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Machine tool industry vicious price competition signs of reproduction

As a free-flowing commodity, the price war or the price competition is quite normal. However, with the tidal wave of price war, not only many enterprises have fallen, but also a wake-up call for the development of the industry.


There is room


After years of dealing with the machine tool industry, we also think that price reduction is a boon for users and that enterprises can cut prices, indicating that there is still water and squeezing more healthily.


Moreover, in a fully competitive market, a good competitive enterprise is without fear of such competitive means. The appliance industry is experiencing a traumatic price of baptism, outstanding business talent to come to the fore, in the domestic and foreign markets have their own voice.


However, as the main machine equipment industry, the machine tool industry has its own industry characteristics: First of all, it is a typical "processing - assembly" type discrete manufacturing industry; followed by product structure and manufacturing process is more complex, the manufacturing process required machinery and equipment and fixture types Many; there are a wide range of types of production technology, both order-type production, inventory-based production, but also order assembly-type production and order design and production, but most of the current machine tool manufacturing enterprises to order-based production; there is a clear point Machine tool mainly consists of two parts of electrical and mechanical components, electrical parts are mainly outsourced; mechanical part of the parts by the Association, self-made and purchased three models derived; workshop is generally divided into machining large workshop, machining small pieces Workshop and Assembly Workshop.


Therefore, as a multi-product small batch production product, the machine tool is not self-compatible with the mass production and sale of household appliances, but due to the complexity of manufacturing, the precision of the product is strict, its use is not compared with ordinary daily products.


However, from about 2000 to about 2011, almost 10 years of vigorous development have taken place. In addition, the government has proposed to revitalize the equipment manufacturing industry and pay more attention to the machine tool industry. For a time, capital predators generous intervention, small-scale factory workshop is numerous, as an industry association, China Machine Tool Industry Association, who told reporters that often hear of the establishment of new business, the data changes every month.


The vigorous development of the market has given birth to many new forces. However, with each cold current strike, the stage of the market shrunk or slumped, not enough to support the ever-expanding capacity, price competition naturally took place.


For example, the recent market from the second half of 2011, due to the continued downturn, the average output value of industrial enterprises fell about 20%.


Relevant data show that in 2012, with the significant drop in market demand for machine tool products, the key industrial enterprises output fell 15.6%. Among them, the output value of the cutting machine tool industry dropped by 17.9% from the same period of last year with a profit of RMB5.73 billion, down by 30.4% over the same period of last year. CNC system and rolling parts of the two small industries the most serious decline, down 38.4% and 34.2% respectively, the other machine tool accessories fell 22.8%.


In 2013, the situation did not show a major improvement, and the industry's hope of a rebound did not stabilize. In the backlog of inventory, the market is not clear under the premise of the price is undoubtedly the most effective promotional practices.


According to Tu King first analysis, from January to November 2013, when the sales revenue of small-size metal cutting machine tool trades decreased by 7%, the total profit dropped by 82.1% and the sales profit margin was only 0.65%, indicating that the business conditions of the enterprises have deteriorated and the profitability Substantial reduction, some companies have been at a loss. Homogenization of the enterprise is very serious, the signs of the vicious competition in the industry has emerged.


Excess capacity is the soil that produces vicious competition. In 2011, the number of metal cutting machine tools enterprises was 1070 with a production of 403,935 units, but by 2013 it reached 1,264, an increase of 18.1%. The annual output is expected to reach 858,100 units, up from 2011 112.4%.


With so many businesses, and gold cut sales of 18 billion US dollars in 2012, no wonder some people say that modest competition or elimination is conducive to the industry's healthy body.


In this sense, indeed, there is room for compression in the industry. However, from another perspective, compared with the profit margin, the profit margin of gold cutting products in 2012 was only 4.1%, down 1.5 percentage points from the previous year.


This shows that there is little room for price reduction. After all, a modest profit is the guarantee of product quality.


The price war in history


Since the reform and opening up, China's machine tool products as early cancel the national mandatory plan to market the product has been experiencing price competition. In the 15 years since the mid-1980s, it has gone through roughly three phases.


The first round is the export machine tool price wars from the mid 80s of last century to the early 90s. After the State Council formulated the relevant policies encouraging the export of electromechanical products in 1985, the export of machine tool products in our country showed a relatively high growth momentum. At that time, the first machine tool factory in Jinan, Shenyang First Machine Tool Plant, Yunnan Machine Tool Plant and a number of export-led enterprises as the representative, led a large number of SMEs to expand exports.


