The weak construction industry in China is affecting two heavy machinery companies here in Korea. Doosan Infracore and Hyundai Heavy Industries are thus making changes to accommodate their declining market share; Doosan held 18.9% of the market in China in 2006 but last year, the figure dropped to 8.5%

2013-09-30 16:17

Slump in China hits Doosan, Hyundai

By Yi Whan-woo
The weak construction industry in China is affecting two heavy machinery companies here in Korea. Doosan Infracore and Hyundai Heavy Industries are thus making changes to accommodate their declining market share. Doosan Infracore, Korea’s largest construction equipment manufacturer, held 18.9 percent of the market in China in 2006 but last year, the figure dropped to 8.5 percent, according to latest data from the China Construction Machinery Association (CCMA).Hyundai Heavy Industries also saw a drop in its market share from 17.7 percent to 7.9 percent, according to CCMA.
The association said that China’s slow economic recovery is causing the problem.
Doosan Infracore runs two plants, one each in Suzhou and Yantai. To deal with the decrease in market share, the company plans to cut the number of excavators made per month at its Suzhou plant by half.
Hyundai Heavy said it plans to raise sales in India, Brazil and Russia instead of China, which the company considered its biggest overseas market with three heavy machinery plants.
The two companies are the only Korean heavy machinery makers in China, but statistics show other companies are struggling as well. The revenue for the top 13 construction machinery companies in China dropped by 3.68 percent in 2012 from a year earlier, according to CCMA. Plus, profits plunged by 34.2 percent year-on-year.
Hanwha Investment and Securities, a Korean brokerage firm, anticipates sales of excavators, a key piece of construction equipment, will hit 103,000 this year, down from 108,000 in 2012 and 172,000 in 2011.
The economy isn’t the only culprit; more competitors have entered the market as well.
“The number of such manufacturers rose from 13 in 2003 to 29 this year,” a Doosan Infracore spokesman said, asking not to be named. “Moreover, the Chinese government has stepped up its effort to protect domestic firms against international rivals, making it difficult for us to run business there.”
For example, the market share of Sany Heavy Machinery, a Chinese firm, soared from 1.2 percent in 2006 to 12.7 percent in 2012.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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