Machinery / Industrial Parts & Tools

Recently, Hyundai Heavy Industries Holdings (HHIH) has officially completed the acquisition of Doosan Infracore under the decision of the Korean Fair Trade Commission to agree to the acquisition. Doosan Infracore has now become an independent construction equipment company under Hyundai Heavy Industries.

After the completion of this acquisition, Doosan Infracore and Hyundai Infracore together become a subsidiary of HG.

Hyundai & Doosan acquisition process:

◆On December 10, 2020, Hyundai Heavy Industries Group won the bid for the sale of Doosan shares, intending to invest 800 billion won (approximately 4.8 billion yuan), and officially signed the contract at the end of the year.

◆On February 5, 2021, Hyundai Heavy Industries Group signed a formal contract for the acquisition of Doosan Infracore.

◆On April 9, 2021, Hyundai Genuine acquired 75,509,366 shares of Doosan, becoming its largest shareholder.

◆In July 2021, Hyundai Heavy Industries established the holding company Hyundai Genuine (HG).

For this major merger and acquisition case, it has aroused great concern in the industry. After the completion of the acquisition, how will Hyundai Heavy Industries' market share of excavators in China and the world change? What are the moves in business development and product layout?

1. Complementary advantages and join forces to impact the Chinese market

As the first batch of construction machinery manufacturers to enter the Chinese market, Doosan and Hyundai have been among the top Chinese market shares for many years. However, with the rise of local brands, the market share of Korean brand excavators has been declining, and brand concentration has begun to scatter.

In recent years, as Korean brands have adjusted their business strategies in China, the market sales of Korean companies represented by Doosan and Hyundai have begun to rise slightly. Taking sales in 2020 as an example, Doosan Excavators sold 18,686 excavators in China, a year-on-year increase of 22.4%. Hyundai excavators also sold more than 8,000 units in China, and their market share in China has also increased slightly.

In terms of brand distribution in the Chinese market in 2020, Doosan ranks 6th with a market share of 5.88%, and Hyundai ranks 9th with a market share of 2.38%. After the formal merger of the two parties, Doosan and Hyundai have a combined market share of 8.26% for excavators in the Chinese market, second only to Caterpillar’s 10.3% market share. The market share ranking may rise to the second foreign brand in one fell swoop, and the top five in the Chinese market. name.

From this point of view, after the acquisition, Hyundai Heavy Industries will benefit from the advantages of business channels and resource reorganization, and its competitiveness in the Chinese market will be further improved, or it will have a certain impact on the Chinese excavator market structure.

2. Resource integration, sprinting into the international competition landscape

In the 2021 global top 50 construction machinery manufacturers list released in May this year, Doosan ranked 10th with a revenue of 7.109 billion U.S. dollars (down 1 place from last year), and Hyundai ranked 21st with a revenue of 2.345 billion U.S. dollars ( Up 1 place). After the merger, the combined sales of the two were 9.454 billion U.S. dollars, slightly surpassing the fifth-ranked Zhonglian (9.449 billion U.S. dollars).

From the perspective of superposition of sales alone, Hyundai Heavy Industries is expected to rank first among Korean brands and top five in the world in the global top 50 list.

After the two mergers, the effective synergy of business and resources between the two parties, the reform and innovation of mechanisms, and the elimination of the competitive relationship between the two parties will undoubtedly further stimulate the development potential of Hyundai Heavy Industries, and its market competitiveness and international status will achieve new Span.

3. Strategic coordination and layout of new electric track

With China's strategic goal of dual carbon emission reduction, a wave of green new energy for construction machinery has been set off, and innovative products such as electrification have become a breakthrough for enterprises to open up the market.

Regarding the layout of new technologies and innovative fields, HG stated that it will work hard to promote the commercialization of Doosan Concept-X system and fully develop new products such as electric excavators, battery packs, and hybrid fuel cells. In order to enhance the competitive advantage in the global market.

According to data, Concept-X is a future project planned by Doosan in response to the Fourth Industrial Revolution. Accurate and rapid construction can be achieved through unmanned driving and 5G remote remote control equipment to meet customer needs for efficient operation, cost reduction and efficiency, and safety.

In the future, relying on the synergistic advantages of both parties to form a complete industrial chain resource sharing and technology, and relying on the innovative new electric products developed by Doosan, HG is expected to gain a share in the electric market.

In recent years, with overcapacity in the industry and serious homogeneity, international competition continues to intensify, and industry integration and mergers have become a strategic choice for companies to accelerate the realization of benefits. However, M&A integration is a complex and systematic project, and there are uncertainties in the market. Can Hyundai Genuine's acquisition of Doosan Infracore ultimately achieve the effect of 1+1>2? We will wait and see.