Caterpillar Bullish on China Despite Second Quarter Sales Drop

Caterpillar, the world’s largest manufacturer of heavy machinery, is sticking to its full-year sales projections for China despite signs of a slowdown in the second quarter.

Douglas C. Pizac

Excavator sales in China in May were down 10 percent over the previous year, according to data from the China Construction Machinery Network, a sign of weakness in the construction sector.

“Typically in China during the second quarter you have a downturn in sales simply because our largest selling season is around Chinese New Year,” Caterpillar group president Richard Lavin told CNBC on Wednesday.

“I see the Asia figures are really seasonal figures… We're still very optimistic we're going to see the level of growth in Asia, in China specifically that we projected in the beginning of the year.”

China is Caterpillar’s fastest-growing market and accounted for 10 percent of the company’s revenues in 2010. Last year, the company increased capacity for excavator production in China by 60 percent.

Lavin said the company plans to quadruple capacity at its flagship facilities located in the southeastern cities of Suzhou and Xuzhou over the next two and half years. He also said Caterpillar is building a new engine factory in the northern city of Tianjin, which will be operational by 2013 and another facility in Wujiang, in the south.

“One of the things we're doing is investing heavily in manufacturing capacity to ensure that we've got the machines available to really support our customers and finally compete for leadership in China,” Lavin said.