Japanese companies are competitive again with higher sales volumes, even to the point of over-demand in the GCC, reports Stian Overdahl
Suddenly Japanese companies are competitive again with higher sales volumes, even to the point of over-demand in the GCC, reports Stian Overdahl
Following its rapid industrialisation in the second half of the 20th century, Japan became an industrial powerhouse, famed for its high quality engineering, its innovation, and the resourcefulness of its large integrated business groups, the kereitsu.
Globally, Komatsu and Hitachi are ranked as the second and third largest manufacturers of construction machinery respectively, while major manufacturing groups including Toyota, Isuzu and Nissan produce light-, medium- and heavy-duty trucks, forklifts and other material handling equipment, and of course engines.
Yet Japan’s economy fared poorly in the global economic crisis, and the value of the Yen soared at the end of 2008, severely hampering exporters. And the sudden drop in currency didn’t just affect the major Japanese manufacturers, but also any local distributors and importers of products from Japan who had currency owing there, and suddenly found their liabilities almost doubling overnight.
Furthemore, the Great Tohoku earthquake and tsunami in 2011 dealt a further blow to the country and its industry, killing thousands and devastating the north-east of the country. For businesses, many with factories or else component suppliers in the affected regions, there were multiple impacts, including power shortages relating to the Fukushima nuclear power plant crisis, as the subsequent shut-down of the remaining nuclear power capacity due to safety concerns.
Against this backdrop, the Japanese construction machinery continued to move forward, investing in new products, despite dropping profits.
It may be that their general position as a quality product in this instance worked in their favour: many customers who had been buying their machines for decades proved loyal, and it didn’t hurt that many of their customers were from top-tier industries such as oil and gas, who are focused on total cost of ownership (TCO), including reliability and safety, rather than on up-front cost. But late last year this picture began to change, as the Japanese domestic economy recovered, with the rebuild for the Tohoku disaster underway.
From the point of view of exporters, the currency situation too improved significantly following new reserve bank policies and political impetus.
Figures from JETRO (the Japan External Trade Organisation) show that growth in Japan’s exports to the GCC countries in 2012 grew 27.1%, up to $24.94billion in 2012 from $19.63 billion in the previous year. Automotive and machinery are a major component of this, and in the UAE export of self-propelled bulldozers and graders from Japen rose by 42% to $273 million in 2012, compared to $192 million in 2011.
Currency down, competitiveness up
And Japanese sellers of machinery in the GCC spoken to by Construction Machinery Middle East were unanimous in their declaration that the currency shift had improved their competitiveness in the market.
Hitachi Construction Machinery Middle East general manager Piet van Bakergem says that while there was a difficult time following the ’09 crash, the adverse circumstances forced them to refine their business model.
“We have been benefitting from the whole situation in a sense that it made us more alert and flexible when looking at potential business opportunities. Today we know clearly where we are and what needs to be done to enter the future and to be successful. The currency situation has definitely brought us in a better position and made us more competitive, however when buying Hitachi CM it is the whole package that counts.”
But in the GCC their most popular products are their hydraulic excavators and their crawler cranes, both of which have benefited from newly launched products in 2013, namely the new generation of Zaxis excavators, the ZX-5G, and the SCX1500A-3, a 150-tonne capacity crawler crane from Hitachi Sumitomo Heavy Industries Construction Crane.
The ZX-5G features a sophisticated hydraulic system, improved maintenance features, more comfortable operator environments, as well new IT systems built in for monitoring and performance.
“Hitachi excavators are identified as the work horses of the region, they don’t need much maintenance and the have very successful track record when it comes to making a healthy contribution to production,” says Bakergem.
Both the new excavators and the crane have engines built by Isuzu, which is perhaps a clue to the popularity of Japanese machinery brands – they are often powered by highly-reliable Japanese brand engines.
Tadano is another brand that has seen improved fortunes in the Middle East, notably in Saudi Arabia. The brand is a favourite with the oil and gas industry, prized for its simplicity, reliability, and safety.
It its recently published annual report for 2013, it reports an improved sales performance as demand rose in North America, Asia, the Middle East, Australia, and other markets, primarily in sectors related to energy and infrastructure.
