Manufacturing giants take Chinese firms international
International manufacturing giants are ushering their Chinese partners to the global market in a bid to pursue bigger market shares for both.
Pat Olney, president of Volvo Construction Equipment, a subsidiary of the Volvo Group, said on Tuesday that Volvo's sister brand Shandong Lingong Construction Machinery Co Ltd, or SDLG, will manufacture four models of excavators in Brazil in 2013.
In 2006, Volvo CE bought a 70 percent stake in SDLG, an engineering machinery manufacturer and supplier in Shandong province, a move seen as a big step for Volvo CE's expansion in China with its two-brand strategy.
SDLG sells low and medium-end equipment, which complements Volvo CE's strategy of selling high-end products with higher prices.
"The dual-brand strategy has proved to be very successful," said Olney during the Bauma China 2012 exhibition.
SDLG used to sell mainly wheel loaders in the Brazilian market, but Volvo CE is now going a step further and plans to launch a range of excavators that will be manufactured in Brazil's Pederneiras plant.
On the other hand, Volvo CE's market share in China has increased following its commitment to invest in the emerging economy.
Although China's machinery industry has seen orders and product prices fall due to the gloomy global market, Volvo CE's market share in China for its major products - such as wheel loaders and excavators - grew to 14.7 percent in the second quarter of 2012.
"We have two strong brands to meet customer needs. Thanks to the complementary products offered by Volvo and SDLG-branded machines we have become a leading player in China," said Olney.
Also at the Bauma exhibition on Tuesday, Metso - the Finnish provider of technology and services for the mining and construction industries - and Guangxi Liugong Group Co Ltd said that they will establish a joint venture.
The 50:50 joint venture will combine Metso's expertise with Liugong's 900 sales centers across China.
The localized design and production of Metso's Lokotrack 1000 series of mobile crushing and screening equipment will be the initial scope of the joint venture. Products will be sold under the new brand Metso LiuGong.
"We would like to have more of Metso's products made in China," said Liang Xiaofeng, senior vice-president for China of Metso's mining and construction business.
Liang said that the Chinese construction equipment market will likely be worth $100 billion by 2016, driven by the country's urbanization and infrastructure projects, which offers great growth opportunities for Metso.
Tommi Lehtonen, senior vice-president of the mobile equipment business unit at Metso, believes that the mobile crushing and screening businesses are a new concept in the Chinese market.
"The development of this segment has not been presented strongly in China. We are trying to open a new business here. Also, with this joint venture we will be able to reduce the costs of transportation," said Lehtonen.
Metso will also acquire 75 percent of Shaorui Heavy Industries Co Ltd, one of the leading mid-market crushing and screening equipment makers in China.
Shaorui's 18 sales and service centers and a strategically located manufacturing facility in southern China complement Metso's manufacturing unit in Tianjin.
"China is a very important market for us, and we want to be part of the future development of the fast-growing construction market," said Andrew Benko, president of the mining and construction business at Metso.
In 2011, China was one of the company's biggest markets in terms of net sales, which totaled 777 million euros ($1.01 billion). Metso operates in seven fully owned factories and three service centers, and it has three joint ventures with local partners.
The growth rate of the machinery industry in China in 2012 will be 14 percent, down from last year's 25 percent, Cai Weici, vice-president of the China Machinery Industry Federation, said earlier.
"The growth of the industry in the first half was much slower than we had expected and the second half won't be very easy either," he said.
The industry's output stood at 8.7 trillion yuan ($1.38 trillion) from January to June, up 12.17 percent year-on-year. (Source: China Daily)