Beijing is preparing for the Olympics and doing big business in the lead-up. PHOTO: China National Tourist Office

By Paris Lord

Glance at the growth and size of China's forklift industry, and the numbers might induce dizziness.

Total exports of electric forklifts alone soared by more than 60% in 12 months. One major manufacturer anticipates 2007 sales will jump by at least 40% year-on-year. Another expects to sell 35,000 units this year in China and abroad.

Sang Tian, general manager of materials handling equipment division EP Equipment, estimates that when she began in the industry 13 years ago, China exported around 400 units a year.

The industry's official statistician says over the first half of 2007, China exported almost 786,000 forklifts and industrial trucks equipped with lifting or handling equipment. That's up 40% compared to the same time in 2006.

"The reality is that the Chinese forklift market is booming," Sang says. "That's why I ... am proud of these changes. The great changes have been over the past seven to eight years."

Zhang Jie of the Industrial Truck Institution of China Construction Machinery Association (CITA) says demand for Chinese forklift machines is huge, and output is improving.

"We enjoyed an annual growth rate of about 30% this year," says Zhang, CITA's administrative vice secretary general.

Many of China's forklift titans are concentrating on exports, where established vendors say they're getting repeat business despite the machines' short time on the market.

"The units are performing incredibly well in the field, so much so that we're seeing repeat orders from the same customers looking to add to their fleet," says Mark Di Vito, president of Terraquip in Concord, Ontario, Canada. "We're also seeing repeat orders from government authorities on trucks, which is an amazing sign."

Shanghai is also growing at a rapid pace. PHOTO: China National Tourist Office

Di Vito says his company expects to sell more than 200 Hangcha brand forklifts across Canada this year, up from an initial order of about 50 in mid-2006.

Jenny Zhang, general manager of Zhejiang Hangcha Import & Export Co, last month said 2007 exports would reach 9,000 units - up from 250 when it was privatised in 2000.

Hytsu Group tips it will export its 9,000th unit next month, says spokesman Stephen Ling.

Its brands include Hytsu and T&U and 95% are exported to more than 70 countries.
EP Equipment forecasts sales of around 8,500 trucks this calendar year.

Its turnover is likely to be roughly USD80 million for the same period, says Sang.

She says that represents close to a 100% rise in sales year-on-year, a result she attributes to marketing of its key products, electric pallet trucks and electric forklifts.
Domestically, too, the industry looks set for continued growth to meet the rise of the rapidly developing food and tobacco industries, CITA says.

Demand is also being stimulated by new logistics centres and warehouses in China's major cities and regional centres.

Examples include Kerry EAS Logistics which in October announced a planned RMB50 million (USD6.7 million) logistics centre for an air park in Chengdu, south western China. It includes 24,000 square metres of warehouse space. Kerry EAS declined an interview request.

This month, China's largest train production and repair factory opened in Wuhan, Hubei province. It's unclear how many forklifts might be used for the heavy lifting at the 100-hectare (247 acres) base. Officials with Changjiang Company of China South Locomotive and Rolling Stock Industry declined to comment.

Linde's operations in China.

The world's biggest express delivery companies all operate in China and some are expanding. DHL Global Forwarding China uses 49 forklifts at present, most of which are electric counterbalance models, according to a spokeswoman for the company. The company bought three units this year and uses Linde, OM, Jungheinrich and Fantuzzi trucks.

FedEx and UPS declined requests for comment.

Other demand factors are preparations for the 2008 Beijing Olympics and the 2010 Shanghai World Expo.

"In addition, newly built domestic ports and harbour constructions have also led to a huge demand for forklifts," CITA's Zhang Jie points out. "In 2007, we have accomplished initial facility construction on new harbours in Shanghai, Tianjin and Ningbo, among others."

SUPPLY

CITA says exports in the first half of 2007 of forklifts and industrial trucks equipped with lifting or handling equipment jumped 40% compared to the same time a year ago. Sales were worth about USD337 million.

China's total imports exceeded 7,300 forklifts and a similar number of industrial trucks for the first six months of 2007, a rise of 9% compared to the previous corresponding period. Japan led the way with almost 3,000 units, followed by Sweden, Germany, France and Denmark.

