Getting to Know LiuGong Construction Equipment

Bryan Furnace (00:00):

Today we're here to talk about LiuGong. What is LiuGong? Well, it's only one of the biggest equipment manufacturers on the planet, but we just don't know them very well here in the US. And if you're like me as an American contractor, you probably imagine an excavator with 20-year-old technology, toggle switches, sticks that are way up here and look like they're out of a dozer from the 1960s. But as Chris Saucedo's going to tell us, that is not the case at all. These are some very advanced machines and they actually have a leg up on some of the American machines. So without further ado, here's Chris.

(00:44):

Let's just kind of get the big elephant in the room out front and open.

Christopher Saucedo (00:48):

Sure. Okay.

Bryan Furnace (00:49):

LiuGong is not one of the big, recognized brands, especially here in the American market. And so for some of the people who have never even heard of your brand, could you give us a brief overview of just your product offering here in the US?

Christopher Saucedo (01:01):

LiuGong may not be a big brand in North America, but it is actually a very old, established brand. We're celebrating our 65th year this year globally. We have 13 manufacturing facilities globally. We've been in the US market since 2008, not with our construction equipment product line but rather with our fork truck product line. So those are the first products we brought into the North America market. But since then we've expanded our portfolio, expanded our dealer network, which is one of the fastest growing networks in the construction equipment market in North America. We've also increased our sphere. So the LiuGong North America area of primary responsibility, if you will, is actually the countries from Panama to Canada. So we have a very diverse product portfolio because of the emissions regulations, the lesser regulated markets versus the higher regulated markets.

(01:47):

But in the main, wheel loaders is our core product. You may not realize, but LiuGong is actually number one in the world in wheel loaders. We've built and sold more wheel loaders globally than any other manufacturer. That's our flagship product. We have a complete excavator line, everything now from 1.8 ton to our 95-ton machine, which we unveiled at ConExpo this year. We have a line of dozers, both organically in the LiuGong name and in 2014 we purchased Dressta. So we have the Dressta dozer line as part of our product portfolio in North America as well. We launched a new 12-ton dirt roller at ConExpo, and that will be part of the family of rollers, eight-, 10-, and 12-ton capacity. And we are also bringing in motor graders. Later this fall we'll introduce a 35,000 pound, 200 horsepower, 14 foot motor grader into the marketplace. But for us, we are focused in five product segments, which is general construction and rental, our quarrying aggregate product offering, which we unveiled at World Concrete two years ago now is growing quite rapidly, and our product portfolio is growing as well.

(02:45):

We've had a relationship several years with another North American OEM for the forestry segment, that's evolving and maturing. We have a lot of dealers that play in that segment. Industrial's been a big part for us, waste and recycling, snow removal, demolition. And then the last segment that's emergent for us is the agricultural segment. So all the dealers that we've been bringing on participate in least one of those segments as their primary business functionality, so they're specialized in that region.

Bryan Furnace (03:09):

I'll tell you, it occurs to me, I've always known Americans are very American centric, and then I get into the construction industry and it is very American centric. We don't lift our heads up, we don't look around. And so just as you go through the company history and where you guys are, it's just yet another example to me of, this is not a new company that just popped up overnight and decided to start selling excavators over here in the US. This is a very well established brand, it's been around for a very long time. And you guys have multiple markets that you're already operating in, this is just one of your newer markets. But as you've already stated, you guys have been here since 2008. So it's not even that new of a market to you guys at this point.

Christopher Saucedo (03:48):

Yeah, I think as we've evolved over the last three years we've had an opportunity to do a lot of things with regards to our strategic approach to this market. One of the big differentiators for us is people and relationships. As LiuGong continues globally, its globalization efforts, our chairman tells us all the time, globalization really equates to localization. So if you look at the team that's here in North America, it is a North American team. Decisions are being made here in North America, products being marketed, and we have a product management team. We've now started to add engineering capacity here. So we've become very close to our markets very, very quickly through that process.

Bryan Furnace (04:23):

So I now want to pivot to the other big elephant in the room, which is the fact that at the end of the day LiuGong is a Chinese company. So the common trope of all contractors, "Oh, that's just cheap Chinese junk."

Christopher Saucedo (04:35):

Yeah.

Bryan Furnace (04:35):

What would you say to these contractors before they've ever sat in a machine making that snap judgment?

Christopher Saucedo (04:41):

Yeah, I think this is the fun part where we actually get to talk a little bit about our history and the way we're structured. We are, for all intents and purposes, a publicly traded company, have been for several years since the early '90s. But the way that the company's evolved, we're number four in the Chinese marketplace but we're the largest exporter of construction equipment in the marketplace.

Bryan Furnace (04:59):

Wow.

Christopher Saucedo (05:00):

So our acumen is really just as much outside of where we came from as inside. And you could switch that around too. The domestic American brands have just as much presence in other markets than they do in this market. So the other thing that really differentiates LiuGong, again, we're an old and established company, but we have some true joint venture relationships that make us unique in the marketplace. I say all the time that we're the most vertically integrated non-vertically integrated company in the marketplace right now.

