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Business trends

Komatsu digs in with cheaper excavators in Thailand and Indonesia

Southeast Asia offerings to feature simpler models as Chinese rivals make inroads

Komatsu's more basic excavator offered in such markets as Indonesia will be suited for residential development and road construction. (Photo courtesy of the company)

TOKYO -- Machinery builder Komatsu will roll out more affordable excavators in Southeast Asia, eyeing demand for urban development and fending off competition from cheaper Chinese-made equipment.

Midsize, 20-ton-class excavators tailored to residential land development and road construction will be marketed in Thailand and Indonesia starting in April 2021, with sales in nearby markets under consideration. These products will be built in Japan or Thailand.

Hydraulic excavators in this size class, Komatsu's mainline, have conventionally been multipurpose machines able to handle such high-horsepower jobs as mining, quarrying and logging.

The new models will come with more moderate engine power and 10% to 15% lower prices. Komatsu hopes to woo customers who might consider Chinese manufacturers, which are said to undercut Japanese, American and European peers by 20%.

Komatsu forecasts its sales of construction, mining and utility equipment in Asia outside Japan and China at 129.8 billion yen ($1.24 billion) for fiscal 2020, down 37% on the year. Sagging coal prices sapped demand in major coal exporter Indonesia, while the coronavirus pandemic dealt a blow to business in general. Hard economic times have made construction companies sensitive about price performance.

Equipment sales in China are projected at 149.4 billion yen, up 18%, fueled by stepped-up public infrastructure investment.

Komatsu is a major player in Indonesia's market for construction machinery. But such Chinese competitors as Sany Heavy Industry and XCMG Group have increasingly challenged it in recent years.

Customer incentives from Chinese companies include no down payment for equipment financing and interest waivers on loans for three years. With these perks, they are targeting construction companies that have used small and midsize Japanese excavators. Competition is also heating up for talent from sales agents with long histories of business with Japanese manufacturers.

Komatsu machines have boasted ease of use, durability and a full range of maintenance services. If sales of new equipment decline, the key maintenance business would also suffer. Komatsu is adjusting prices and its lineup to retain customers with a determination to "keep a 20% market share in Southeast Asia," said Kiyoshi Mizuhara, president of the construction equipment marketing division.

Urban development in Southeast Asia is expected to remain strong in the medium to long term. Oxford Economics sees construction investment there growing by an average of 6% a year through 2030 to reach an annual $1 trillion.

Other Japanese companies are also moving to protect their market shares. Hitachi Construction Machinery sells previously leased equipment under the Premium Used brand in Southeast Asia, offering warranties and repair histories in exchange for a 10% premium over standard resale prices. This will encourage buyers to come back for genuine parts later, the company hopes.

Demand for used excavators is particularly robust in Vietnam, which has kept the new coronavirus under control, and sales are up about 10% on the year.

Sumitomo Construction Machinery is spending 3.5 billion yen to roughly double capacity in Indonesia to 2,500 excavators in 2021. Equipment built there will be sold locally and shipped to Thailand, Malaysia and Myanmar.

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