As new machinery sales decelerate, aftermarket services including maintenance, parts supply, and retrofitting are gaining increasing attention from construction machinery enterprises. In recent years, numerous machinery companies including Guangxi Liugong Machinery Co.,Ltd. (000528.SZ), Xcmg Construction Machinery Co.,Ltd. (000425.SZ), Shantui Construction Machinery Co.,Ltd. (000680.SZ), and Wuxin Tunnel Equipment (835174.BJ) have explicitly stated their intention to enhance aftermarket business contribution. Some enterprises even regard aftermarket expansion as a strategic transformation, aiming to increase aftermarket business proportion to over 50%.
"The domestic market is transitioning from a new equipment growth market to an existing inventory market, making the aftermarket a key source of business growth and an important pillar for enterprises to withstand risks during market downturns," a Guangxi Liugong Machinery representative stated. Previously, during the growth market phase, main equipment manufacturers often adopted free service strategies to compete for market share, which somewhat overdrafted aftermarket value. Now, with changing market and customer demands, as well as international business development, the aftermarket is receiving increased attention.
Multiple industry professionals indicated that under current market conditions, machinery companies' emphasis on aftermarket business relates to its characteristics of "high margins, large scale, and risk resistance." Additionally, benchmarking against international leading machinery enterprises shows that higher aftermarket business proportions typically correlate with stronger operational stability.
**Strategic Transformation**
Unlike new machinery sales, machinery enterprises have different approaches to aftermarket positioning. "Our aftermarket business layout mainly involves overseas markets, out-of-warranty parts, and retrofitting services," Guangxi Liugong Machinery explained. Through recent years of development, the company has enhanced the systematization, standardization, and digitalization of parts supply and service support systems. The proportion of out-of-warranty parts and service revenue continues to increase, with international aftermarket business revenue now exceeding domestic levels.
"Our aftermarket business primarily focuses on consumables and components," Wuxin Tunnel Equipment stated. The company has been developing an integrated online and offline self-operated parts service system, launching equipment remanufacturing and major repair services.
Despite different approaches, machinery enterprise aftermarket business generally encompasses post-sale maintenance and servicing, parts and consumables supply, technical training and support, retrofitting and refurbishment, and leasing and recycling services. Industry professionals note that aftermarket business typically covers the entire lifecycle following new equipment sales and warranty periods.
Several machinery enterprises have set ambitious aftermarket development targets, with some viewing such initiatives as operational transformation strategies. Guangxi Liugong Machinery explicitly stated its intention to accelerate aftermarket business strategic transformation and establish industry leadership. Xcmg Construction Machinery Co.,Ltd. positions aftermarket alongside internationalization and new energy industries as "three major growth drivers," emphasizing accelerated precision implementation of aftermarket creative practices. Shantui Construction Machinery Co.,Ltd. considers aftermarket transformation, new energy transformation, and digital intelligence transformation as three key strategic initiatives for comprehensive enterprise transformation. Wuxin Tunnel Equipment positions aftermarket business as a strategic growth engine.
Some enterprises have proposed more specific objectives. Wuxin Tunnel Equipment stated in 2023 its goal to achieve through ten years of effort a new business structure where infrastructure and mining markets each account for 50%, domestic and international markets each represent 50%, and main equipment and aftermarket sales each comprise 50% of total revenue.
"International benchmark enterprises we study have aftermarket revenue proportions approaching 70% and continue growing, which represents our future development target," Wuxin Tunnel Equipment representatives noted.
**High Profit Margins**
From implementation perspectives, machinery enterprises primarily focus aftermarket development around service stations, warehousing and parts networks, and supply chain networks. "Our aftermarket business has undergone significant transformations in recent years, fully leveraging vehicle networking data to advance digital marketing capabilities," Guangxi Liugong Machinery stated. The company has shifted from passive to proactive approaches, from stationary to mobile commerce, from departmental legal entity assessments to full value chain evaluations, and from focusing on dealers to end customers.
Wuxin Tunnel Equipment indicated in its 2024 annual report continued improvement of aftermarket service ecosystem development. Building upon service networks, sales networks, and supply chain networks, the company emphasizes expanding value-added services including mid-term maintenance and major equipment repairs, creating integrated applications featuring equipment management, fault warning, and efficiency optimization functions.
Xcmg Construction Machinery Co.,Ltd.'s aftermarket business priorities center on parts systems, domestic warehousing networks, international parts networks, and overseas maintenance service centers.
