In February, domestic sales of various types of construction machinery products showed a structural rebound trend.

In recent years, the domestic leasing penetration rate has continued to rise [it has exceeded 60% in 2023, and the "fragmented" leasing market structure of major construction machinery (purchase planning is more random), so the monthly sales of each year are highly correlated with the construction progress of domestic engineering projects].

Most projects start/resume work in late February or March after the holiday, enter the plum rain period after the end of June, enter the rush period or finishing period from September to the end of the year, and enter the Spring Festival holiday in mid-January and February of the following year.

Therefore, the progress of project construction and machinery demand are affected by the availability of project funds and weather changes, the Spring Festival holiday, and other factors such as environmental protection, safety, and policies.

Although the Spring Festival holiday in 2025 is more than ten days earlier than the previous year, due to the lower average collection rate of lessors of various categories last year than in previous years, as well as the wait-and-see policy of the two sessions, the start-up rate in the spring period of 2025 is lower than that in 2024.

According to the survey data of Centennial Construction Network, the project resumption rates on February 6/13/20 were 7.4%, 23.5% and 47.7% respectively, all lower than the same period of the previous lunar calendar. In January and February, the national cement production decreased by 8.5% year-on-year, and the demand for downstream projects decreased by about 30 million tons.

Some media predict that the growth rate of national fixed asset investment in January and February will be the same as that of the previous year.

In short, even if the Spring Festival in 2025 is more than ten days earlier than that in 2024, the number of projects started and the funds in place during the Spring Festival in January and February are lower than that of the previous year. However, all categories of products in January and February have rebounded or warmed up. Does it indicate that a new round of upward cycle is gradually coming?

According to the official WeChat data of the Construction Machinery Association, the sales of various sectors during the Spring Festival in January and February are as follows:

Earthwork sector: 17,000 excavators were sold domestically, a year-on-year increase of 51.4%; 8,200 loaders were sold domestically, a year-on-year increase of 26.2%.

Lifting and hoisting sector: 1,500 truck cranes were sold domestically, down 13.5% year-on-year, 22.0pct less than in 2024; 109 crawler cranes were sold domestically, down 13.5% year-on-year, 25.6pct less than in 2024; 3,300 truck cranes were sold domestically, up 13.7% year-on-year. 396 tower cranes were sold domestically, down 56.1% year-on-year, 12.0pct less than in 2024.

Pavement construction sector: 903 rollers were sold domestically, up 31.6% year-on-year; 127 pavers were sold domestically, up 44.3% year-on-year. 226 graders were sold domestically, up 40.4% year-on-year (Note: graders are more widely used).

Weak cyclical equipment sector: 121,000 forklifts were sold domestically, up 6.5% year-on-year; 6,300 aerial work platforms were sold domestically, down 47.0% year-on-year (due to rapid development in recent years), and 777 aerial work vehicles were sold domestically, up 33.3% year-on-year (indicating that the aerial work vehicle market segment still has room for growth).

Obviously, during the Spring Festival period from January to February, the domestic sales of the above different categories showed signs of rebound or accelerated bottoming year-on-year. Does this mean that a new round of upward cycle in the construction machinery industry is about to begin?

Some media predict that the newly started area of ​​real estate will still decline by 15.6% in 2025 (down 23.0% year-on-year in 2024), and infrastructure will increase to 7.0% growth rate (4.4% growth rate in 2024). This means that there is little possibility of significant growth in market demand in 2025.

Therefore, the main factor for the rebound or accelerated bottoming of sales of various categories of products at the beginning of the year is due to changes in the inventory end. In fact, judging from the changes in the stock side, the current construction machinery market is completely different from that of more than a decade ago, especially the structure of the stock side is more complex.

First, the proportion of small machinery continues to rise. This is due to both rapid economic development and the replacement of an aging population. For example, the rapid development of aerial work platforms and the continued rise in the proportion of small excavators/wheel excavators.

