in foreign consultants to aid implementation of quality control procedures. All understand that after-sales service and quality parts are particularly important in sustaining export sales. Maximal's Su believes that paying attention to customer feedback is essential as is a consistent standard of equipment quality. This is echoed by Hytsu's Hu who adds that quality and service are not just a verbal guarantee but "need to be seen in every detail".

Deng says LiuGong forklifts "never enter a market without dealers, service and parts availability, so LiuGong machines are always supported". He adds that "when LiuGong makes service and parts easy, we believe our dealers will enjoy long-term customer satisfaction and repeat purchases".

Hangcha plant, Lin'an, Zhejiang province, China
Hangcha plant, Lin'an, Zhejiang province, China
CITA believes that emerging markets such as India, Eastern Europe and Latin America are important targets and that the cost-effectiveness of Chinese forklifts in those markets gives them an edge. However, the organisation cautions that Chinese manufacturers must address the growing fuel efficiency and environmental concerns in the European and US markets. Zhang says that "Chinese enterprise should focus on fundamental research, grasp core technologies, conquer difficulties and raise intensity and level of R&D".

There is no doubt that Chinese forklift manufacturers will make a significant impact on the world market. It may take time but, as Tian says, "it is those manufacturers who understand the core value of brand and who continue to invest in building a brand name who will be winners."

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