GF SEC: Over the past four years, the market share of domestic forklifts overseas has doubled. There is potential to surpass competitors with lithium-powered forklifts.

GF SEC released a research report stating that from 2012 to 2019, the market share of domestically produced forklifts (excluding small vehicles) in overseas markets has consistently been between 11-12%. In the period from 2020 to 2023, the market share doubled in four years. The top overseas forklift manufacturers experienced delays in delivery due to the pandemic, while domestically produced forklifts had shorter delivery times. After a significant increase in overseas market share in 2020, brand recognition gradually formed, combined with the maturity of China's lithium battery industry chain, creating a competitive advantage in lithium battery forklift products. This led to a continuous increase in overseas market share. Over the next four years, the focus will be on the increase in market share for electric large vehicles (classes 1+2). Leading domestic lithium battery forklift products and overseas expansion are expected to lead to the first breakthrough in the international market, increasing overseas market share and driving profitability growth. Review of the overseas market share of domestically produced forklifts: (1) 2012-2019: The market share of domestically produced forklifts (excluding small vehicles) has been between 11-12%. Internal combustion forklifts are more dependent on the aftermarket, and Chinese companies have a disadvantage in overseas aftermarket layout + the need to import internal combustion engines, resulting in no long-term increase in market share. (2) 2020-2023: The market share doubled in four years. The top overseas forklift manufacturers experienced delays in delivery due to the pandemic, while domestically produced forklifts had shorter delivery times. After a significant increase in overseas market share in 2020, brand recognition gradually formed, combined with the maturity of China's lithium battery industry chain, creating a competitive advantage in lithium battery forklift products. This led to a continuous increase in overseas market share, reaching 29.61%/23.67% for forklifts overall in 2023 (excluding class 3 vehicles). By category, in 2023, the market share of class 1, 2, 3 forklifts, and internal combustion forklifts in overseas markets were 21.03%, 8.37%, 36.59%, and 32.39% respectively. Over the next four years: The focus will be on the increase in market share for electric large vehicles (classes 1+2). In Europe, there is a dual-trophy market structure, with domestically produced forklifts expected to have a market share of 25.3% in 2023, with the highest market share in internal combustion vehicles, and only 16.6% in classes 1+2 vehicles. In the Americas, there is a "one super, many strong" market structure, with the market share of domestically produced forklifts expected to reach 25.68% in 2023, including a market share of 11.89% in classes 1+2 vehicles. This market is dominated by South America, with a large market potential in North America. In Asia, the market share of domestically produced forklifts is relatively high, reaching 86.67% in 2023, with a market share of 63.83% in classes 1+2 vehicles. Future market share growth will mainly rely on classes 1+2 vehicles. Domestic brands are expected to achieve global competitiveness through lithium battery forklifts. GF SEC analyzes the elements of competitive breakthrough for lithium battery forklifts from the following perspectives: (1) Product Strength: In the past, domestically produced internal combustion forklifts lagged in core technologies such as engines and transmissions, resulting in lower overall cost-effectiveness due to weaker pricing competitiveness. Domestic lithium battery forklifts benefit from advanced performance resulting from the mature lithium battery industry chain in China, with economies of scale bringing the selling price of 3-4 ton domestic lithium battery forklifts down by 1-2 thousand euros compared to similar products in Europe, resulting in excellent overall cost-effectiveness. (2) Cost: Among lithium battery forklifts, the battery cost accounts for the highest proportion (about 24%). The strong supporting capabilities of the domestic lithium battery industry chain create a cost advantage for lithium battery forklifts. Assuming a battery capacity of 40kWh for lithium battery forklifts, current calculations show that the battery cost for domestically produced forklifts is more than $1000 lower than for overseas products. The downward trend in the core raw material price of lithium carbonate, which is used in lithium batteries, is expected to reduce the material cost of forklift batteries from 15 thousand yuan in 2023 to 11 thousand yuan in 2024, a year-on-year decrease of 25%. With the advantage of fast price transmission and short delivery times in the lithium battery industry chain, domestically produced forklifts are expected to benefit first. (3) Aftermarket: In the era of internal combustion, downstream customers place a high value on aftermarket services, giving foreign companies an advantage. Lithium battery forklifts require less frequent maintenance, avoiding the disadvantage of domestically produced forklifts in aftermarket services when exported. Investment recommendation: GF SEC estimates that the export scale of Chinese forklifts by companies will reach 229/259/292 billion yuan from 2024 to 2026. Leading domestic lithium battery forklift products and overseas expansion are expected to lead the first breakthrough in the international market, increase overseas market share, and drive profitability growth. Anhui Heli Co., Ltd. (600761.SH) and Hangcha Group (603298.SH) are recommended. Risk warning: Industry competition risk, slower-than-expected growth in overseas market share, rising costs risk, exchange rate fluctuations risk.