Second, the proportion of domestic brands has increased significantly. On the one hand, domestic brands with great cost-effectiveness have not only seized the market for new machines of joint venture brands, but also greatly compressed the domestic stock of imported second-hand machines; on the other hand, the internal price war in recent years has not only caused the price to plummet, but also forced the main manufacturers to continue to reduce manufacturing costs, and the homogeneous reduced-configuration models have proliferated, thus shortening the equipment life cycle.

Third, due to the above two factors, the replacement cycle of stock equipment has been shortened. At the same time, due to the vicious price war of the main manufacturers in recent years, the interests of the main stock subject-leasing companies have been greatly damaged, forcing leasing companies to shorten the age of equipment and sell them reluctantly, further exacerbating the equipment elimination and clearance cycle.

Fourth, the impact of policies on the stock side is increasing. Although construction machinery is an industry that leads economic policies and is highly sensitive to changes in macroeconomic policies. However, the impact of previous relevant policies on the construction machinery market was transmitted from the impact on the market demand side such as infrastructure, real estate and mining.

The current policy impact has shifted from the market side to the stock side. The policy guidance of "Large-Scale Equipment Update" and new energy iteration diesel-driven are all directed to stock equipment.

Fifth, the stock equipment is accelerating its circulation to overseas markets. Since the mask period in 2022, domestic second-hand machines have kept pace with new machines, and sales to emerging markets such as Southeast Asia and South America have soared. According to a media report, the export volume of second-hand excavators in 2024 is close to that of new machines, and is expected to exceed 80,000 units.

Not only excavator machinery, but also other second-hand machinery such as lifting and pavement have continued to grow. Obviously, this not only broadens the channels for clearing stock equipment, but also forms a "withdrawal effect" on the domestic stock side, greatly alleviating the imbalance between supply and demand in the domestic leasing market.

Sixth, due to factors such as the real estate market and debt repayment pressure, the markets in various regions have become increasingly differentiated. This differentiation trend is not only becoming more and more obvious, but also the influencing factors are more complex, and the structural differences between regions and even cities are expanding.

In January and February, the total number of working hours of Komatsu in China was 123 hours, an increase of 12.8% year-on-year. I think this is due to the sharp drop in domestic sales of new machines in recent years, the accelerated clearance of old equipment, and the intensification of overseas circulation of second-hand machines, which has caused the rapid reduction of domestic Komatsu equipment inventory.

According to data from Centennial Construction Network: From February 26 to March 4 and from March 5 to March 11, the weekly cement outflow volume in China increased by 32.5% and 6.5% month-on-month, respectively, and increased by 93.7% and 1.4% year-on-year, respectively. Among them, the direct supply of infrastructure cement increased by 28.8% and 31.1% week-on-week, and increased by 139.5% and 55.2% year-on-year, respectively.

Obviously, in late February/early March, infrastructure projects rebounded strongly, driving the growth of demand in the construction machinery market. Real estate projects are still in a slow recovery stage. According to downstream feedback: the overall demand for housing construction may have decreased by 30%, and the mixing station has reduced its purchases. However, public facilities and civil projects (self-built, decoration, etc.) have maintained steady growth.

In summary, the main reasons for the rebound or sharp narrowing of the decline in domestic sales of various categories of products at the beginning of 2025 are: structural changes in the stock end, accelerated policy clearance, early arrival of the renewal cycle of old equipment, continued increase in replacement demand, and a strong rebound in infrastructure projects.

Judging from the domestic sales data from January to February, 2025 is indeed worth looking forward to. However, judging from the changes in the stock end, even if a new round of upward cycle begins, it is based on the rebound in sales under the stock market.

From this perspective, in 2025, even if the sales of new machines in various categories increase significantly or rebound from the bottom, the rental market is unlikely to improve, and rental prices and occupancy rates will still hover at low levels.

Moreover, if the sales of new machines in overseas markets slow down, the growth of domestic sales may still be insufficient to support the digestion of the huge production capacity of the main engine manufacturers. The new machine market may face the dilemma of volume increase but no price increase, or even volume increase but price continue to fall. The internal price war may be difficult to "die down"!