China construction machinery sector watch by Credit Suisse

Credit Suisse recently held an investor conference call with Komatsu's exclusive dealer in Shanghai as well as Zhejiang and Jiangsu provinces to better understand China's construction machinery market.

The key points included:

1.5% price hike: Most domestic and foreign construction machinery makers had raised prices by 1.5% by the end of 2012, and discounts of similar size are expected to be rolled out during the peak sales season. China's excavator production capacity is estimated to be 400,000 units per year, but manufacturers have idled some capacity in response to weak demand and high inventory levels.

Utilization down: Construction machinery utilization was 140 hours/month on average in 2012, down from 160 hours/month in 2011 and around 200 hours/months in the years earlier. Utilization climbed to 150 hours in January, the breakeven point for excavator operators.

Positive outlook for CAT, Volvo & Sany: Caterpillar Inc and Volvo are expected to gain market shares in 2013, bolstered by products of better quality and aggressive sales tactics. Sany Heavy Industry Co is also expected to gain market share, bolstered by its improving quality comparable to South Korean peers and approximating Japanese peers and by sales promotions aimed at the after-sales market. The above three's gains will probably come at the expense of South Korean and Japanese brands.