What changes have occurred in the Russian market for crane trucks recently? The Russian magazine "Fixed Assets" had a dialogue with representatives of equipment suppliers for on-board cranes. The participants in the conversation are Pavel Chernezov, the product manager of Palfig Crane; Viktor Pinsky, General Manager of KMU Company in Russia; Arjom Ganin, General Manager of Smarteko Company in Russia.
What is the situation in the truck mounted crane market after the exit of Western brands? What have you done in this situation, and what changes have you made in production and supply? What achievements have you made?
Pavel Chernezov: We quickly responded to market changes and successfully filled the demand for on-board cranes that had exited. By integrating the design, logistics, and production resources of the INMAN and VELMASH factories under the Parfit Group, we not only maintain competitiveness but also enhance our own capabilities. We have expanded our product range and provided more choices to meet customers' demands for high-quality and reliable cranes. The withdrawal of Western component manufacturers and the complexity of supply chains have brought us significant challenges. To address this situation, we have developed an import substitution plan. At present, the first phase of the European substitution plan has been successfully completed, and the second phase - localization of components and materials - is actively being promoted. Victor Pinsky (KMU): KMU company began collaborating with HKTC or Hankook crane brands. The company was founded in 1978 and specializes in lifting structures. In 2022, HKTC merged with Hyundai, the largest holding company in South Korea, and began supplying gantry cranes under the new Hyundai Everdigm brand. Smarteko: European brands have never dominated the mobile crane market. There are many Chinese truck mounted cranes on the market, as well as some Korean brands that have not been affected by sanctions, such as Kanglim (with a load capacity of 7 tons). In addition, local brands in Russia, such as brands under the Palfinger Group and our FG brand, are also growing and expanding. Therefore, the end consumers did not feel the reduction in product variety. As for the components produced in Europe, there was indeed a shortage at the beginning, and we had to quickly adapt to the new situation. But we successfully adjusted the supply process. Nowadays, 70% of the components of our FG crane are produced in Russia, such as hydraulic cylinders, which are manufactured by our Tsental factory. The remaining 30% still needs to be imported from China temporarily. The market situation has prompted customers to pay more attention to local Russian brands, and compared to 2022, our production of on-board cranes has increased by 2.5 times.
What is the current market situation for mobile cranes? What is its direction? Pavel Chernezov: Currently, there is a certain oversupply in the market for crane trucks. This is mainly due to the large number of Asian models introduced due to the expected sanctions restrictions on imports in 2023. This oversupply problem is putting pressure on the market and will continue for some time to come. In addition, the rise in interest rates by the Russian central bank, the expected increase in scrap recovery fees, and the continued impact of chassis shortages have all hindered the positive development of the market in the short term. Victor Pinsky (KMU): After evaluating the import market in March 2022 and confirming the interruption of cooperation with European suppliers, we expect a significant increase in demand for on-board cranes in 2023. Meanwhile, we also anticipate that emerging Chinese brands will enter the market at lower prices. Previously, European brands held a 25% market share, with the majority of them being hydraulic truck mounted cranes. With European manufacturers almost completely withdrawing from the market, Korean crane trucks now dominate. In 2023, there will be 4456 Korean mounted cranes on the market, accounting for 70% of the market, while Chinese mounted cranes will account for 27.9%, totaling 1766 units. In 2021, KMU introduced 300 on-board cranes from South Korea with a load capacity ranging from 3 to 10 tons. Based on market demand, we have decided to increase supply and reserve products in the warehouses of our partners. In 2022, the supply increased by 25% to reach 400 units, and the products were sold smoothly. By the end of 2023, the supply will increase to 573 units. In 2023, KMU will hold a 12.86% market share in the imported truck mounted crane market, mainly consisting of products from the Hyundai Everdigm brand (formerly known as HKTC). However, due to the impact of high interest rates, market activity has decreased, and many customers choose to repair existing equipment, waiting for better market conditions. Smarteko: In my opinion, the current market supply and demand have reached a balance. Based on our order situation for 2024, we expect production to increase by 15% to 20% compared to last year. Although the growth rate has slowed down in recent months, we are prepared for this growth.
