In recent years, the domestic leasing penetration rate has been rising [more than 60% in 2023, superimposed on the “fragmented” leasing market structure of the main construction machinery (procurement planning is more random), so the annual monthly sales are highly correlated with the construction progress of domestic projects.
Most projects start/resume in late February or March after the holiday, enter the rainy season at the end of June, enter the rush or finishing period from September to the end of the year, and enter the Chinese New Year holiday in mid-January and February of the following year.
Therefore, the progress of project commencement and machinery demand are affected by the availability of project funds and changes in weather, the Chinese New Year holiday, as well as other factors such as environmental protection, safety, and policies.
Although the Spring Festival holiday in 2025 is ten days earlier than the previous year, the spring period start rate in 2025 is lower than that in 2024 due to factors such as the average return rate of last year’s leasers in all categories being lower than that of previous years and the wait-and-see policy for the two sessions.
According to the research data of Centennial Construction Network, the project start-up and resumption rates on February 6/13/20 were 7.4%, 23.5%, and 47.7%, respectively, which were lower than the level of the same period of the previous year’s lunar calendar. In January-February, the national cement production dropped by 8.5% year-on-year, and the demand for various downstream projects decreased by about 30 million tons.
Some media expect the national fixed asset investment growth rate in January-February to be the same as the previous year.
In short, even though the Chinese New Year in 2025 is more than ten days earlier than 2024, the number of project starts as well as the availability of funds during the Chinese New Year period in January-February is lower than the previous year. While January-February, all categories of products have rebounded or a warming trend, does it signal the gradual arrival of a new round of the upward cycle?
According to the official data of the Construction Machinery Association, the sales of each segment in the Spring Festival period of January-February are as follows:
Earthmoving segment: excavator domestic sales of 17,000 units, an increase of 51.4%; loader domestic sales of 0.82 million units, an increase of 26.2%.
Lifting and hoisting segment: car crane domestic sales of 0.15 million units, down 13.5%, compared with the decline in 2024 to shrink 22.0 pct; crawler crane domestic sales of 109 units, down 13.5%, compared with the decline in 2024 to shrink 25.6 pct; truck-mounted cranes domestic sales of 0.33 million units, an increase of 13.7%. Tower crane domestic sales of 396 units, down 56.1%, compared with the decline in 2024, to shrink 12.0%.
Road construction segment: 903 units of road rollers domestic sales, up 31.6%; paver domestic sales of 127 units, up 44.3%. Grader domestic sales of 226 units, an increase of 40.4% (Note: grader application is wider).
Weak cycle equipment segment: forklift domestic sales of 121,000 units, an increase of 6.5%; aerial work platform domestic sales of 0.63 million units, down 47.0% (due to the rapid development in recent years), while the aerial work truck domestic sales of 777 units, an increase of 33.3% (indicating that there is still a certain amount of growth in the market segments of the high machine space).
Clearly, during the Spring Festival period from January to February, domestic sales of the above-mentioned categories all showed signs of a year-on-year rebound or accelerated bottoming out. Does this signal the imminent start of a new upward cycle for the construction machinery industry?
Some media outlets predict that the newly started real estate construction area will continue to decline by 15.6% in 2025 (after a year-on-year decrease of 23.0% in 2024), while infrastructure growth will increase to 7.0% (after a 4.4% increase in 2024). This suggests that significant market demand growth in 2025 is unlikely.
Thus, the primary factor behind the rebound or accelerated bottoming out of sales in various product categories at the start of the year is changes in inventory. In fact, judging by changes in inventory, the current construction machinery market is completely different from that of a decade ago, particularly with its more complex inventory structure.
- First, the proportion of small machinery continues to rise. This is driven by both rapid economic development and the replacement of an aging population. Examples include the rapid development of aerial work platforms and the continued rise in the proportion of small/wheeled excavators.
- Second, the proportion of domestic brands in inventory has significantly increased. On the one hand, domestic brands with superior price-performance ratios have not only captured the new machine market from joint venture brands but also significantly reduced the domestic stock of imported used machines. On the other hand, recent price wars have not only caused prices to plummet but also forced OEMs to continuously reduce manufacturing costs, resulting in a proliferation of homogeneous, reduced-featured models, thus shortening equipment lifecycles.
- Third, these two factors have shortened the replacement cycle for existing equipment. Furthermore, the vicious price wars waged by OEMs in recent years have significantly harmed the interests of lessors, the primary players in the existing equipment market, forcing them to shorten equipment lifespans and sell them off, further exacerbating the equipment phase-out cycle.
- Fourth, the impact of policies on the existing equipment market is increasingly stronger. Although construction machinery is a leading industry in economic policy and highly sensitive to macroeconomic policy changes, previous policies on the construction machinery market were primarily driven by demand from markets such as infrastructure, real estate, and mining.
Current policy impacts have shifted from the market to the existing equipment market. Policies such as the “Large-Scale Equipment Replacement” and the transition to new energy diesel engines are all directed at existing equipment.
- Fifth, the distribution of existing equipment to overseas markets is accelerating. Since the mask era of 2022, domestic used machinery has closely followed the growth of new equipment, with exports to emerging markets such as Southeast Asia and South America surging. According to a media report, used excavator exports in 2024 are expected to approach those of new equipment, exceeding 80,000 units.
Exports of used machinery, including cranes and road construction equipment, are also growing. This not only broadens channels for clearing existing equipment but also creates a “withdrawal effect” on domestic inventory, significantly alleviating the supply-demand imbalance in the domestic rental market.
- Sixth, due to factors such as the real estate market and debt repayment pressures, regional markets are increasingly diverging. This divergence is not only becoming more pronounced, but the influencing factors are also becoming more complex, leading to widening structural differences between regions and even cities.
