XCMG speaks

CT: What has driven the recent dynamic growth in Chinese truck crane demand?

Yin Sheng Du: Back in 1992 demand reached 6,000 units but then due to macro economic factors demand declined between 1993 and 1999 making for a very difficult time for manufacturers. At that time XCMG had a share of about 20% but now our share is close to 60%. In 1999 we made a decision to make a strategic change and improve both product quality and our technology with significant capital investments in our manufacturing plant. In 2002 we introduced the first in our 'K Series' of truck cranes with our 16 and 50t capacity models and with this series we really changed the Chinese market.

CT: What is your manufacturing capacity?

Du: Before 2002 we had only 50,000 sq m of manufacturing capacity. Now we have 120,000 sq m. Beginning in March of this year we produced over 700 cranes for the first time and every month since then we've produced about the same but in July we produced almost 800 truck cranes. Currently our factory is operating at full capacity. Our workers are only taking two days per month off work. The day starts at 7 am, they take 90 minutes for lunch and finish at 5.30pm. Some also work 2-3 hours per day overtime. Presently we employ 3,000 people in the plant including 300 in administration. Our sales and engineering departments are separate from this as are our sales and service branches.

CT: Could you tell us about your domestic sales and service network?

Du: We have 28 company-owned branches across China and nine parts centres just for cranes. Altogether there are about 300 people engaged in sales and service with about 60% on sales and 405 on service and parts. Our cranes are covered by a 12-month warranty and we promise to reply to a customer call in 12-minutes maximum. In 2005 our spare parts revenues were about 3% of our total sales (about RMB 120m: $15m). In China about half the customers do their own repair work.

CT: Why does XCMG offer several different models of truck cranes of the same capacity?

Du: China is a very large market for small truck cranes (about 90% of total demand is for cranes of between 8 and 25t capacity), competition is very intense. We offer the different models to meet the different needs of different customers. For example we offer four different 25t and three different 16t truck cranes. Some have three-section and some have four section booms. There are full width or narrower carrier cabs and there are mechanical or hydraulic crane controls. However, most of the components are the same. We also manufacture almost all our carriers - including the small two-axle carrier for the 12t model. Most of our competitors buy trucks or carriers because they don't have the technical capabilities. On our smallest carriers we buy the power trains from (Chinese truck maker) Dong Feng instead of buying their complete trucks. This way the crane is on a purpose-designed carrier with serviceable components.

CT: Where do you see growth in demand in the Chinese market?

Du: The 20t and the 40t classes are growing. In addition we recently introduced a three-axle 30t capacity crane and five-section boom version of our 25t. Crane rental customers are our major customers and are driving our product development. They represent 70% of our market with the remaining 30% being government departments.

CT: What is the life expectancy of truck cranes in China?

Du: The average is 15 to 20 years. Then the government will ask customers to scrap old cranes. We guarantee to supply spare parts for up to 10 years. In China there is no trade-in policy amongst the manufacturers. We only sell new cranes and do not take old ones in exchange.

CT: How many truck cranes does XCMG export?”

Mrs Luo, export sales manager: In 2003 we only exported about 50 units but this increased to 90 in 2004, 300 in 2005 and we expect about 1,000 this year. The most popular sizes are our 16, 25, 30 and 50t truck cranes. The most important markets in 2005 were Australia with about 35 units, Brazil and Angola, where we sold about 100 machines to Chinese contractors and our government departments.

Mr Tang, group export sales director: XCMG is a new company to export. Really we have only exported for the past two or three years. We only have what might be called normal distributors in Australia, Brazil, Iraq, Kazakhstan and Kuwait. Chinese contractors take most of our cranes overseas for large projects sometimes sponsored by our government. In such cases, like the large Angolan contracts, we send technicians and parts with the cranes. We cannot say that we have set up a distributor network at this stage. We do have relationships with some import/export companies in several countries in Africa, the Middle East and Asia but these cannot be called distributors. We are very pleased with the efforts of David Potter and his team at Australian Crane & Machinery, based in Campbellfield, Victoria who are our distributors for Australia and New Zealand. Between March 2005 and May 2006 they ordered 47 truck cranes including sixteen 25t, six 35t, eight 50t and seventeen 65t. In Brazil our distributors GTM sold twenty-one truck cranes ranging from 35 to 100t capacity but again our 65t QY 65K has proven the best seller.