{"id":5539,"date":"2016-08-05T19:42:27","date_gmt":"2016-08-05T19:42:27","guid":{"rendered":"http:\/\/minutes.machine.market\/?p=5539"},"modified":"2016-08-05T19:42:27","modified_gmt":"2016-08-05T19:42:27","slug":"caterpillar-affected-by-falling-commodity-prices-and-chinese-rivalry","status":"publish","type":"post","link":"https:\/\/machine.market\/blog\/caterpillar-affected-by-falling-commodity-prices-and-chinese-rivalry\/","title":{"rendered":"Caterpillar affected by falling commodity prices and Chinese rivalry"},"content":{"rendered":"

Even during the Great Depression in the 1930s, construction machinery titan Caterpillar<\/a> managed to grow its business.<\/p>\n

But its sales have been shrinking since hitting a record in 2012. \u00a0Last year its revenue decline accelerated to 15 percent.<\/p>\n

The company has been reeling from the falling prices of commodities of all sorts, including metal and coal, according to China Securities Journal.<\/p>\n

As the profitability of miners plummet, so does their appetite to invest in new projects and machinery.<\/p>\n

Uncertain global economic outlook is expected to continue to hinder\u00a0Caterpillar\u2019s future growth, which being further dimmed by intensifying rivalry in the sector.<\/p>\n

Rivalry is nothing new to the company. It has seen its business thrive in the face of competition from such companies as Sweden\u2019s Volvo<\/a> or Japan\u2019s Komatsu<\/a>.<\/p>\n

But this time around, cut-throat offerings from Chinese makers are particularly hard for Caterpillar to handle.<\/p>\n

Overwhelmed by excess capacity at home, top Chinese brands like Sany Heavy Industry<\/a> \u00a0and Zoomlion Heavy Industry<\/a> are reportedly taking advantage of their lower costs and pushing its models, typically low-to mid-range products, by pricing them 15-40 percent lower than comparable offerings of established players like Caterpillar. \u00a0The good news is the CAT still makes a better product than the Chinese counterparts and though it initially costs more to purchase, end users recoup cost in extended life cycle and durability.<\/p>\n

Chinese companies\u2019 share of the global construction machinery market is estimated to be about 7-8 percent, the report said.<\/p>\n

The number is expected to go up to 15 percent by 2025, compared with less than 2 percent just three to four years ago.<\/p>\n

Going after the international market, though hurting rivals, has not solved the Chinese makers\u2019 problem.<\/p>\n

Hasty expansion during their heyday continues to take its toll on the Chinese companies\u2019 revenue and income.<\/p>\n

Last year both Sany and Zoomlion barely broke even. Back in 2011, both reported earnings in excess of 8 billion yuan (US$1.2 billion).<\/p>\n

It seems for the time being, other than digging a bigger hole for the industry, Chinese makers have not gained much from its aggressive pricing strategy.<\/p>\n

Raymond Tsoi<\/a><\/p>\n

\u2013 Contact us at english@hkej.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Even during the Great Depression in the 1930s, construction machinery titan Caterpillar managed to grow its business. But its sales have been shrinking since hitting a record in 2012. \u00a0Last year its revenue decline accelerated to 15 percent. 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