Deere & Co. is expanding its strength in the North American construction equipment market around the globe to China — the world’s largest and fastest-growing market.
The Moline-based Deere is entering a new joint venture in China with Xuzhou Xuwa Excavator Machinery Co. Ltd., or XCG. Deere said it has signed a definitive agreement to own 50 percent of XCG — a subsidiary of Xuzhou Bohui Science and Technology Development Co. Ltd. Financial terms of the transaction were not disclosed.
The move will give Deere — a maker of agricultural, construction and lawn and turf equipment — its first construction equipment manufacturing operation in China.
“Today’s action provides Deere with a foundation in this important and rapidly expanding marketplace with an opportunity to leverage the expertise of XCG in China,” Samuel Allen, president, Worldwide Construction and Forestry Division, said in a news release. “XCG is a leader in providing quality machines that perform to high standards for customers, which is a key to enhancing our construction equipment business in this growing market.”
Deere said XCG was viewed as a viable partner in China because of its strong domestic position as a leading Chinese construction equipment manufacturer. XCG produces a broad excavator product line of 14 models. Currently, XCG is the third-largest domestic excavator manufacturer in China with dealers covering all but two provinces of the Chinese market.
“Excavators are a vital segment of the construction equipment market,” Allen said. “XCG is well positioned to provide Deere recognition as a key provider of construction equipment in China.”
Deere spokesman Ken Golden said the companies will produce equipment under both brands.
In terms of sales volume, he said China is the world’s largest market for construction equipment. “We’re No. 2 in North America in construction, but not in the world. This indicates an effort on our part to move in a more global platform in construction,” he added.
Although this marks Deere’s first construction facility in China, the company has had a long-term presence in China with its agricultural equipment. Deere first entered the market in 1976 with its products and services. It began manufacturing agricultural equipment there in 1977.
The expansion comes less than a year after Deere acquired the Ningbo Benye Tractor & Automobile Manufacture Co. Ltd., located in Ningbo in southern China. The earlier acquisition, completed in August, expanded John Deere’s small tractor product line for Chinese farmers. It also expanded its worldwide capacity to produce low horsepower tractors.
In its news release, Deere said the new arrangement will have no effect on its existing relationship with Hitachi Construction Machinery Co. Ltd. Deere has a long-standing business relationship with Hitachi, a leading global manufacturer of excavators. The two companies manage a joint venture in Kernersville, N.C., producing equipment for distribution solely in the Americas.
The joint venture with XCG is subject to regulatory approval in China. No closing date has been set, Golden said.