Business
UPDATED: 10:09, May 17, 2004
Daewoo digs deep in local digger market
Daewoo Heavy Industries Yantai Co Ltd will spare no effort to hold on to its lion's share of China's booming excavator market.
Between January and March, it managed to acquire a 25 per cent share of the Chinese market, up from last year's 22 per cent, according to sources with the Excavator Branch of the China Engineering Machinery Industrial Association.
In March alone, the company sold 1,537 excavators, equalling its total Chinese output for 2000.
Kenneth Chae, general manager of Daewoo Yantai, said it only took Daewoo 7 years to make and sell its 10,000th excavator in China, making it the country's largest excavator producer.
"As the first exclusively foreign-owned excavator-producer, we came here with 'China dreams' in the 1990s," he said.
"Today we are realizing those dreams."
In 1994, Daewoo Heavy Industries & Machinery Ltd (DHIM), based in the South Korea, injected US$63 million to set up a plant in the Yantai Economic and Technological Development Zone, when other foreign excavator producers were not so confident in the Chinese market.
After being put into production in mid-1996, Daewoo Yantai started making excavators and forklifts.
Last year, Daewoo Yantai sold 6,116 diggers and 1,000 forklifts, and chalked up sales of 3 billion yuan (US$363 million), taking it to first place among excavator producers in China in terms of both sales value and market share. To date, its total assets have reached 3.2 billion yuan (US$387 million), with an annual production output of 12,000 excavators and 3,000 various forklifts.
Chae said the company's Chinese success story could be attributed to three reason.
First, the nation's sustainable economic development and sound investment environment have encouraged the company to take root in China. The vast local market has provided numerous opportunities for the company.
Statistics show that China has become the fourth largest excavator market after Europe, the United States and Japan. In 2000, about 7,700 diggers were made in China. The number rose to 19,500 in 2002 and 30,000 last year. The increasing market potential has attracted world brands. Besides Daewoo, companies such as Hyundai, Komatsu, Hitachi and Caterpillar have also founded their own joint ventures in China.
Chae said good customer services and a complete production, distribution and service system throughout China have also helped Daewoo earn more customers in the past three years.
To date, it has set up 12 branch offices and developed 65 sales agents in China. Daewoo's customers can gain quick, quality and convenient services at 24-hour after-sales service centres.
Third, pursuing reasonable profits and adopting flexible operational strategies have also won many customers. Daewoo was the first company to offer installment plans. "The new sales mode initiated by Daewoo has greatly increased our sales records and consolidated our sales network," said Chae.
"We are negotiating with 10 of China's major banks to complete the installment plans for our customers, forming a production, sales and purchasing union among Daewoo, banks, sales agents and our customers."
Chae said as an enterprise entrenched in China, the interests of Daewoo Yantai are linked with those of China's, which means the company is devoted to the country's economic development.
"We are making the best excavators in the world in China with the same design, standards and technologies as those in South Korea," Chae said. Daewoo Yantai has a larger production area and more advanced facilities than the Daewoo excavator plant in South Korea.
"We are trying to localize our company by using Chinese resources as much as possible," he said.
Ninety-five per cent of Daewoo's staff are Chinese and 95 per cent of its Korean staff can speak Chinese.
Since 2002, Daewoo Yantai has been exporting diggers mainly to Southeast Asia, the Middle East and Europe.
Its small and flexible excavators can be used in subway, highway, Olympic stadium and urban construction projects.
The company's numerical-control machine tool plant went into operation on April 8. It has an annual production capacity of 1,000 units.
In the meantime, the completion of its third excavator production line expansion has increased the company's output to 15,000 units a year. It will also try to select and co-operate with new partners in China in other engineering machinery projects, to diversify its management.
Chae said in the near future, the company's total investment in Yantai will surpass US$200 million, and Daewoo Yantai will become a production base for DHIM not only in China but the world.
Chae estimated that this year, Daewoo Yantai would achieve sales of 7 billion yuan (US$847 million). Its annual sales are expected to hit 20 billion yuan (US$2.4 billion) by 2020.
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