Liugong Opens a New Situation in North America

Marc Dowdell, president of North American Liugong, said: "The question is not whether China Construction Machinery Corporation can succeed in North America, but how many will be successful."

LiuGong North America is a subsidiary of Liugong Machinery Co., Ltd., headquartered in Liuzhou City, Guangxi Zhuang Autonomous Region, and achieved its first profit in 2013. This is a major breakthrough made by Liugong in North America since its opening in 2008.

The chairman of Liugong Machinery Co., Ltd. Zeng Guangan had predicted that he would not be profitable in the North American market within 10 years: "Globalization is a long-term process, and it will inevitably be paid part of the tuition fees."

At Con Expo-Con/Agg in Las Vegas on March 4th, he spoke on a company’s largest excavator, praising the North American company’s team and encouraging them In the North American market to achieve better results.

Liugong sold 500 sets of equipment in North America last year, with sales of about $30 million.

Luo Guobing, vice-president of Liugong, said that LiuGong is still in the initial stage of development in the North American market compared with LiuGong's total revenue of 680 million U.S. dollars in overseas operations last year. The potential is huge but the competition is fierce.

He predicted that the company’s sales revenue in North America will maintain a 40% annual growth rate in the next five years.

Founded in 1958, Liugong has become a leading manufacturer of heavy construction machinery and material handling in China.

Liugong's major overseas markets are Latin America and Southeast Asia.

Liugong owns a factory in India and has a 16,000-square-foot (about 1,500-square-meter) parts warehouse and a North American office in Houston, Texas, to strengthen after-sales service.

Zeng Guangan said: "The United States attaches great importance to the service of the engineering equipment market. If there is no after-sales service, the product will be unable to talk about."

As a helmsman who has worked for the company for 30 years, Zeng Guangan has been advocating the expansion of company business overseas.

He believes that although the market share in North America is relatively small, the company still firmly develops this market and continues to invest because it is the most important market for global construction machinery manufacturers.

He said: "Southeast Asia is currently our largest overseas market, but North America is our fastest growing market. We will maintain this high growth and increase profits."

Zeng Guangan said that in the long run, the North American market will account for 25% of Liugong’s total sales revenue within 10 years.

"For Chinese companies that have already achieved a leading position in the domestic market, they must enter the overseas market."

Due to rising costs in the domestic market, reduced orders and lower profit margins, more and more Chinese manufacturers have started investing in overseas markets in the past few years.

According to the data from the China Machinery Industry Federation, the annual growth rate of profits of the domestic machinery industry has decreased from 55.6% in 2010 to 15.6% in 2013.

Cai Weici, vice president of the China Federation of Machinery Industry, estimates that the overall industry's profit growth rate will continue to decline to 12% this year.

Cai Weici said: “It is not easy to go to the international market. Chinese companies should make full preparations and steadily advance in overseas markets. In the international market, Chinese companies give the impression of low prices and low quality. But this situation has changed. We have advanced technology and high quality products. It only takes a certain amount of time for our customers to understand us."

At present, more and more Chinese companies have entered the North American construction machinery market. Douglas R. Oberhel鄄man, Chairman and Chief Executive Officer of Caterpillar, the world’s largest manufacturer of construction machinery and mining equipment, said that one or two Chinese companies will stand out in the future.

He said: "We have been in China for many years, which means that we know these companies very well and know how to compete with them in this region (North American market)."

Luo Guobing said: “North America has set a high threshold for construction machinery manufacturers in terms of technology, emission standards, safety and after-sales service. Therefore, Chinese companies that want to play a major role in the North American market must be fully prepared.”

For a long time, the North American market has been monopolized by high-end brands, making it difficult for Chinese companies to enter.

Prior to setting up a representative office in the United States, Liu Gong spent three years of research and development and testing. Luo Guobing said that more than 30% of Liugong's R&D investment is directed at the North American and European markets.

Zeng Guangan said: “Localization of talent is another important factor for success.”

He said: "In overseas markets, we need a high level of professional law firms and headhunting companies to serve us locally. At the same time, Liugong also strives to strengthen the mutual understanding between Chinese employees and overseas employees. We think this work is very important."