Capital Equipment News December 2019

EDITOR'S COMMENT

EVOLUTION OF THE SIMPLE TOOL

I n what has been another difficult year, the construction and mining equipment market continued to lose traction. Latest COMNESA figures show that equipment sales in Q3 followed the downward trend experienced in the first two quarters of the year, marking a third consecutive negative quarter. Overall, the market decreased by 9,7% year-on-year, with construction equipment sales going down 11% and mining equipment sales contracting by 3,6%. Quarter-on-quarter, sales of new equipment went down by 6,42% in Q3 2019 when compared with the same period in 2018. Figures show that 1 357 machines were sold during Q3, 93 units less than the 1 450 recorded during the same period last year. In a recent interview with an executive from one of the leading premium OEMs, he noted that with the market struggling, local customers are more open-minded about trying new products and more cost- effective solutions. This trend is expected to gain momentum as the market remains under pressure and customers have to deal with the ongoing uncertainty. The trend is not unique to the local market; there is definitely a big global shift towards low-spec, low-priced construction equipment, better known as value brands. In fact, available industry statistics show that value brands currently contribute about 80% of global construction machine sales. However, this is more prevalent in developing markets. To give a context, Chinese brands now have a 60% share of the African wheel loader market, while 80% of the same market segment in Russia belongs to value brands at large. Fleet owners are opting for less expensive, non-premium machines capable of undertaking less rugged jobs, which don't necessarily need premium machines. There is defeinitely a big demand for

service-type machines. Chinese OEMs are largely the custodians of this market tier, as the days when their offerings were viewed with disdain are long gone. They have achieved this feat by improving the quality of their offerings. They have also stuck to their strategy of offering low-cost models with simple functionalities. In fact, this is the new product development strategy in the manufacturing environment, aimed at meeting the growing global appetite for a simple tool. To survive internationally, OEMs are strategically examining customer needs and values in all their served market segments. Increasing complexity and costs of new products place an increased importance on balancing upfront costs of equipment and productivity. Premium OEMs have long noted this trend. Consequently, they have aligned themselves with low-cost brands in their stables to make the most of this growing market segment. For example, Volvo CE acquired SDLG some years ago, while Caterpillar bought SEM. The trend has even expanded into the crushing and screening market where Metso recently exercised its call option to acquire the remaining 25% of shares of Shaorui Heavy Industries Ltd, a Chinese manufacturer of crushing and screening equipment targeted for mid-tier markets. This is a clear indication of the evolution of the simple tool. Innovation is traditionally defined by sophisticated technologies, but in these challenging economic conditions, it shouldn’t always be the case. Some of the best ideas, especially in today’s designs of yellow metal equipment, are very simple, based on a clear understanding of customers’ needs – finding balance between simplicity, productivity and price.

Munesu Shoko – Editor

capnews@crown.co.za

@CapEquipNews

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CAPITAL EQUIPMENT NEWS DECEMBER 2019 2