Sales of heavy-duty trucks in the first half dropped 32 percent to 292,200 units. The segment has taken a hit not seen since 2012. The top 10 players – DFCV, CNHTC, FAW, Shaanxi Auto, Foton, JAC, CAMC Hualing, Dayun, Beiben and SAIC-IVECO-Hongyan – now account for 97.2 percent of the market, up 0.4 percentage point from the same period last year. The top five account for 82.4 percent, 0.8 percentage point higher than the same previous period. With total market demand shrinking and market concentration increasing, there is virtually no room for new entrants.
Moreover, new plants started construction years ago were put into operation successively in 2013 and 2014 one after another, which expanded production capacity in the heavy-duty truck sector to over 2 million units. The current capacity utilization rate, however, is estimated to be only around 30 percent, a record low, according to industry experts. Some players, such as Beiben, have received warning from the China Audit Office recently for long-term overcapacity and idle investment issues.
Fierce competition in the first half of the year turned out to be vicious in a way, as all of the truck manufacturers want a slice of the cake in the declining market. A couple of the major players suffered from sales and marketing risks in the first six months. Rivals even used a vehicle recall event two years ago to attack long-term industry leader DFCV.
As Gary Huang, president of DFCV, said numerously, the market slump could become a new normal and truck manufacturers should be used to this new normal and try to make their own way out of the tumultuous environment by improving technology, quality, financial and aftermarket services rather than seeking quick access and risking danger in desperation.
“Our priority in the second half of the year is to walk the walk rather than talk the talk,” said Huang at a recent event.
He is right. As the market slowdown continues and competition gets cutthroat, companies better get down to business because the margin for error is even smaller.