China is undisputedly the largest automobile market in the world.
Its car, truck and bus markets also lead the world in volume. Over the past decade, all three sectors have witnessed significant growth not only in terms of sales and revenues, but also in competitiveness and export volume.
But the one thing that sets the bus industry apart from the other two sectors is that it has the least policy incentives, the least government intervention, the least entry restrictions and the least protection, as veteran industry observer and CBU/CAR guest columnist Yao Wei points out in her article. In a nutshell, the free competition among different players in the bus industry has made it stronger and more competitive not only in China but also globally.
Unlike the car and truck industries, the bus industry also has the least foreign involvement. A look at the sales rankings of China’s bus manufacturers, especially in the large and medium bus sectors, reveals that virtually none are foreign-invested. Volvo and Toyota are perhaps the most active but large and medium bus sales from their JVs pale in comparison with market leaders such as Yutong, King Long and Foton.
Another interesting point to note is that the higher the industry entry barrier, the more profitable it is. A look at public listed OEMs in the three different sectors shows that the car industry is still the most profitable, followed by the truck industry. The bus industry, however, is the least profitable. That’s why over the recent years not many new players have entered the industry, while countless new players have entered the car and truck industries over the same time.
Most of the leading players in the bus industry today, especially those in the large and medium bus sectors, did not receive major support from the government when they were established. Take the top four players Yutong, Xiamen King Long, Higer Bus and Xiamen Golden Dragon, for example. They were founded in 1993, 1988, 1998 and 1992, respectively, with registered capitals of ¥12.5 ($2.05), ¥5, ¥28 and ¥40 million, levels that are far from what is required in terms of investment in the car and truck industries. But thanks to a market-based competitive environment and with superior management and resource allocation capabilities, they have thrived and prospered. The combined large and medium bus sales of the four bus makers have consistently accounted for over 60 percent of the sectors in recent years.
The emergence of these leading players as a result of free competition elevated the competitiveness of the domestic bus industry and gradually took market share away from foreign brands. China’s import volume of buses with 30 seats above, for example, never topped 100 units after 2004, when bus exports took off. In 2012, China exported 54,450 buses, 23 times what it imported.
Purely in terms of volume, China’s bus sales (large, medium and light) in 2013 were only around 560,000 units, much lower than those of cars and trucks.
But thanks to less control, the bus industry is the most globally competitive.