Such initiatives inevitably create cost pressures. "Aftermarket business capability requires long-term investment and time accumulation," Guangxi Liugong Machinery noted. Initial aftermarket business investments are high with slow returns, unlike new equipment sales which can show quick results, creating certain cost and profitability pressures.
The company further explained that aftermarket business expansion costs primarily include parts procurement, service personnel labor, transportation, and potential inventory impairment risks from parts reserves.
"Our aftermarket business costs mainly concentrate on supply chain network construction," Wuxin Tunnel Equipment stated. Current aftermarket business expansion challenges involve further cost reduction through management and process improvements to develop products with lower prices and better quality assurance from supply chain perspectives.
Nevertheless, industry consensus indicates machinery aftermarket business generates higher profits than new equipment sales. "Our aftermarket business gross margin exceeds main equipment business by approximately 10 percentage points," Wuxin Tunnel Equipment reported. For the first half of 2025, aftermarket business gross margin reached 41.92% compared to 30.32% for main equipment business.
"Compared to complete equipment sales gross margins of 15% to 25%, aftermarket business can achieve 30% to 50% gross margins," Guangxi Liugong Machinery stated. Based on mature market experience, aftermarket overall scale over long cycles matches complete equipment revenue scale, but aftermarket business offers higher gross margins and more diversified revenue sources including parts sales, maintenance service income, retrofitting and major repairs, and used equipment business.
"Global benchmark enterprises achieve high-margin growth through advantages in parts supply and intelligent services. Deep excavation and integration of aftermarket value chains has become the core profit driver," the company noted. Comparing mature markets and industry benchmark revenue and profit structures, combined with the domestic market's overall transition from growth to existing inventory markets, Guangxi Liugong Machinery has repeatedly emphasized that construction machinery industry profit models are transforming, with enterprise profit focus shifting from new equipment sales to deep excavation and integration of aftermarket value chains.
**Risk Resistance**
Beyond higher margins and scale comparable to main equipment sales markets, multiple industry professionals indicated aftermarket business demonstrates stronger performance stability than new equipment sales. Higher aftermarket business proportions provide enterprises with enhanced cyclical risk resistance capabilities, making this a key attraction for companies seeking "transformation."
Guangxi Liugong Machinery noted that as domestic markets transition from new equipment growth to existing inventory markets, aftermarket represents a key source of business growth and an important pillar for risk resistance during market downturns.
"Aftermarket represents a continuous and stable market. Even with changing macroeconomic environments and potentially significant main equipment sales fluctuations, existing equipment demand remains relatively stable," Wuxin Tunnel Equipment stated. Aftermarket business significantly contributes to enterprise performance stability, with higher aftermarket business proportions generally correlating with stronger operational performance stability.
Previously, during new equipment sales growth periods, main equipment manufacturers paid insufficient attention to aftermarket business, primarily due to companies competing for main equipment market share and aftermarket demand characteristics. Current main equipment manufacturer transitions toward aftermarket business will significantly impact enterprise operational models and industry development.
"Past new equipment growth markets enabled rapid increases in complete equipment revenue and profits. Aftermarket was treated as new equipment additional benefits, with companies mostly adopting free services to compete for market share, overdrafting aftermarket value," Guangxi Liugong Machinery explained. Now, with changing market and customer demands plus continued international business development, overseas markets and customers, particularly large clients, have increasingly higher aftermarket requirements.
"Enterprise emphasis on aftermarket business expansion fundamentally reflects changing customer demands, with companies adapting to corresponding trends," Wuxin Tunnel Equipment noted. Current aftermarket demand no longer uses price as the sole criterion. While customers pursue lower prices, they increasingly value quality and after-sales service guarantee capabilities, enabling main equipment manufacturers to advance aftermarket business development.
Previously, construction machinery aftermarket business was primarily developed by private service providers including family-operated shops and individual contractors. Industry professionals believe such providers offer price advantages but face scale limitations that often prevent meeting current higher customer requirements.
"Compared to main equipment sales, aftermarket business models emphasize long-term approaches with higher requirements for refined business management," Guangxi Liugong Machinery stated. Facing aftermarket transformation, domestic construction machinery enterprises will experience changing aftermarket profit structures, intensified service and parts competition, and industry evolution from disorderly competition toward standardized development, from product competition to service ecosystem competition, with service and parts teams gaining greater importance.
Additionally, Guangxi Liugong Machinery indicated that enterprise aftermarket transformation will require higher global service and parts management standards, potentially upgrading customer experiences.
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