28.02.2012

Palfinger and Sany team up

Palfinger and Sany Heavy Industry have reached an agreement to establish two joint venture companies in which both parties will each hold 50 percent of the shares.

Sany Palfinger SPV Equipment Co will primarily produce and sell Palfinger products for the Chinese market. The venture will initially build 10 Palfinger loader crane models, at a new plant close to Sany’s existing Changsha facility and headquarters. It will also establish a national network of loader crane dealers to sell the products. The two partners will invest up to 900 million yuan ($143/€106 million) in the venture.

A second phase will include aerial lifts and other Palfinger products. The new plant will have a capacity of 10,000 cranes, with the aim of winning and holding a 30 percent share of the growing market for loader cranes, expected to reach 30,000 units by 2017.

The second joint venture - PalfingerSany, will be registered in Salzburg, Austria and will distribute Sany mobile cranes produced in China, primarily in the European Union and CIS states, where it will have exclusivity. It will also develop a boom truck product for the American market. This venture is expected to be fully operational by the end of this year. This is also a more modest investment, with the two putting up €4 million to get it started.
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The establishment of the two joint ventures is subject to the normal regulatory approvals.

Palfinger chief executive Herbert Ortner said: “With the establishment of these two joint venture companies, we have taken a big step forward in our internationalisation strategy. We now have manufacturing and assembly plants in all of the world’s major markets. With Sany we have a partner that is not only one of the fastest growing companies in the world, but one that meets our high quality standards as well.”

“Together with Sany, we have laid the foundation for holding our own on a long-term basis in an increasingly aggressive competitive environment and for expanding our leadership position in the global market. China will become our second domestic market. By enabling our partners outside China to distribute Sany mobile cranes we are giving them a valuable addition to their range of products.”
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(L-R) Xiuguo Tang president of Sany and Herbert Ortner of Palfinger

Liang Wengen, chairman of Sany added: “For Sany, this close cooperation with Palfinger is a major step towards tapping the global market. We will use Palfinger’s dense, international sales and service network to promote the globalisation of Sany from a Chinese perspective.”

“We are looking forward to our cooperation with a partner that is a technology and market leader and whose customer proximity and comprehensive services are highly appreciated by its customers. We are fully convinced that these two joint ventures will swiftly achieve success, thereby making a significant contribution to the rapid and sustained growth of Sany.”
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There were 1.23 million trucks built in China last year, almost half the worldwide total, the NAFTA countries of Canada, the USA and Mexico produced around 420,000 trucks, the EU 220,000, India 310,000 and Russia 58,000. Non-Chinese manufacturers currently only represent two percent of the Chinese truck market.

Palfinger believes that China will soon become its largest market. In 2010 roughly 7,000 articulated and telescopic loader cranes were produced in the country. That is expected to rise to 30,000 units by 2017 - representing roughly half of the global market.

UPDATE -
Interview with Palfinger chief executive Herbert Ortner

According to Palfinger chief executive Herbert Ortner the recently announced joint venture agreements with Sany Heavy Industry are the most important event for the Group for more than a decade. He said that the company had been working on several major strategic goals - including having an equal split between loader cranes and truck mounted platforms - which have now been successfully completed.

For the last year or so it has turned its attention to its internationalisation strategy which aims to achieve equal company revenues from the Americas, Europe and Russia and Asia. Since 2010 it has become involved in companies in America, Russia, Brazil and Holland and last year has actively been looking for a Chinese partner.

“We set off on a fact finding mission early in 2011 talking to all major Chinese equipment manufacturers including XCMG, Zoomlion and Sany, but we preferred Sany which we saw as being a similar company to Palfinger in many ways,” says Ortner.

“The Chinese joint venture will take at least six months to obtain a business license from the authorities, so will not really get going until the second half of 2012 with the first units appearing in 2013. We hope the new venture wins a 30 percent share of the growing Chinese market.”

Initially it will produce 10 redesigned and simplified Palfinger loader crane models, mainly from the light and medium ranges from six to 50 tonne/metres. The capacity of the new plant is 10,000 cranes but it has plans to increase this to around 30,000 cranes over the next five years.

Truck mounted platforms will also be added over the next few years, beginning with smaller models from Palfinger’s range. Ortner hopes to have a 17 or 18 metre truck mounted platform available by mid to late 2013.

“Our aim is to be number one in the market,” says Ortner. “Sany is market leader in mobile and crawler cranes and construction equipment so there is no reason to think that we will not also be market leader for loader cranes and truck mounted platforms.”

“When talking with Sany we realised it had a similar internationalisation strategy to reduce dependency on the Chinese market. One product group that is closest to the loader cranes is the mobile crane and we have reached an agreement to distribute the range throughout Russia and Europe. This will include All Terrain, Rough Terrain and truck mounted cranes and we will set up a completely independent company based in Salzburg, Austria, and will develop a dedicated mobile crane team."

"Palfinger has a strong brand name, we already deal with many of the major construction and rental companies throughout Europe and we have a strong sales and service network. We will initially offer this product to our existing dealers and see if they are interested but they will have to have a specific, dedicated sales and service team for the task. If they are capable and willing then we will be happy to appoint them, if not then we will appoint or set up a specific company to cover an area.”

"The agreement does not include crawler cranes and does not cover any products or area covered by Sany America. “Sany America does not have a boom truck so in North and South America we will be offering a new boom truck product that is currently being developed by Sany,” he adds.

"The crane joint venture will start immediately although Sany is still working on the development of its European range of AT, RT and truck cranes."

Vertikal Comment

This is a very interesting announcement and is a story of two halves.
The Chinese based venture makes excellent sense for both parties, with timing looking to be ideal. The combination of Palfinger technology and Sany’s Chinese production, distribution power and local knowledge will virtually ensure that the venture will do well. It is very likely to meet the expectations that the two companies have for it.

The other venture however will, we think, be much more of a challenge. Palfinger has an excellent European distribution network, but very few of its dealers have any knowledge or experience of the mobile crane market and few are likely to be interested in tackling it. Mobile crane buyers are also still sceptical about investing in Chinese built cranes, particularly larger ones. Add to this the fact that this market has never managed to support a two tier distribution channel and it is hard to understand how this will succeed in the short term.

However Sany is making solid progress in the USA, albeit with a limited number of crane models. One thing we have learnt over the years is to never underestimate either of these two players, they both move fast and are quick to learn.

Watch this space.

We will add an update article in the next day or two, after we have had time to speak with senior managers.