(05:32):

And the reason why I say that is we've had a joint venture with Cummins, who's one of the global market share leaders in off highway engines, we've had that relationship for well over a decade now. In fact, we have a 50/50 joint venture inside of China. We build all of the engines that go into the Chinese marketplace, including to our competitive product offerings. We have a very similar relationship with ZF that started out just in light fabrications but now has evolved into joint development of axles and transmissions, which we use in our products, our new generation of wheel loaders. We're partnering with Kawasaki, again, global brand. In fact, the software that's running our E over H control system in majority of our new F series excavators is a joint development product with Kawasaki.

(06:15):

Rexroth, there's several others we could go into, but at the end of the day, you can have a perception of what it means, but we don't shy away from the fact that we are very, very close to our supply base. And at the end of the day, that brings a pride to the marketplace that we don't have to lead with price. We will never come to this marketplace or any other marketplace really as the lowest price, because we have no reason to do that. We offer a very competitive value to our customers that most of our Chinese competitors or even other Asian competitors can't bring to the marketplace.

(06:44):

Well, I think the other big differentiator for us is really about the sustainment piece. So as we've grown our business in North America, we've actually created specialized teams that do two things. One is, we have what we call the core team, which is customer operational readiness and enrichment. And basically that's the team that's focused on helping our dealers grow their capability and skill set. So our dealers have highly trained technicians just like the domestic guys do.

(07:09):

And then we have also, which makes us a little bit unique, LiuGong North America has created a technical solutions team. And basically our commitment to our customers is that if your dealer can't get you up and running in 48 hours, if there's something that exceeds their skill set, I actually put a subject matter expert technician onto an airplane and I fly them out, and they'll get that machine up and running.

Bryan Furnace (07:30):

Wow.

Christopher Saucedo (07:31):

And we'll stay there until it goes. So try and call any of the domestic OEMs and say, "My machine's broken, my dealer can't fix it. Can you send somebody?" And see what kind of response you get.

Bryan Furnace (07:39):

Let's shuffle over and get into the equipment a little bit. And one of the things, electric equipment in my mind as a contractor I have largely written off as, the technology's not there, it's just not viable. And then I started doing a little research on your electric wheel loader. And in my mind it's going to be mostly for a pit or a quarry operation, but you guys actually have a pretty viable product. Could you talk a bit about the capabilities of that machine?

Christopher Saucedo (09:25):

I think your observation is absolutely correct. In this marketplace there's a lot of movement of machines. Even though if you look on a road project, by example, you're moving three or four miles every day, and it's very difficult to have the technology to replenish that electricity requirement. Now, there's some things that we're working on to address that gap, but our approach really is looking at fixed site applications where the infrastructure could be installed, where there's a regulatory need or a environmental want to reduce emissions. So things where the wheel loader will come in place, you're exactly right, quarrying aggregates, asphalt plants, ready mix facilities. Again, fixed site facilities where they're using a wheel loader and they've got the infrastructure to do the charging.

(10:09):

The other one that I think is going to be very interesting is, we've got the 856, which is basically the 41/2 yard machine, now. We will be bringing in our 820, which is a product model that we previously sold under 816. So basically 1 1/2, 1.8 cubic yard machine, that will be fully electric as well. And I think that has a lot of viability into the agricultural arena. So if you think about working in a feed lot or working around cattle and livestock.

Bryan Furnace (10:36):

Absolutely.

Christopher Saucedo (10:36):

No noise, no emissions, no petroleum products, no exhaust fumes messing with your cattle or your livestock or your feed. Tremendous opportunities there. The battery electric vehicle product in North America, the wheel loader in particular, we've already sold the first two machines. One went into a municipal application, one went into a quarrying aggregate application. We've sold 1,500 of those machines globally.

Bryan Furnace (10:57):

Wow.

Christopher Saucedo (10:58):

We have amassed over a million hours of total operating time on those 1,500 machines. We have some machines that are in their 10,000 hour range already.

Bryan Furnace (11:06):

Wow.

Christopher Saucedo (11:07):

So they've been in the marketplace for three or four years now. It's amazing what they can do compared to the other machines. So some of the application we've had, in their altitude where a diesel engine would derate.

Bryan Furnace (11:17):

Really struggle, yeah.

Christopher Saucedo (11:19):

They're just blowing and going because they don't have that same requirement for the oxygen. All the data we have on it is, yes, there's an acquisition cost and then there's charging pile cost that seems big up front, but the payback's about 19 months on that. Basically your savings in fuel.

Bryan Furnace (11:37):

That's not bad at all.

Christopher Saucedo (11:38):

And then the other big one that I just saw some numbers, and these are North America numbers, that basically running a like size machine, like size diesel machine to our 856 wheel loader, we are producing more cubic yards per hour than the diesel machine with the exact same size bucket, exact same size machine. And the reason for that is because the machine's quicker. We have higher torque, we're faster in acceleration, and we could get one or two extra loads in per hour. Again, your productivity per hour changes and your metric changes. And then that same customer did their own calculation. They said, "Okay, this is my price per kilowatt hour for the electricity. Here's my total investment cost. Here's what I'm going to pay for fuel and maintenance over the next 10,000 hours." And the savings was quite significant. I think just in fuel cost alone we're talking between $85,000 and $90,000 just in fuel cost statements.

