Komatsu invest in Chinese market

The surge in demand for construction equipment in Indonesia and China has led Komatsu, one of the giants of the industry, to announce plans to double their production.

Despite projections being released in April, Executive Officer Masahiro Uegaki said in a Tokyo interview that the actual figures will exceed those projections by 60 percent. Last year saw 44,000 machines for the construction and mining industries produced by Komatsu; the end of this year will see approximately 85,000.

Komatsu's rivalry with Caterpillar means that they are counting on the US and Asian markets to grow this year. Despite China's demand for equipment, it saw a rapid decline in growth in 2008, and Yasuhiro Matsumoto, an analyst at Shinsei Securities Co. in Tokyo warns that, Komatsu faces the risk of a further slowdown in the Chinese economy, which would lead to a drop in its stock price. However, long term growth in the Chinese market, which is expected, will benefit Komatsu.

Both Komatsu and Caterpillar, great rivals and manufacturers of excavators, saw their share prices dip this, with Komatsu's falling 2 percent, and Caterpillar's falling by 0.3 percent. Komatsu have clearly targeted China as the market with the most potential, setting up a specific buying department for China, and sending a more than 20-strong delegation of executives to the country, as they vied with Hitachi, the Japanese construction equipment firm, and Sany Heavy Industry, an indigenous company, for business. At present, Komatsu is the leading supplier of excavators and other construction equipment to China, and it means to retain that share.

China is the world's most rapidly expanding economy, and also one of the largest, with Uegaki saying, China’s strength is outstanding. Indonesia is also strong, the markets for the country’s mining, agriculture, forestry and construction sectors are all good.

Komatsu combines Japanese and local produce in their excavators, with Japanese steel used to make the high-pressure tubes, and local steel for the booms and exterior shells. They have exceeded their projections, with an net income of 52 billion yen in the last two quarters, after a prediction 37 billion yen. The huge infrastructural projects in China, such as railways, roads and mining, mean that it now accounts for 19 percent of Komatsu' sales.