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What are XCMG鈥檚 export priorities?
21 January 2025
Chinese manufacturer XCMG made a big showing at the Bauma China exhibition in Shanghai in late November. It was a good place to find out more about the company鈥檚 export strategy, and its response to possible US import tariffs.
XCMG鈥檚 Hanson Liu, speaking to Construction Briefing on the second day of Bauma China, is keen to play down the comments on tariffs made by President-elect Trump the day before the show opened.
鈥淔ortunately, it鈥檚 only a small portion of the market for us,鈥� he says, 鈥淸The USA] is not our biggest market. It鈥檚 not even the second largest one.鈥�
Hanson Liu, vice president of XCMG Construction Machinery Co Ltd, pictured at Bauma China. (Photo: Construction Briefing)
Of course, as a vice president of the Chinese manufacturer and general manager of its import and export division, Liu is very aware of the importance of the USA. The company has previously said that Europe and North America will represent 25% to 30% of its total exports by 2027, with exports reaching half of all revenues.
In support of that aim, the OEM already has a factory in Monterrey, Mexico, and in early 2024 announced it was investing in a second facility in the country.
What tariffs will come under the new US administration are still not known, so it is not fair to expect a detailed plan from the company. However, Liu, who joined XCMG more than a decade ago as an IT specialist, makes it clear - in diplomatic language - that he believes consumers do not benefit from high tariffs.
He says they increase prices, hinder competition on technology and, ultimately, lead to 鈥減oor customer satisfaction鈥� They transfer the tariff burden to the customer. And because the customer cannot get the right product, they compete less well in their market.鈥�
Liu places the discussion in the context of how Chinese manufacturers have evolved in their export strategies, with the initial focus on price then shifting to service, and finally moving towards competition on technology.
He thinks that 鈥榯echnology鈥� stage has been reached. Few who walked the Bauma China show last November would argue with that, with Chinese suppliers clearly matching their Western counterparts when it comes to new power technologies such as electrification and hydrogen fuel cells.
鈥業nternationalisation is localisation鈥�
Higher tariffs will be an issue that XCMG and other Chinese manufacturers will have to address. And while the focus, understandably, is on what is going to happen in the US, Liu is keener to make a wider point about the manufacturer鈥檚 strategy.
鈥淲e have a facility in Mexico, in Brazil, in India, in Germany鈥�, he says, 鈥淲e are globalised. We strongly believe that internationalisation is localisation.
鈥淲e are a global brand that localises its resources as much as possible. We say local people, local marketing people, designers, engineering. For example, in India we have almost 100% Indian people. We can export technology, and export investment.鈥�
Excavators on XCMG鈥檚 stand at Bauma China. (Photo: Construction Briefing)
Regarding Europe, there are discussions between the European Union and China on minimum pricing arrangements for electric vehicles, as an alternative to tariffs. Could such an approach work on construction equipment?
He responds by saying that Chinese OEMs are already manufacturing products in Europe, and that in consumer goods and EVs, European brands have been very successful in China; 鈥淓uropean car manufacturers have worked in China for many years and earned a lot of money. Why can鈥檛 you enjoy some Chinese-made cars? The market works both ways - we work together.鈥�
If the US market is where uncertainty lies, XCMG is still forging ahead in other areas of the world. The current priorities are Indonesia and the Middle East, where manufacturing facilities are now being planned.
It will also expand its footprint in Uzbekistan, where it has had a manufacturing facility for 10 years already, and possibly Pakistan. It also has a mining truck assembly line in Nigeria.
What is the plan for Indonesia? 鈥淚 think it is under investigation, how to make it happen soon. We already made this part of our strategy.鈥�, he says. That facility would focus initially on electric mining trucks.
For the Middle East, Saudi Arabia is option being looked at, and that plant would be for excavators.
鈥淭he logistics cost is a big factor for heavy machinery鈥�, says Liu, 鈥淚t鈥檚 not logical to export a lot of counterweights, structures. The space, the weight, the cost; sometimes it is not sensible for an OEM to produce in one manufacturer plant.鈥�
Committed to aerial platforms?
One new area for the business is aerial platforms - the self-propelled booms and scissors that are so popular with the world鈥檚 equipment rental companies.
鈥淎WP definitely is one of our leading emerging new business sectors鈥�, says Liu, 鈥淲e continue investing. It鈥檚 good for our electric technology, new energy.
鈥淭hat鈥檚 our main investment. This is a big commitment to our customers. We鈥檒l grow this business.鈥�
In addition to its Chinese manufacturing facilities for MEWPs, it is also producing lifts in Mexico; 鈥淣ow it is already up to 50% localized in Mexico鈥�, he says, 鈥淟ocal procurement and local labour.鈥�
XCMG鈥檚 massive XCA4000 crane pictured at the 2024 Bauma China show. (Photo: Construction Briefing)
The investment in electric AWPs is just part of XCMG鈥檚 investment in new power technology. XCMG benefits in this area from a battery manufacturing joint venture with BYD, the Chinese car maker and battery producer.
Liu sees China鈥檚 advanced battery supply chain as giving its OEMs an advantage in the global market; 鈥淒efinitely we have an advantage over other competitors because we have integrated our supply chain for electric equipment. We have our own joint venture with BYD for battery cell manufacturing.
鈥淲e have our own battery pack plant. We have our own team for battery management systems, we have our own motors plant, in Dalian.
鈥淲e have the charger, we have electric cylinders, electric axles, reducer. We can do that by ourselves and that鈥檚 why we can move faster than any other manufacturers.鈥�
Growth in electric equipment
China is the biggest current market for electric construction and mining equipment, largely for mid- and large-sized wheeled loaders which are used at quarries and other fixed locations, where charging is relatively easy.
Even so, electric machines still only represent around 5% of all of XCMG鈥檚 machine sales. 鈥淏ut it鈥檚 growing very fast鈥�, says Liu, 鈥淎nd our export growth of electric machines is around 280%. That鈥檚 from a small number but is growing fast.鈥�
This XC7-SR07 skid steer loader was one of the all-electric machines on show on the XCMG stand. (Photo: Construction Briefing)
Liu says the driver is not just the environmental benefit 鈥� lower carbon emissions 鈥� but a lower total cost of ownership; 鈥淭CO is much lower. That鈥檚 the main driver.鈥�
How quickly will XCMG鈥檚 sales of electric machines grow? What will the proportion be in three years?
鈥淚 think maybe 20 to 30%. It could be 50% for some small machines鈥�, he says, 鈥淔or example, small loaders, it could be much faster in China. Maybe within the next five years there will be no diesel loaders.鈥�
Of course, the investment in export markets comes at a difficult time for the Chinese construction equipment market. Total annual sales reached a peak in 2020 and 2021 鈥� more than 450,000 units - because of government stimulus efforts, but have since dropped to less than 200,000, according to Off-Highway Research.
鈥淔ortunately, we saw very favourable signs in October鈥�, says Liu, 鈥淭he working hours of the existing population of machines was higher than the first nine months. And also, sales in October were higher than previous months this year [in 2024]. October was a big surprise to all of us. It鈥檚 rebounding.鈥�
It may indeed be rebounding, but export growth will remain a key component in XCMG鈥檚 growth strategy. That was clear at Bauma China, where it hosted some 800 foreign customers.
It is also likely to be very evident at the Bauma exhibition in Munich this April, where XCMG is expected to make a big showing. And if the worst fears about US tariffs are realised, it may be that Europe becomes an even higher priority for the company.
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