What is the current market structure divided by the type and lifting capacity of on-board cranes? What size is most needed? Pavel Chernezov: The market share of rope mounted gantry cranes continues to grow. To meet this demand, the company has modernized its production capacity and strengthened collaboration among various enterprises to increase the output of rope cranes. In addition, due to the greater load-bearing capacity of chassis produced in China compared to domestic products, this has driven an increase in demand for larger lifting cranes. Victor Pinsky (KMU): Currently, rope cranes are the most popular, and the market largely relies on the availability of the chassis. In 2023, there will be a large number of chassis weighing 9 to 15 tons in the market, which will drive the sales of cranes weighing 3 to 5 tons. In 2024, the market trend is tilting towards cranes weighing 7 to 8 tons. Although many customers still miss European and Japanese equipment, the current market is dominated by Chinese chassis. There is still a shortage of chassis in domestic factories such as Kamaz, Ural, and Gorky in Russia. The import of Chinese chassis has solved some of the problem of insufficient supply. In addition, Daewoo in South Korea continues to supply chassis for on-board cranes. Smarteko: Since December 2023, we have been a manufacturer of gantry cranes with maximum lifting capacities of 3, 4, and 5 tons. By 2024, the undisputed leader in this field will be the 5-ton truck mounted crane. This is due to two reasons: firstly, there is a trend of increasing total chassis weight in the market; Secondly, the price difference between 3-ton and 5-ton cranes is not significant, so customers are more inclined to choose equipment with higher carrying capacity.
Could you please tell us about the new model of the on-board crane? Can all models that meet market demand be purchased? Are there any problems with chassis imports from China and Türkiye?
Pavel Chernezov: In response to market demand, the PALFING Group has developed a plan to expand its crane models. In 2024, the company launched the INMAN IM 240N articulated crane that meets EU replacement requirements. Its lifting torque is 22.57 tons per meter and the maximum lifting capacity is 10 tons. It is an alternative to the Austrian PALFINGER PK 23500 model. In addition, a new IM 175T with a lifting torque of 16.8 ton meters and a powerful IM 440 with a lifting torque of 40 ton meters will be launched in the coming months. At the same time, the company will also release new rope type cranes with lifting capacities of 3 tons and 5 tons. Victor Pinsky (KMU): The model of Hyundai's on-board crane remains unchanged, but continuous improvements are being made. At the request of the customer, the factory has increased the support span of HTC 3014 model to 4.5 meters. The latest release is the HLC 3014 model, which has been installed on the Forland 12 chassis newly launched by MB Rus company. Smarteko: We still have inventory of well-known brand chassis such as Isuzu and Hyundai in 2023, but now we are shifting our customers to domestic and Chinese chassis. At the turn of spring and summer this year, there was a shortage of chassis supply, especially from April to June, when our chassis gap reached 60%. However, by August, 90% of the gap had been filled, and we expect to complete the installation of all chassis by the end of October. In terms of the new chassis, we have expanded our cooperation with the small tonnage Dongfeng and introduced six new brands: HOWO, SDAC, DAYUN, Forland, Altai, and AmberTruck produced in Kaliningrad. In December 2023, we launched a new 7-ton truck mounted crane FG 716, and in June 2024, we launched an 8-ton version FG 716 HP (high-power model) based on this model. Now, customers can order an 8-ton crane at the price of a 7-ton model.
Are all the accessories available now? Is there anything wrong with that? How to overcome these problems? How much inventory do you need to maintain? Pavel Chernezov: Due to supply chain restrictions, the supply of components for our cranes and other equipment has been affected. However, PALFINGER Group is actively promoting localized production of key components to ensure that customers can complete equipment maintenance within a reasonable time and cost. Victor Pinsky (KMU): The issue of accessory supply is currently prominent in the market, but KMU has not been greatly affected. Our main popular accessories are stored in the warehouse and we strive to maintain sufficient inventory. Through customer feedback and repair experience, we gradually expand the supported parts catalog. Due to the fact that some devices have been in use for over eight years and unforeseeable malfunctions have increased over time, we strive to quickly provide original parts instead of keeping customers waiting for months. By September, there will be approximately 500 types of accessories in stock in the warehouse. In addition, if customers can predict in advance the wear and tear of certain components or the need for replacement, but the inventory is insufficient, we can also accept pre order orders. In addition, we have launched a "trade in" program for old parts recycling, where customers can purchase new or refurbished parts at a discounted price by returning damaged parts. The refurbished accessories were repaired according to the factory's recommendations and combined with the rich experience of our service partners. In the autumn of 2024, we will launch a localized production project for accessories. These Russian made accessories are not only comparable to original components, but also more suitable for Russian working conditions in some aspects, ensuring their reliability and durability. Smarteko: As 30% of our accessories come from China, every time we produce a new batch of cranes, we also place an order to purchase the corresponding spare parts. Although we cannot disclose the specific inventory quantity, we have not encountered any customer waiting to order parts from China due to malfunctions since 2018.
Is it necessary and exists for parallel imports of Western crane trucks? What is the prospect of parallel import of hydraulic equipment and components? Pavel Chernezov: Due to the increasing risks and uncertainties brought by parallel imported parts, the best solution is to promote localized production of components and find companies willing to cooperate in friendly countries for production. Smarteko: We did not address the issue of parallel imported cranes because we produce our own cranes. As for the components, we have completely shifted to using Russian and Chinese components to avoid relying on any 'grey channels'.