(12:32):

And that's calculated in, that's after you've taken all your cost for the charging pile and for what the cost to buy the electricity is. So tremendous opportunity, zero emissions. Maintenance is highly simplified, because if you think about it, it's electric components. I'm not worried about gears breaking down and things like that. If I have a failure, it's a swing. Just take that part out and put the new part in, and off we go.

Bryan Furnace (12:57):

Well, between you and me, you haven't even gotten to the impressive part. The part that really impressed me is, what kind of run time are you getting and what's the recharge time on it? Because that's what blew me away.

Christopher Saucedo (13:05):

It really depends on application. That's one of the reasons why we don't offer the charging pile, because we want to make sure that we suit it to the application. So our machine runs in light applications will run 10 hours continuous.

Bryan Furnace (13:15):

Wow.

Christopher Saucedo (13:16):

Heavy application, we'll get eight hours out of that. We can do everything from a trickle charge and an overnight charge to the rapid charge, take it from basically 20% to a full charge in less than 90 minutes. So if you think about a big operation, you'll refuel more than you actually have to put it on the charger. But the operator stops for his lunch break, plugs in the rapid charger.

Bryan Furnace (13:36):

You're good to go for the rest of the day.

Christopher Saucedo (13:38):

Yeah, and you can run it almost non-stop continuous if you're running second or third shift without a problem. We actually validated that number with our municipal customer out in southern California. The LA County sanitation district was the first one that procured that machine. And similarly, our excavator product line. So we have two, a 20 and a 30 ton excavator that are in evaluation in Europe right now doing exactly the same thing, working in scrap and recycling. But they had the infrastructure there and their productivity is actually higher, because again, you're working off electric motors and you're not having all that parasitic loss to the drive trains and the engines and things like that.

Bryan Furnace (14:10):

Absolutely. Well, you mentioned your excavator line and I think that's a perfect transition. Let's move over talking about your new F series that you guys are releasing. You guys, from what I understand, are bringing some new machines to market here in the US. What machines and what can we expect, and what are some overview features of the machines?

Christopher Saucedo (14:27):

Our F series excavators will span from 1.8 metric ton all the way up to 95 metric ton. So we start at the small end, or 9018, 9027, 9035 are all going to the F series. The 9018, 9027 are contained radius, we'll have another small 9017 that will be a contained radius machine as well. At ConExpo, we unveiled our five- and six-ton machines, 9051 and 9057. Those will be in the marketplace in Q3. We launched at ConExpo our 913, 915 machines, 13- and 15-ton machines. Those are contained radius machines. Very, very popular with contractors especially working in confined spaces or doing road work, only closing one lane of the road.

Bryan Furnace (15:08):

That's a handy machine size to have, especially with the contained radius. It's great.

Christopher Saucedo (15:12):

Well, there's also a huge safety factor there as well, right? So you're always, especially when you're working on those types of projects and you have ground personnel working in close proximity with the machines, having that contained radius is a huge benefit for us. It's a big part of the design criteria. Our 922, 926, so our 20 ton class, our 30 ton class is now all in F series. Our 50 ton class will go to the F series at the end of this year. We also have a 72 ton machine, and of course our 95 ton machine is in F series. The big thing for F series, and we're aligning with our colleagues in Europe, so we're primarily running stage five engines. Again, we don't have to do that, but we choose to do that. But stage five engines, as you're probably aware, are incredibly fuel efficient. We're gaining more horsepower and more productivity out of the engines than ever before. The trade-off obviously is you have the higher use of DEF fluid, but the cost of DEF versus the cost of diesel fuel makes the difference more than worth it.

(16:13):

Our EH control system on our F series machines on the full size machines also has a lot of technology in it. We're working with limited 2D integration. We're trying to make it easier for the operator to improve their productivity and their efficiency. Our F series excavators feature all new cab designs and ergonomics. I think the other big thing when we talk about excavators is understanding that excavators are aren't just meant for digging any more, they've become work tools. So we've done a lot of work inside really with domestic US supply base on our work tools product portfolio and understanding that the modern excavator, the current excavator, they're tool carriers. And the arrangement of the boom and the dipper or even different boom designs and different attachment portfolio designs, again, in one of those five segments that we're looking at, creates an opportunity for us as well.

Bryan Furnace (17:01):

This is awesome information. And I'm going to be totally honest, before this interview I had this much of an understanding of what LiuGong was and what you guys did. And I am very curious to get in the seat and try out one of your machines now. So I appreciate the time.

Christopher Saucedo (17:12):

You're very welcome. I appreciate the time, and we look forward to seeing in one of our machines too.

Bryan Furnace (17:17):

I mean, there it is. That's some impressive stats, that's some impressive company history, and that's some impressive technology coming out of these guys. And we don't know anything about them here in the American market. So with that being said, as always, I hope this information helps you make decisions within your business. Thanks for joining us, and we'll catch you next week on The Dirt.