Chinese push into Germany’s heart and soul
Todd 08-11-2010
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By Daniel Schäfer in Frankfurt

Sany, one of China’s flagship machinery groups, is set to become the first engineering company from the Middle Kingdom to launch production in Germany, a move that presages an attack by China’s rapidly advancing industrial companies on Europe’s engineering market.
Daniel He, Sany Germany’s managing director, has told the Financial Timesthat the industrial conglomerate aims to start production in early 2011 at a plant for concrete pumps that is being built close to Cologne.
Mr He has put his 60-strong German workforce, which will be increased to several hundred once the plant and an accompanying research and development centre start operating, on a mission to conquer the global heartland of engineering.
“We want to be at least in a very prominent position in Germany,” he says.
His confidence has evidence to back it.
Sany, which makes a wide range of machinery from excavators to mobile cranes, overtook Germany’s Putzmeister as the world’s largest concrete pumps manufacturer by sales in 2006. Over the 16 years since it was founded, the group’s revenues have grown on average by more than 50 per cent a year, to Rmb30.6bn ($4.5bn) in 2009.
“We deserve a good market share in Europe because we are already the global leader,” Mr He says in his Cologne office, where a model of Sany’s 72m concrete pump, the world’s highest, embellishes his desk.
Sany and Chinese rival Zoomlion, which bought Italy’s concrete pumps maker Cifa two years ago, underline how Chinese industrial companies are starting to become serious competitors for Germany’s often market-leading engineering groups – hitting at the very heart of the country’s export success.
“My experience is that more and more Chinese companies are switching from cheap and low-cost products to more sophisticated products,” says Hermann Simon, chairman of Simon Kucher & Partners, a German consultancy group.
“They often eye the Germans as paragons. This new type of competition has to be taken very seriously.”
Mr Simon singles out the solar industry, where Chinese companies such as Yingli are already taking over as world leaders from Germany, and the wind energy sector, where about 70 Chinese companies are trying to overtake global players such as Denmark’s Vestas or Germany’s Siemens.
While Chinese companies gear up to push into the European market, many of Germany’s smaller family owned engineering companies lack the resources to pursue a similar approach in Asia.
Industrial behemoths such as Siemens or Bosch and family-owned market leaders such as laser cutter Trumpf have long established low-cost strategies for emerging markets that include large production facilities and research and development centres in the region.
But smaller companies are struggling to follow.
Roman Zeller, managing director of Alix Partners, a restructuring consultancy, says: “German machinery and engineering companies are weak in those markets where technological leadership is not the decisive factor. But those are exactly the markets where the music will play in the coming years.”
Even a 32 per cent surge in orders for German engineering products, driven by China, in the first six months of the year cannot obscure the fact that the companies have not only lost out to Chinese players in their home market, but also in countries such as India and Brazil.
Chinese companies have long ago overtaken Germany as the global market leaders in the machinery industry.
Last year, sales of Chinese machinery rose by 12 per cent to €300bn ($393bn), whereas revenues for the German industry fell 23 per cent to €178bn.
“German machinery and engineering companies are rapidly losing market share. This is a huge problem,” Mr Zeller says.
When it comes to technology, some Chinese companies such as Sany rival their German counterparts.
But in Europe, Sany is still trailing behind in some crucial areas: it lacks a large sales and service network and an established brand name.
“If you ask me how long it will take for people to accept Sany as a brand then this is really hard to predict,” Mr He admits.
“But we are not the price killer or a low-cost company. We will not sell cheaper than others as it is the lifetime cost that matters for the customer,” he says.
Other Chinese industrial behemoths are set to follow Sany’s example.
The German head of a leading foreign investment bank says that many Chinese companies are investigating acquisition targets.
“I expect a lot of foreign direct investment and also a lot of mergers and acquisitions by Chinese companies in Europe,” Mr He says.
For most, Germany will be the starting point.
“Germany has the highest level of regulatory requirements. If you are successful here, you can easily expand into other markets,” Mr He says.
For Mr He, Germans are not only fierce rivals but also cultural paragons.
“Germans have a great industrial tradition. They love machines from their childhood on. You will find that nowhere else in the world,” he says admiringly.
Pump N00b 08-12-2010
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Competition is always good, but I don't think the chinese will survive long
in Germany or EU with all the regulations and laws on production and workers and unions.
Sales maybe, when you can get 2 of brand X instead of 1 of brand Y, cash is always king.
Full size production I think not, assembly maybe.
And where are they market leaders?, in countries with not so stringent rules and regulations as EU, or US for that matter,
and markets without the same labour cost and revenue risks as EU/US.
PUMBO 08-12-2010
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Good luck to them - they will definitely need it. I strongly doubt the Commitee for European Construction Equipment (CECE) will take such a proposal lightly or let a foreigner tap into their market, especially jeopardise local infrastruture. The Chinese may push into Germany's heart and soul and may well be pushed just as easily out. I don't believe they will be embraced - there are some big companies in Germany with an equally big reputation (not just concrete pumps). Germany is not an easy market like Australasia. The Germans are loyal to their own brands that extends beyond their machinery (i.e friendships relations, support, local manufacturers, etc). Will be hard to break such ties with insentives that revolve around price.
2IC 08-12-2010
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i can smell gunpowder, i think it is coming from that volkswagon,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
jj707 08-12-2010
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maybe just maybe theyre going to Germany to hire some Germans to correct their faults with their pumps maybe a smart move.
murf 08-12-2010
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Dont under estimate....

http://en.wikipedia.org/wiki/Nissan_Motor_Manufacturing_UK

http://en.wikipedia.org/wiki/List_of_Honda_assembly_plants
zxazxa 08-12-2010
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the german are not more stupid or smart than any other....like "PUMP NOOB" said....cash will be only king....

like it or not, the chinese will be the first world economy soon...and yes they can make very good product by the way!!even concrete pump!!

here a link for the "sceptic" here....http://www.cnbc.com/id/38482538
jj707 08-12-2010
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Maybe so but they're not there yet not even close to the German rigs, one day maybe but they're not there yet, you say Germans are not smarter I didn't say they were but they do have decades of experience on the Chinese building pumps and I'll put my German rig against any Chinese rig there just more tried and true sorry that's the facts.
Many 08-13-2010
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I guess miracles can and do happen,one of the toughest markets I know of,Europe.This could be better than watching a old re run of twilight zone.