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Remedies to rejuvenate the bus market

China’s bus sector, unlike the heavy-duty truck sector, shrank in the first half of 2014. Sales of buses longer than 5m totaled 94,240 units, down 9.09 percent. Highway buses and school buses also witnessed sales drops of 15.99 and 32.24 percent, respectively. Sales of public transport buses, however, bucked the trend, increasing 8.25 percent.

With less than four months to go in the year, the bus market is unlikely to return to the positive growth territory for the year, according to She Zhenqing, deputy secretary general of China Highway Transport Society Bus Branch. Prospects for both highway and school buses are poor. The public transport bus market growth is only concentrated on certain segments. With deliveries of new energy buses expected to rise as purchase tax exemption policy kicks in in September and expanding bus export volume, the bus market in the second half may recover slightly. For the year, the bus market is expected to fall 5 percent.

Despite the downturn, there are remedies and actions that bus makers can take to help alleviate the market slowdown.

Bus makers can take equity in public transport bus operators, develop rural bus transport and dig into the overseas school bus market. Zhongtong Bus, for example, recently delivered nearly 2,200 school buses to Saudi Arabia.

As public transport bus operators enjoy financial subsidies from the government, bus makers can join the industry and ensure stable profits despite fluctuating economy. The Ministry of Transportation has set clear targets in the urban-rural road transportation integration policy, and bus makers should pay much attention to this preferential policy.

As a policy-affected sector, the school bus market has seen ups and downs in recent years. The development of school bus export may open a new path for the industry. The school bus sector in China currently faces lots of restrictions and oppositions from different stakeholders, just like what the pickup truck market faced several years ago. Chinese-made pickup trucks have blossomed in the overseas market with the emergence of several star brands such as Great Wall and Zhongxing. This can be a model for the school bus market to follow.

School bus export can not only grab more shares for Chinese brands in the international market but also reduce operational risks for bus makers. Export may also improve technology and standards of domestic bus brands.

Well-known U.S. school bus makers Navistar and Bluebird had great ambitions for the Chinese market two years ago as they actively sought Chinese partners, but went home empty handed due to product and standards issues. Chinese bus makers can also consider the business model of OEM contract manufacturing as a way to enter the U.S. market.

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