"Meetings on our Global Industrials trip to China point to a modest demand pickup across key machinery markets, though competitive intensity for Western companies is clearly rising."
"Broad visibility on 2012 remains limited due to the completion of China’s stimulus infrastructure buildout, high inflation, and a transition in leadership."
Source: Goldman Sachs
Demand for mining machinery is still enormous
The combination of rising energy demand and deteriorating resource quality is bullish for mining equipment sales.
Source: Goldman Sachs
Chinese equipment makers are starting to eat the lunch of Western competitors
Goldman Sachs
The size of China's mining equipment industry has tripled in the last four years. Western competitors have only experienced modest growth.
According to Cummins dealer inventories are lower while order activity is up.
Source: Goldman Sachs
Meanwhile, Chinese truck makers are gaining market share
Goldman Sachs
Demand for Cummins' high end products is declining while demand for middle market products by competitor Weichai is holding steady. Cummins is now expanding into that market.
Source: Goldman Sachs
But overall, construction machinery demand is starting to lag
Construction has been lagging as China's stimulus funded infrastructure build-out tapers. However, valuations for companies like Lonking are becoming more attractive.
Source: Goldman Sachs
Again, Chinese excavaters are taking market share from the west
Goldman Sachs
Chinese companies like Sany Heavy are growing in market share while western companies like Caterpillar, Komatsu, and Hitachi Construction are shrinking. However, Caterpillar has been introducing new products that have caused market share losses to decelerate.
