Three factors boosted instant development of local Chinese enterprises
As a safe, reliable and efficient emergency supply, mobile supply and self-contained power, the diesel generating set served as important auxiliary power source to guarantee the economic development in the past few decades in China. Besides, the sustainable growth of demands for emergency power supply has given rise to some local Chinese enterprises that can rival such famous international brands as Commins and Caterpillar, etc. to share the market. Since the 1980s, the Chinese market of diesel generating set has evolved from large dependence on importing to complete localization of manufacturing middle and low power products, and currently part of local Chinese enterprises can produce sets with power above 2000kW and high stability. During the short period of two to three decades, the Chinese enterprises of diesel generating set showed mature process and assembly capacities, which won wide recognition of a good many users at home and abroad.
In the last one decade, several factors drove strong demands of Chinese market for diesel generating set and the demands largely promoted establishment and development of local Chinese enterprises in domestic market. Firstly, during 2003-2005, China suffered from power shortage extending from local parts to the whole country, especially in 2004, the power shortage of the country exceeded 30,000MW, which equaled to installed capacity of 30 ultra-supercritical thermal power generating unit. To guarantee the urbanites' power utilization, the government had to cut power of the manufacture plants that consume much power, thereby driving the huge demands for diesel generating set. Secondly, during the 2008 Beijing Olympic Games and 2010 Shanghai World Expo, the investment in venues for the former reached 20 billion Yuan and that for the latter reached 18 billion Yuan. Above all things, this drove the investment of more than 1,000 billion Yuan in construction of urban orbit traffic, high-class hotel industry, internet, communication and financial service, while these terminal markets are just the main application domains of diesel generating set. Thirdly, to withstand global financial crisis, the Chinese government put in 4,000 billion Yuan to stimulate the domestic economic development from 2009 to 2011, with more than 2,000 billion Yuan invested in projects of construction for railway and highway, etc. Added to this, there was also severe power shortage of China during 2008 to 2011, especially in 2001, the power shortage again approached 30000MW.
These factors stimulated demands in the market of diesel generating set in China, making annual compound growth rate of domestic market in a given period close to 15%. The industry report of MARTEC consulting firm shows that the sale of Chinese diesel generating set market in 2011 reached RMB 14.5 billion Yuan and market size in 2015 is estimated to exceed 25 billion Yuan. Continuously and stably increasing market demand gave rise to some large local enterprises, such as KCWY, Dingxin, Baifa, Starlight, etc., whose annual sales exceed 500 million Yuan. These enterprise already can rival international giants such as Commins, Caterpillar and Kohler.
Resistance to development has emerged in the domestic market
After quick development of one decade, the domestic market of diesel generating set suffered from some resistance to development, which is unavoidable trial in development cycle of the market. That bearing the brunt is slowdown of increase rate of Chinese investment in infrastructure construction and manufacturing industry with high energy dissipation. During 2009-2011, the construction projects in the government-led investment of 4,000 billion Yuan were basically finished and put into service, while some projects failed to deliver expected usage efficiency after constructed, thereby forming some resistance to further introduction of future stimulation policies. On the other hand, to reduce pollution discharge and improve energy efficiency of industrial production, substantive medium and small-sized manufacturing plants, in particular, the enterprises in the industry with high energy-dissipation, will be possibly shut down, while they have ever been important users of diesel generating set in power shortage of many times in China.
Secondly, the competition in the domestic market is cut-throat and product homogeneity is high. Solely the enterprises with sales of more than 10 million Yuan exceeds 200 ones, which are called OEM enterprises, and the engines used by them are mostly provided by Chongqing Commins, Volvo, Mitubish, etc, and generators are supplied by international brands like Leroysomer and Marathon. The terminal application market of medium and low end also adopts local Chinese engine brands, such as Shanghai Diesel Engine, Jinan Diesel Engine, and Changchai, etc. In the past market phase, local Chinese enterprises generally only stressed development of clients and expansion of marketing channels, while few enterprises made a point of customizing products according to clients' application demands and maintaining after service, as the this requires large input of cost, and cannot profit the enterprises in a short period.
Thirdly, as the international brands such as Commins, Caterpillar and kohler etc. shifted manufacturing to China, and some foreign funded enterprises took China as the production base in the Asia Pacific region or even the whole world., to reduce cost and compete with domestic enterprises, which undoubtedly lowered the general profit margin of the industry.
Due to the above reasons, local Chinese enterprises of diesel generating set no longer rested satisfied with the domestic market, but turned to overseas market, especially the foreign market of engineering contracting projects. The case study by MARTEC consulting firm on Chinese market of diesel generating set shows that the volume of exports of diesel generating set in China was only about 1 billion Yuan in 2006, while in 2010, the number mounted up to more than 10 billion Yuan, with annual compound growth rate close to 80%.
Compete with international giants in the world market
Local Chinese enterprises of diesel generating set sell own products mainly in two forms in the global market: Part of products are directly supplied to local foreign terminals via foreign distributors or direct selling team. The users are usually local manufacture plants or citizens, especially in India, Bengal and Africa where municipal power is not supplied in most of the time. Another form is to participate in foreign engineering contracting projects, with direct clients being usually local Chinese EPC enterprises and project construction companies. In a general way, the majority of Chinese EPC enterprises or project construction companies would purchase domestic generator set for foreign projects. The foreign construction market requires higher on product quality, reliability and brand reputation, which can more embody the status of diesel generating set enterprises in the market.
The chief factors attracting local Chinese enterprises to participate in foreign market of engineering contracting are naturally the tempting market size and long term potential. According to the data of CHINCA (China International Contractors Association), the sum for the engineering contracting projects for which the governments invited tender openly was up to 1,800 billion dollars, while Chinese EPC enterprises only account for 7% of market share currently. After investigating more than 30 Chinese first-class EPC enterprises and 50 largest enterprises of diesel generating set, MARTEC consulting firm found that the sum of foreign engineering contracting projects participated in by Chinese EPC enterprises in 2011 reached 142.35 billion dollars, leading to more than 5 billion Yuan of demands for diesel generating set. Chinese EPC enterprises are of top level in construction of highway, railway, power plant and communication engineering, and in future they will gradually seize the rest market share of 93%, which will cause sustainable growing demands for domestic diesel generating sets.
Despite large gap from the international brands in share in the global market, the local Chinese enterprises gradually formed brand awareness in foreign market, such as Cooltech, Tellhow, KCWY, etc., whose sales to the foreign market exceeded 100 million Yuan. This is not easy for Chinese enterprises of diesel generating set with only about 2 decades of development history. Such achievements increase is attributed to following points: the local Chinese enterprises have significant price advantage over the international brands. The diesel generating sets of Chinese enterprises usually adopt the engine of Commins, Volve, Doosan, Mitubish, MTU, etc., and are assembled via mature technology. The local enterprises have good clients relation with Chinese EPC enterprises and Chinese project construction enterprises.
In market expansion form domestic market to the world scene, local Chinese enterprises of diesel generating set should further make up own drawbacks, such as improving customization level of terminal application, enhancing domestic and foreign after service market, to acquire competitive edge over the international brands, Only all-round improvement on level of products, services and inner management can make the enterprises trusted by the clients for long and win more global users.