“Markets in the Near and Middle East exhibited robust demand, driven by the petroleum industry and by infrastructure and other projects, chiefly in Saudi Arabia. The rapid devaluation of the yen from the end of 2012 served as strong tailwinds.”
In the UAE, Tadano is sold by United Alsaqer Heavy Equipment, and sales manager Walid El Dessouki says that the major buyer of Tadano is the oil and gas sector, especially since the major drop in construction activity in the Emirates.
Buyers of Tadano are attracted to the long life and high resale value, believes El Dessouki. “In oil and gas, uptime is critical. We provide high quality after sales service through our fully equipped workshop and high qualified technicians.
“We have a fully-fledged spare parts warehouse (3920 square metres) and counter facility within the Abu Dhabi showroom premises, and there are available 85,000 line items of various products. We do have mobile service teams as well.”
In the UAE Tadano cranes can still be seen working on many infrastructure sites, though here the levels of fleet growth and unit replacement may be slower than oil and gas. Rental house Al-Faris remains a major buyer of Tadano rough terrain cranes, despite its strong relationship with Liebherr, a testament to the esteem which Tadano is held in by the crane rental industry.
Komatsu is the second largest construction equipment manufacturer in the world, recording sales revenue of $19.2 billion in the year ended March 2013.
In the UAE its equipment is sold by Galadari Trucks and Heavy Equipment, and its excavators are popular in the quarry industry, including at the major operation Stevin Rock, where a large number of PC800 and PC400 hydraulic excavators are used, as well as HD325 rigid trucks.
A deal was concluded earlier this year for further sale of equipment to the quarry.
But the biggest news for the Komatsu in the Middle East is the formation of a new cooperation with Abdulla Latif Jameel (ALJ) in Saudi Arabia, which commenced in 2013, and signals a new phase in the brand’s presence in the major market of KSA.
Another brand with new intentions in the Middle East is Kobelco, which recently unwound its global excavator supply agreement with CNH, and plans on targeting the Middle East with its ‘true blue’ excavators.
According to its 2013-15 business plan, North America will be its priority market, while it will grow its business in Europe, the Middle East, South America and Africa with a “a customer-oriented marketing and a differentiation strategy”.
The product offering should prove an exciting proposition to owners of fleet in the Middle East, given Kobelco’s reputation for reliability and service in the region when the business was conducted directly.
Sister company Kobelco Cranes Middle East FZE (both of the Kobelcos are owned by Kobe Steel) is also seeing improving fortunes, partly as a consequence of the currency swing. Specialising in crawler cranes, its machines are especially popular with the petrochemicals industry and in construction projects.
Managing director Masakazu Usami says that their best selling machine is in the 250 tonne class, while new machines this year are the SL6000S and SL4500S crawler cranes, successor models to the popular SL6000 and SL4500R.
“Principal improvements from the previous model (SL6000 and SL4500R) are the engine, cabin and lifting capacity. Therefore, basically the application has remained unchanged. Of course, heavier material can be handled, because of improved lifting capacity,” he explains.
Feedback from customers suggests that Kobelco Cranes are popular because of their simplicity, and infrequent breakdowns which are the result of easy maintenance: “Customers can reduce the operating cost and can avoid delaying the job. And furthermore, can re-sell the machine easily, with high resale value, if it is required.”
Usami says that their machines are designed to require less work and to be easier to transport, and to ensure safety during assembly and disassembly.
“What’s more, simpler, more efficient loading for transport have reduced the cost of both transport and storage.”
One outcome however for Kobelco Cranes has been increased sales and enquiry, and thus potentially longer wait times for customers. Usami says that demand for crawler cranes in the GCC in 2013 has not changed significantly since last year, but there is more demand for products made in Japan.
‘“Because of the currency situation, it has become more healthy for the customers to consider to buy products made in Japan and actually the number of serious inquiries has increased in 2013.
“The problem is the high demand of crawler cranes in the world. Namely we are having many orders for crawler cranes especially in Japan, North America and South East Asia and the delivery time is getting longer and longer now. Therefore, if customers do not take this circumstance into consideration, we are afraid that they may be facing difficulties to procure the machines in the right time.”