Most significantly, starting next month it will be assembling hoists whose components are between 80-90% locally sourced, according to managing director Thomas Dorn.

“The Chinese market is so big that we have to take further steps, or otherwise we will lose opportunities,” Wang says. “At the beginning of last year, we decided not to take a small step but to put two feet in.”

“The question here is about price,” he added. He says that the Chinese lifting market that Demag can reach was Euro 900m ($725m) last year. Its target is 10% of that market.

He said that international customers are 80-85% of Demag’s business. To reach the middle of the market, the large Chinese-owned companies, hoists need to be 30-50% cheaper.

“Manufacturers need this quality, but they must not pay a high price. They know that quality European suppliers are several steps higher, but they are growing businesses, and don’t have the cash. We are not able to say, ‘this is free of charge.’ So our plan is to localise part supply to meet the cost requirements of local customers, without reducing quality. This is a challenge for us.”

As of early December, Demag had locally sourced 410 out of the total of 700 components that make up the DR and DC hoist series (400 and 300, respectively), according to managing director Thomas Dorn.

Wang said that the company’s goal is to manufacture 90% of the hoist – and continuing to import crucial and high-technology parts from Germany.

Demag began the process of looking for local suppliers early last year. “It takes three to six months to identify potential suppliers, and then it takes three months until you get samples,” Dorn says.

The schedule meant that four months after moving into its new factory, the company broke out the blueprints to design and build a test lab to examine suppliers’ series-produced components. Test engineers are particularly interested in measuring the geometry and physical strength of batches of supplied components.

“We have to move Chinese suppliers, who are used to achieving quality from 60-80% of the time, to 0.01% of the time,” Dorn says.

Dorn rejects the suggestion that all of this development lags behind that of its strongest European rival in China, KCI Konecranes, which opened a factory that has assembled hoists from local parts for several years. “I wouldn’t say we are behind Konecranes,” Dorn says. “We started assembling here in 1997. With our latest range, we are supplying product that is not outdated, but which is world-standard,” he says.

Demag expects to sell 4,000 hoists in the smaller range and between 1,200 and 1,500 hoists, and 600 cranes, in larger capacities in its 2005-2006 year.

Dorn said that a particular strength of the Chinese factory is its management. “Demag benchmarks all its plants and subsidiaries all over the world, searching for best practice. Every place does something better than others. Here it is team-building. Managers are very close in knowledge and character and thinking to workers.”

In its last fiscal year, which ended in September, Demag made Euro 25m ($20.1m) sales revenue in China, according to Wang, who said its plan is to double revene for this year, and double again in the fiscal year 2006-2007.

Demag’s next steps for producing product are unclear. Managing director Thomas Dorn says that it has no plans to export Chinese-made product: “We will work with Chinese engineering, labour and parts for the Chinese market,” he says.

But a genuine Demag hoist at a lower price would seem to me attractive to many low-cost marketplaces, for example India. It also might be attractive for some markets that are not so low-cost.

Sales manager Yun Wang put it best: “Once the product is accepted in the market, it is possible to adapt it to other low-end countries.”