The excavator index is showing positive signs: effective investment supported by policies, with growth in overseas markets surpassing domestic growth.

Benefiting from multiple factors such as infrastructure demand, the country's strengthening of environmental governance, and the need for equipment updates, excavator sales continued to maintain high growth in July.

According to industry statistics from the China Construction Machinery Industry Association, a total of 12,346 excavator products were sold in July, a year-on-year increase of 11.0%. Among them, domestic market sales were 10,190 units, a year-on-year increase of 9.1%.

From January to July, the 25 main engine manufacturing enterprises included in the statistics sold a total of 149,553 excavator products, a year-on-year increase of 13.9%. Among them, domestic market sales were 135,062 units, a year-on-year increase of 12.0%.

Excavators have always been regarded as a barometer of the construction machinery industry and an economic weather vane. Although the current growth rate of fixed asset investment is at a historical low, the construction machinery industry, closely related to fixed asset investment, remains prosperous. One reason is the entrepreneurs' expectations for future growth in fixed asset investment, and another reason is that excavators are experiencing a wave of product replacement.

The lifespan of an excavator is about 8 years, and the last peak in excavator consumption was in 2010-2011. After an 8-year cycle, excavators are迎来 a wave of replacement in 2018-2019.

Zhang Dongming, an analyst at Bohai Securities, believes that since 2019, the sales of construction machinery represented by excavators have continued to maintain a growth trend, and annual sales are expected to reach a new historical high again, mainly due to four reasons: first, the significant increase in fixed asset investment in real estate and infrastructure, leading to a notable recovery in downstream demand; second, the construction machinery purchased around 2011 has reached the replacement cycle, resulting in strong update demand; third, environmental protection requirements are becoming increasingly strict, and vehicles that do not meet emission standards are subject to operational restrictions; fourth, the "Belt and Road" initiative has strongly driven the export of construction machinery.

In terms of product market structure, large excavators sold 1,720 units in July, a year-on-year decrease of 3%; from January to July, cumulative sales were 19,006 units, a year-on-year increase of 5.0%. Medium excavators sold 2,741 units in July, a year-on-year increase of 2%; from January to July, cumulative sales were 35,206 units, a year-on-year increase of 8.9%. Small excavators sold 5,729 units in July, a year-on-year increase of 17.5%; from January to July, cumulative sales were 80,850 units, a year-on-year increase of 15.2%.

Industry analysis indicates that the rapid growth in small excavator sales is mainly due to strong demand from downstream rural water conservancy and municipal projects; the slow decline in medium excavator sales is mainly due to the high-level retreat in real estate investment and new construction starts; large excavator sales remain stable due to high fixed asset investment in the mining industry and environmental inspections in mines.

The demand for real estate investment is mainly concentrated in medium and small excavators, and the high-level retreat in new construction starts in real estate will affect the sales of medium excavators. Data disclosed by the National Bureau of Statistics shows that from January to June, national real estate development investment reached 61,609 billion yuan, a year-on-year increase of 10.9%, with a growth rate down 0.3 percentage points compared to January to May.

The continuous growth in export sales has become a major highlight of the growth in China's excavator sales. In July, export sales reached 2,156 units, a year-on-year increase of 20.7%. From January to July, cumulative export sales were 14,491 units, a year-on-year increase of 35.7%.

It is expected that the growth rate of excavator exports in 2019 will far exceed the growth rate of domestic sales, and the overseas market may become a new growth point for China's excavator industry.

The Liu Guoqing team at Pacific Securities analyzed that after nearly 40 years of rapid industrialization, China's machinery and equipment market has begun to enter a stock phase, and the logic of machinery companies growing based on incremental demand is gradually transitioning to relying on large stock updates for stable profits. Therefore, leading enterprises cultivated in the past incremental market must explore new markets to achieve rapid growth again, and looking globally is an inevitable choice.

Regarding the upcoming trends, Wang Huajun, an analyst at Guojin Securities, believes that the "special bond" policy supports infrastructure, and the policy's strong willingness for "counter-cyclical" measures makes a rebound in infrastructure investment a high-probability event. Coupled with the update demand driven by lifespan and environmental factors, it is expected that the growth rate of excavator sales in the second half of the year is likely to exceed zero growth, with an annual growth rate of about 10% in 2019. Considering the sustainability of this round of excavator update demand, it is expected that excavator sales will remain basically flat or slightly decline in 2020.