China's Lithium-ion Power Tools Market: Navigating Intensified Overseas Competition and Trade Barriers
"Most people would think that 'involution' means 'rolling down' prices and products, making profits thinner and beating competitors to the point where they have no way to survive. However, our understanding is to 'roll up', to enhance product competitiveness and R&D innovation capabilities," said Fei Bo, the person in charge of overseas marketing at Jiangsu Dayi Technology Co., Ltd. (hereinafter referred to as Dayi Technology), which focuses on lithium battery tools, to the First Financial Daily reporter at the Canton Fair on October 16.
Fei Bo stated that this year, with the advancement of the country's "Belt and Road" policy initiative, although the company's sales volume has maintained a 50% growth, the fierce market competition still makes people feel that the market is becoming more and more "involuted."
Bao, the person in charge of overseas business at Jiangsu Jinding Electric Appliance Co., Ltd., also feels the same way about involution. "There are too many domestic manufacturers of the same type, and we are all 'rolling'," Bao said.
Advertisement
In recent years, China's electric tool industry has achieved significant development and has become the world's main production base and exporter of electric tools. In 2023, China's electric tool production reached 240 million units, accounting for more than 60% of the global output. With the continuous boom of the country's "new three major items" in exports, many Chinese electric tool manufacturers have started to shift from the domestic market to the international market, making price wars increasingly fierce.
Electric tools, as one of the commonly used application tools, include electric drills, electric saws, cutting machines, lawn mowers, etc. The application range of electric tools is also very wide, and they are important equipment for daily production and life, playing an indispensable role in the economic and social development.
With the development of lithium battery technology, lithium electric tools equipped with lithium batteries have become the first choice for industry insiders and have also provided opportunities for industry development. Public data shows that the global electric tool market size in 2021 was $34.3 billion, and it is expected to continue to grow stably at an average annual compound growth rate of 5.7% in the future, reaching a market size of about $45.2 billion in 2026.
Looking at the regions, North America is currently the most important sales market, followed by Europe and the Asia-Pacific market, with market sizes accounting for 38.65%, 32.39%, and 19.87% of the global total, respectively, and together exceeding more than 90% of the overall market.
In recent years, with the intensification of global market competition, many Chinese manufacturers of lithium battery tools have started to shift from the domestic market to the international market, making price wars increasingly fierce.
Bao, who is in his 40s, has been working in the lithium battery tool industry for more than ten years. In his view, the ones currently participating in the "involution" in the market are still those enterprises that are positioned in low-end manufacturing."Some small workshops in the domestic electric tool industry simply find some motors, batteries, and other products, directly purchase these components, assemble them, and then ship them out. The minimum profit for each electrician's tool is only 50 cents," said Feibo. This kind of low-end manufacturing cannot represent the "future" of the industry.
The competitive situation of domestic lithium-ion electric tools is spreading to overseas markets, with more and more Chinese brands beginning to lay out in overseas markets to seize market share.
"Our sales growth comes from Southeast Asian countries and regions, and the number of customers establishing cooperative relationships with the company locally is also continuously increasing," Feibo stated.
"This is actually due to the steady growth of the electric tool market in the countries of the entire Southeast Asia region. With the increasing national strength of countries represented by Vietnam, the demand for electric tools is particularly strong due to the continuous increase in local infrastructure construction and industrialization levels," Zhang Qingxin, General Manager of the Overseas Marketing Division of Dayi Technology, told the First Financial reporter at the Canton Fair booth.
While the market is gaining growth, competition is also becoming more intense. In the past year, Feibo has been traveling overseas almost every month, visiting Russia, Europe and America, and Southeast Asian countries, continuously expanding order opportunities locally.
Feibo has clearly felt that currently, consumers in the "Belt and Road" region have a growing demand for tool lithium-ionization, and their sensitivity to prices is also increasing, seeking tools with higher cost-performance ratios and more complete functions to meet daily needs.
"This trend provides our brand with a huge market opportunity, and the sales volume of our newly launched 40V high-energy lithium-ion tools in these regions is continuously increasing," Feibo said.
In Feibo's view, lithium-ion tool companies should "roll" product quality and service, and must have a certain degree of innovation and brand accumulation to win market customers and reputation.
Zhang Qingxin said that under the market environment of internal competition, to continue to do well in overseas markets, the brand positioning must be very clear. "When others are 'fighting for price', if you dive in to compete, this is actually not good, especially for manufacturers who do their own brands. Lithium-ion tool companies need to be clear about where their product positioning is? Based on this positioning, understand the real needs of users, and continuously improve product performance and quality."
Breaking through barriersAt this year's Canton Fair, Manager Bao distinctly felt that overseas clients have very high demands for pricing, and their ability to bear costs is slightly "a bit worse" than before. "In the past, European and American clients prioritized product quality and were not as sensitive to prices, but now they also demand low prices," said Manager Bao.
"There is a 'cheap' way to produce inexpensive products, after all, the materials and labor time used are different, and the quality of the products will naturally differ. We still focus relatively more on quality; we can't just ignore the clients after they've purchased our products. Good customer product service is still necessary," Manager Bao stated.
After more than ten years of working in the overseas market, Manager Bao has personally experienced the changes in market rules. "At present, the European and American markets remain the largest global application market for lithium-ion power tools. There are strict requirements on the quality systems and social responsibility systems of factories in these regions, and these requirements are becoming increasingly stringent," Manager Bao mentioned. In terms of the European market, the certification and annual review of lithium-ion power tool product quality need to be continued every year, which invisibly increases the company's manufacturing costs.
"This year, the European and American markets even have special requirements for the environmental protection of materials used in lithium-ion products, adding certification requirements for product environmental protection, including the materials used inside the casing. PVC materials can no longer be used, and the source of related materials must be traceable," Manager Bao said. These requirements would be considered very strict and inconceivable in other markets, but European and American countries view such certifications as normal.
"There's no way around it; if we want to expand our local market clients, we can only bear these market 'requirements' ourselves," Manager Bao said.
In recent years, overseas countries have placed great emphasis on the construction of their own supply chain systems. "Many overseas countries do not limit the capital, technology, talent, and supply chains of Chinese enterprises. However, some countries have imposed more or less restrictions on the sale of finished products because they want to protect their own supply chain enterprises and limit the direct import of our products," a person in charge of an exhibitor from Shenzhen told the First Financial Daily reporter.
However, in Zhang Qingxin's view, some Southeast Asian and African countries and regions, due to their imperfect supply chain systems, are still unable to completely replace China's supply chain system.
"The American market is forcing domestic enterprises to establish factories in places like Vietnam, Thailand, and Mexico, but once factories are established overseas, the costs actually increase significantly for domestic enterprises," Manager Bao said. In fact, it can only be said that some core raw material production capacity is moved there, plus the assembly of other components. The entire lithium-ion power tool industry chain is still in China and cannot be completely moved away.
Industry insiders in lithium-ion power tools introduced that the global electric tool market is currently experiencing steady growth, a trend that benefits from the continuous improvement of the intelligence and automation levels of electric tools, thereby driving an increase in sales.
"As the market scale expands, competition has also become more intense. This competition is not only reflected in prices but more so in the rapid iteration and updating of products and technologies," Zhang Qingxin said, emphasizing the importance of the safety of the enterprise's supply chain system."The company has rapidly established a Chinese brand image in overseas markets, laying a solid foundation for the rapid growth of our brand in these markets through increased marketing investment, multi-channel promotion, and precise marketing strategies," said Zhang Qingxin.