At this time, the export of machine tools in our country increased from 68 million U.S. dollars in 1985 to about 200 million U.S. dollars in 1990. The vast majority of the products exported are ordinary machine tools. But accompanied by the export price of the machine "fight chaos." A considerable number of SMEs to expand the export of machine tools, at the expense of corporate profits to show their "export performance." Some enterprises have a big gap in product quality and quality compared with similar famous brand products in China, but they sell their products to the traditional markets of Hong Kong and Southeast Asia at a price lower than 50% to 60% of that of similar brand-name products, North American market.


The price war that hit more chaos makes China's machine tool price disruption in the international market completely disrupted. Not only domestic export agents press on each other to buy products, and even affect the existing interests of agents in foreign markets, many foreign agents spend The market pioneered by many years of energetic development was torn apart by the disruption of low prices in the country. By the late 1980s, even the companies that had been doing the export of machine tools from the PRC to the Mainland of China could not afford the domestic price shocks, The export machine tool in turn turned to the development of their own manufacturing industry.


The second round is the price war of domestic machine tools in the mid 90s of last century. After experiencing the ebb of the early 1990s, with the new upsurge of domestic economic construction from 1993 to 1994, the output of machine tools in our country increased from 190,000 units in 1993 to 260,000 units in 1994.


Blind optimism and misguided market information led many businesses to abandon their product mix and desperately to upgrade their average machine tool product by expanding their production capacity. But after a long time, after 1995, with the "cooling down" and "soft landing" of domestic economic construction, the investment in fixed assets decreased and the machine tool market began to shrink. By the end of 1996, the national machine tool inventory was up to 6 months of production.


Some export-oriented enterprises in the past few years, the case of exports fell, began to export some of the machines into domestic sales, and each machine to none other agents, distributors thousands of dollars, which led to a new round of machine tool prices Wars. And some powerful, there is a certain batch of large enterprises, do not lose their market share, have also started to cut prices. After that, the price of Chinese machine tools is like being pushed down dominoes, all the way down. In this price war, both the sponsor and the passive have suffered heavy losses. At the same time, China's machine tool manufacturing industry has entered the dilemma of loss-making throughout the industry.


The third round is the price war of common and CNC machine tools in the late 20th century. From 1995 to 1999, China's machine tool industry suffered a loss for the entire industry for five years in a row, with production and sales declining year by year. During this period, more than 50% of corporate losses, 20% to 30% of bankruptcy or restructuring. Faced with this situation, many companies are saddening, began to vigorously adjust the product structure. On the one hand is the annual compression of ordinary machine tool products, on the other hand began to expand higher prices of CNC machine tools production.


However, due to years of losses, the capability of independent innovation and development of enterprises is obviously not strong. With the active fiscal policy of stimulating domestic demand and boosting investment in the second half of 1999, the investment in technical innovation increased sharply, the production and sales of machine tools stopped sliding, and started to gradually rise. With the rapid growth of domestic CNC machine tools, CNC machine tools in 2000 reached 1.4 million units, an increase of nearly 1 times that of 1998. With the improvement of the market, a new round of price war on the machine again resumed. Some enterprises are rapidly increasing their production capacity while setting off "markdowns" activities, trying to increase the market share by means of small profits and quick turnover, while other companies to keep their market share, but also began to cut prices. So there has been a market but sales of better prices, "increase production does not increase efficiency," the strange phenomenon. One of the most intense price war lathe with CNC lathes, for example, several large domestic lathe production plant in January-September 2001 in sales year on year (30% ~ 50%) growth situation, but negative growth in profits .


Price war is undoubtedly a double-edged sword, the price of each machine tool, will be transferred to the downstream machine tool accessories, parts manufacturers, downstream manufacturers to create new features for the development of components is not conducive to technological upgrading of the entire industry. In addition, prices of raw materials, production costs increase, the price war can only make the machine industry is not profitable day even worse.


However, at any time, there is no shortage of "picks", and perhaps with this kind of action, we can break the calm on the surface and aggravate the changes in the industry.


Some people think that the price war is a manifestation of the market economy and should be free to develop with it. However, at present, the market economy in our country is still not perfect yet and the market competition is still not yet mature. The blind and disorderly market competition will cause more catastrophe to the machine tool manufacturing industry in our country. And low-cost marketing is only a market in the market, the case of backlog of inventory under a marketing tool, not the only means. More enterprises should go out of price misunderstandings and put the foothold of their own business development on product structure adjustment and market structure adjustment.


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Zhejiang Ronnie Precision Machine Co., Ltd.

Address:No.336,Xinxing Section,Wanghai Street,

Haiyan County,Jiaxing City,Zhejiang Province,China

Tel: 0573-86880650

Fax: 0573-86880657

E-mail: [email protected]

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