- Caterpillar on Monday opened a new power train
manufacturing facility and completed the expansion of a
hydraulic cylinder manufacturing facility in Wuxi, China
- The company had also opened two new manufacturing
facilities in the country in Januar
- Caterpillar's strategy of expansion in China is supported
by long term growth opportunities that exist in construction,
mining and power sectors of the country
) announced Monday, the opening of a new power train manufacturing
facility and the completed expansion of another component
manufacturing facility in Wuxi, China. We believe these
expansions are in line with the long term growth opportunities in
China and will help Caterpillar better serve its existing customers
in the country.
The power train facility is a huge 23,000-square-meter facility
which produces axles, transmissions and final drives for a range of
Caterpillar earth-moving and mining machinery. The expansion at the
component manufacturing facility is 17,000-square-meters where
hydraulic cylinders are produced for Caterpillar machines.
We currently have
stock price estimate of $94 for the company
, approximately 10% above its current market price.
See our complete analysis of Caterpillar here
Caterpillar Is Focused On Expansion In China
Caterpillar has a long term view on China and accordingly it is
continuing to expand in the country. Last year, it completed the
acquisition of ERA Mining, whose Chinese subsidiary, Siwei,
provided it with crucial share in the underground roof support
segment of China's mining equipment market. Though, a charge
of $580 million realized post-acquisition, resulting from an
accounting fraud at Siwei, reduced the attractiveness of the share
gain. Caterpillar insists that the acquisition was line with its
growth strategy in China.
In January, earlier this year, the company also opened a large
wheel loader manufacturing facility and proving ground
in Tongzhou, Jiangsu Province, China. In all, Caterpillar
now has 24 existing manufacturing facilities, four R&D
centers, three logistics and parts centers, and a few other
facilities under construction in China.
Rising Urbanization And Energy Consumption In China
Present Growth Opportunities For Caterpillar
This expansionary strategy of the company in China is supported
by the fact that investment in infrastructure, power, mining and
construction sectors of the country is likely to continue for
several years to come.
Currently, 50% of China's population lives in cities, compared
to an urban population of 80% in the U.K. and 82% in the U.S. The
continuing migration of people from rural areas to cities will
require construction of more homes, commercial buildings and
related infrastructure in China over the coming years. This will
promote sales of Caterpillar's construction industry products in
At the same time, sales of power equipment and mining machinery
will also likely continue to grow in China as energy consumption
per person in the country is well below that in developed
countries. China consumes around 3.5 MWh of electricity per person
per year, compared to 12.5 MWh of electricity consumed per person
per year in the U.S..
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