China’s Hengli Hydraulics has been rapidly gaining momentum in the local market, capturing a significant share from European, American, and Japanese hydraulic products due to its price advantage. Bosch Rexroth and Kawasaki have finally begun to counterattack. What strategies have they adopted?
Price is an unavoidable factor. As international companies with a unified global pricing strategy, they can’t simply lower prices for the Chinese market without disrupting their global strategy. The best strategy, then, is to establish new companies.
Bosch Rexroth:
- In 2021, Bosch Group fully invested in the establishment of Letrero Hydraulics, focusing on the design, development, production, and sales of hydraulic power machinery and components, as well as industrial automation control systems. They emphasize technological innovation, promote product structure adjustment, and are committed to providing intelligent, efficient, and safe transmission and control solutions for various engineering machinery and industrial equipment, with a focus on the Chinese market.
- In 2022, Bosch Rexroth planned a collaboration with Wuxi Weifu High-Technology Group Co., Ltd. to establish a joint venture, combining their strengths to develop, manufacture, and sell specific hydraulic products for the Chinese market. Bosch Rexroth will also integrate Letrero Hydraulics into the new joint venture, aiming to bring high-cost-performance products and quick-response services to local customers.
Kawasaki:
In 2024, Kawasaki Heavy Industries and Eddie Precision established a new company in Suzhou, called Aizaki Precision. The JV subsidiary will engage in the research, development, production, and sales of high-end hydraulic pumps, hydraulic valves, and hydraulic swing motors. Once the Aizaki Precision project reaches full production, it will achieve a total production capacity of 22,200 units of high-end hydraulic pumps, hydraulic valves, and hydraulic motors, with an expected annual revenue of 42 million usd
These two international giants have adopted a dual-brand, “local for local” strategy to compete with domestic brands like Hengli. This approach allows them to regain some of the market share lost in China without affecting their global market structure. It also highlights the significant challenge that affordable and reliable local Chinese brands pose to international giants.
Question: If you had to choose between two products with the same functionality, one with excellent quality that lasts 10 years without issues, and another with slightly less stability that only guarantees 8 years but costs half as much, which would you choose?