Hangcha forklifts - ready for export and a growing domestic market

The association has forecast China's top five manufacturers of internal combustion models by sales volume for the second half of 2007. They are: Anhui Forklift Truck Group (Heli brand), Zhejiang Hangcha Engineering Machinery Co (Hangcha), Dalian Forklift Truck Co, Tailift Forklift (Qingdao) Co and Baoli group. Anhui Forklift and Hangcha have 60% market share, the association says.

CITA says the sales volume of motorised industrial trucks surpassed 64,200 units for the first half of the year, up by 28% compared to the same time in 2006.

Anhui Forklift declined to comment for this article.

Jiangsu-province based forklift maker Baoli Group has sold 4,800 forklifts this year, up by 40% from 2006.

Import and export department manager Gao Zhoufei says the company's main market is China and its light-tonnage machines with diesel engines are the most popular.

"The most common fields are harbour construction, manfacturing, the chemicals industry and heavy manufacturing," says Gao.

China is also a major producer of pallet trucks.

CITA says non-motorised industrial truck sales in the first half exceeded 915,900 units, a jump of 30% compared to the same period last year.

The association's sales volume list for electro-motion models in the second half of 2007 is Wuxi Nuoli Forklift Co, Ningbo Ruyi Joint Stock Co, Wuxi Great Dragon Forklift Co, Anhui Jianghuai Yinlian Heavy Machinery Manufacture Co and Anhui Heli Co.

PARTNERSHIPS

China's forklift industry has grown organically and through partnering with established companies.

"The best way is to study and follow Japanese and European successful brands' experiences," says Hytsu group's Ling.

EP Equipment's Sang says her company has acted on information from other manufacturers and training it receives from partners.

"That gives us lots of opportunities to learn how to improve technology," she says.
Apart from research and development, dealers say that Chinese manufacturers pay attention to feedback from dealers and customers.

That includes acting on perceptions that Chinese forklifts have quality control problems.

EP Equipment has terminated contracts with suppliers in the past year because of quality control problems.

Manufacturers are also striving to build and reinforce their dealer networks and back-systems for parts and servicing.

Terraquip's Di Vito says customers have approached Chinese models with scepticism similar to other lines the company sells, with queries about parts, service and availability.

Once the customer learns about the company behind the machines, the components and their availability, their concerns are allayed, Di Vito says.

Some dealers, such as one in the Middle East who declined to be named because he represents several manufacturers, are cautious.

"We are only buying those with Yanmar or Cummins engines - we don't buy anything with Chinese components," the dealer says.

"I don't really know the Chinese diesel engines. Maybe they are good, but I have no experience with them and we have no spare parts for them here."

He adds the transmission for the Hangcha models he sells are fine and he has no complaints from customers.

Few Chinese firms are planning to shift manufacturing to other parts of Asia.
Hystu group's Ling says there are many places in China which still have cost advantages.

Barry Su, general manager of Sino-American Zhejiang Maximal Forklift Co Ltd, says his company is considering it for the future.

Besides, Chinese manufacturers and dealers have an immediate challenge - currencies. The falling US dollar and rising Chinese RMB are forcing firms to adjust.
EP Equipment's Sang says a stronger RMB means Chinese forklifts are less competitive than before on pricing.

"So we have to put more energy in making our support systems stronger and turning the image of China-made forklifts from price competitive only into quality ones, and make our back-up systems reliable."

Di Vito, the Canadian vendor, says it means his company works more closely with its dealers to ensure competitive pricing structures.

CHALLENGES AHEAD

Hangcha's Jenny Zhang - optimisitc

Jenny Zhang of Hangcha forklifts expects industry rationalisation in the next five years or so. There are at least 80 competitors of varying sizes and she says consolidation will kick in.

Hystu group's Ling says that China is on track to pass the US as the world's biggest forklift market.

While that means many opportunities for domestic manufacturers, increased competition will make it tough for the smaller firms, he says.

"Many competitors will have to cooperate to win the cake."