Actuality of Export for Chinese Diesel Generating Set and Countermeasures

- Jan 10, 2018-

I. General export situation of diesel generating set in China

In recent years, the global market demands for diesel generating set has been on the increase. The statistics of Frost & Sulli-van shows that the global market demands for diesel generating set was 7.2 billion dollars and 8.57 billion dollars in 2011. and was estimated to be up to 15.2 billion Yuan in 2012. The volume of exports grew swiftly from 71 million dollars in 2003 to 793 million dollars in 2009, indicating the absolute predominance of diesel generating set in the middle east, Africa, Southeast Asia and Latin America, etc. However, there are also a great many problems and challenges, which are the obstacles to development of exporting of diesel generating set in China.


II. The problems and challenges for export of diesel generating set in China


1 .Few key enterprises, and different quality management levels of enterprises in the industry. There are not many key enterprise with perfect quality management system and production and sale scale of 200 million Yuan among more than 3,000 enterprises of diesel generating set, including only dozens of enterprises such as Shanghai Diesel Engine and Guangxi Yuchai and Wuxi Power, etc., while the rest are basically all small and micro enterprises.


2. Weak competitiveness of product and unreasonable market structure Generally the exported diesel generating sets of China have problems of low grade, single variety, low added value, and low capacity of developing new products, in particular, there are devoid of famous brands with powerful competitive edge in the international market, The unit price of the same model of diesel generating set is only 1/3 of that of the high-end products produced by Japan, etc., or even lower. The target market of exporting is mainly the middle and low-end market in Africa and Southeast Asia, etc., while the market share in the high-end market of EU and America, etc. is low.


3.  The export cost is escalating, leading to continuous fall of export superiority. On the one hand, the large-scale labor shortage in China currently causes significant rise of labor cost, and labour and capital cost has exceeded that in the emerging countries such as Indonesia, Vietnam, India, etc. On the other hand, the land cost of enterprises is also increasingly remarkably. Take Fuan city in Fujian, the capital of small-power motor in China, for example, the rent of workshop is as high as 20 Yuan/month per sqm. The increase in labor force and workshop rent, etc. led to decline of products' competitive edge and export superiority of Chinese enterprises of diesel generating set.


4. The industry order is not normalized with frequent cut-throat competitions. Influenced by the European debt crisis, the international market witnessed downtrend of demands for diesel generating set, so not a few domestic enterprises of diesel generating set adopted low-pricing competitive strategy and made violent price war, which disrupted the market order. In the meanwhile, due to overcapacity, a few enterprises engaged in the industry of diesel generating set only for the purpose of financing via the enterprise platform, leading frequent cut-throat competitions among enterprises, such as competition for one order by multiple enterprises, leading to large decrease of export price and eventually undermining product quality.


5. The foreign trade barriers emerged in endlessly, and the export bar is raised gradually. The countries or regions like EU, America, Africa, etc. introduced a lot of trade barriers, which are mainly requirements in the aspect of authentication, technical standard, qualification assessment procedures, environment protection, package and materials, etc. These foreign trade barriers increased the export cost of Chinese enterprises of diesel generating set on the one hand, and blocked the export of many enterprises of diesel generating set with low technology capabilities on the other hand.


III. Countermeasures


1. Bring the leverage function of key enterprises into play and improve the enterprises' quality management level level. Firstly, the government sectors should bring the leverage function of key enterprises into play with exemption from customs examination for export as breakthrough point. Secondly, the export enterprises should exert themselves to build the production environment conforming to environmental management system/quality management system (EMS/QMS), closely check raw materials, production security and export detection, to guarantee the products meet requirements. Thirdly, we should improve personnel quality, update production units, enhance field management, to gradually transform the small and micro enterprises from extensive workshop into intensive  one.


2. Actively adjust product mix to improve competitive edge of products. Firstly, the export enterprises should enhance R&D input and efforts in high-end and new-type diesel generating set, adjust product mix to improve competitive edge of products and gradually expand market share in high-end market . Secondly, the government sectors should increase support for the key enterprises to aggressively cultivate own brands, build brands, to be distinctive via brands, expand market via brands, and raise grade via brands.


3. The government and enterprises should join hands to solve the imminent crisis. Firstly, the enterprises should increase input in advanced production equipment, decrease input of front line personnel, improve production efficiency and quality, promote industry upgrading, so as to effectively minimize the influence from rise of labor cost. Secondly the government sectors should aggressively build platform to recruit workers for the enterprises, reward the excellent talents in the enterprises, to solve the employment problem. Thirdly, the government sectors should support with fund and credit, and introduce special measures to solve the troubles of land use and house renting of enterprises.