The domestic economic slowdown has significantly impacted the electrician industry, with the supply and demand market showing signs of instability this year. The industry, which once experienced an average annual growth rate of 30%, is now facing a decline in momentum. In the second half of last year, many companies reported a sharp drop in orders. Although the first half of this year saw a slight improvement compared to the previous year, profit margins and sales prices have fallen sharply. On July 19, Bai Wenbo, Deputy Secretary-General of the China Electrical Equipment Industry Association, emphasized that power equipment companies must undergo transformation and upgrading while exploring overseas markets for new growth opportunities. He suggested that overseas M&A could serve as a viable model for companies seeking expansion.
Going global is not just a trend but a necessity for many Chinese enterprises. However, most entrepreneurs find the path challenging. Beyond capital and technology, factors such as investment decisions, market fluctuations, legal barriers, cultural differences, political instability, and regulatory challenges complicate international expansion.
As a result, identifying a suitable business model and finding new profit drivers are critical challenges for companies looking to grow. The decision to go abroad comes with its own set of risks and uncertainties, but it remains one of the few paths forward for firms struggling with shrinking domestic demand.
Since the first half of 2012, the electrical industry has seen rare negative growth, with overcapacity, declining profits, and fierce competition affecting sectors like wire and cable, transformers, and wind turbines. Some companies operate at less than 50% capacity, while raw material costs account for up to 70% of selling prices. Transformers, once a symbol of quality, have become a source of embarrassment in some cases.
China’s power transmission and transformation equipment manufacturing industry has grown rapidly but now faces intense competition and overcapacity. Market development remains a key challenge, and expanding into overseas markets is essential for long-term survival. Wang Dehua from Xi'an Xidian Transformer Co., Ltd. emphasized that while domestic development is important, international expansion is equally crucial.
However, going global is becoming increasingly difficult. The lingering effects of the financial crisis remain, and Chinese companies struggle to compete in high-end markets. Meanwhile, competition in low-end markets continues to intensify. Additionally, they face stricter requirements on policies, taxes, employment, and environmental standards.
Xu Xiang of Daquan Group believes that going abroad is a natural trend. He envisions a balanced approach where international and domestic markets grow in tandem. However, he also acknowledges that the timeline for expansion must be flexible, as market conditions change rapidly and unpredictably.
To succeed, companies need to adapt their sales models, management strategies, and localization efforts. Innovation is key, especially when entering new markets. Power equipment companies often go global through various methods: setting up factories near key markets, establishing production facilities in resource-rich regions, acquiring foreign companies, or leveraging brand value through OEM partnerships.
Wolong Electric Group’s acquisition of German company ATB is a successful example. Rather than sending large teams to Germany, Wolong integrated Chinese management practices and expanded its European presence. This allowed it to tap into ATB’s brand and distribution network, quickly boosting its international market share.
Despite these successes, the path for Chinese power equipment companies remains challenging. Rising international demand for green energy and infrastructure projects brings higher investment costs. At the same time, Western countries often view Chinese companies with suspicion. Few have successfully established a foothold in the front-end market. Without a solid market foundation, simply moving operations abroad to avoid taxes or labor costs is not a sustainable strategy.
Bai Wenbo suggests that direct acquisitions may be the best option for many companies. While the road is tough, international expansion is essential for long-term growth.
In recent years, the drop in international orders has been influenced by both economic conditions and normal market cycles. Yet, the demand for high-performance electrical equipment is still growing, and the global market continues to expand. This pressure pushes Chinese companies to focus on core technologies and product quality.
Although international expansion involves many unpredictable factors—such as political, fiscal, and cultural challenges—it remains the only viable path for opening up new markets. Currently, China’s exported power equipment products often lack competitive pricing, and while some industries have reached global standards, many basic products still lag behind international averages. There are few truly independent Chinese brands in the global market.
Bai Wenbo emphasizes that the industry must recognize the urgency of transformation and upgrading. Xu Xiang of Daquan Group agrees, noting that while his company is close to foreign competitors in terms of product quality, it still needs time to fully adapt to international standards. Recently, attending the Hannover Industrial Fair highlighted the importance of industrial upgrading and internationalization for Daquan, as it transitions from a domestic-focused to a global-oriented business.
Wang Dehua also stresses the need for transformer companies to improve product quality, performance, and cost control. Developing eco-friendly, low-loss, and reliable transformers that meet international standards is essential. Companies must also restructure their sales models, enhance after-sales service, and invest in branding to successfully enter the global market.
ZHITONG PIPE VALVE TECHNOLOGY CO.,LTD , https://www.ztongvalve.com