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Heavy-duty truck makers offer mixed views on 2014 as State IV “mystery” continues

It was a banner year in 2013 for China’s heavy-duty truck market. Total sales surged 21 percent to 770,000 units as December sales jumped 53 percent year-on-year to 76,000 units, according to the latest data released by major heavy-duty truck makers.

The annual tally is the third highest all-time after the record-breaking year of 2010 and 2011.

But will the market go up or down in 2014?

Judging from the sights and sounds from annual business conferences held last December by major heavy-duty truck makers (see FEATURE on p. 1), there seems to be two points of views.

Some truck makers believe that despite the effect of State IV emissions standards implementation in 2014, positive factors outweigh negative factors as macroeconomic control and market further open up, which would further drive sales. Others think that demand will drop significantly because it was pulled way forward to 2013, creating a huge overdraft.

Those that believe growth will be on the plus side include China National Heavy-Duty Truck Corp. (Sinotruk), Shaanxi Automobile, Foton and C&C Trucks. The proactive fiscal and prudent monetary policies announced by the new administration, the expected increase in investment in people’s wellbeing, infrastructure, subway and high-speed rail, the recovery of the world economy and thus export from China as well as increase in logistics transport were cited as reasons for the positive outlook by these truck makers. They forecast sales volume in 2014 will exceed 800,000 units and could even reach double-digit growth.

In contrary, FAW Jiefang, Dongfeng and Beiben are more pessimistic and they simply believe that demand will drop inevitably because of the abnormal overdraft situation in 2013 caused by the State IV emissions standards, which has been “implemented” or not, depending on where you are and how lax or strict the enforcement is.

One consensus view seems to be that if the State IV emissions standards are strictly implemented nationally on January 1 (which obviously is not the case), sales would fall. But if the effective date is pushed back half a year to July 1, that may push “fear” demand up again as customers try to beat the deadline and truck makers continue to register “sales” with advanced invoicing. The sharp rise in sales in December was a good example of this phenomenon as truck makers and customers anticipated the enforcement on January 1.

Major heavy-duty truck makers had a closed-door meeting in Beijing in December with the relevant authorities including the Ministry of Industry and Information Technology and Ministry of Environmental Protection to try to come into an agreement on when exactly State IV emissions standards will be implemented. But unfortunately no consensus was reached.

The most likely implementation date now looks like July 1, which would be three and a half years after the standards were supposed to be implemented on January 1, 2011. While some cities and regions have enforced State IV emissions standards to a certain degree, but the actual effect remains a mystery.

It looks like the market in 2014 will again be hinged on one policy.

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