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Round-up for heavy-duty market in 2009

Despite the global financial crisis, heavy-duty market in China managed to keep its expansion last year. Heavy-duty trucks sold 119,760 units from January to November 2009, up 18.07 percent over the same period in 2008. Medium trucks saw a 39.40 percent year- on-year increase with 162,982 units sold in the period. Sales of large buses stood at 32,618 units in the first 11 months, down 1.36 percent. Medium buses sold 42,661 units, up 10.99 percent over 2008. Over the same period, semi-tractor trailers sold 186,349 units, down 1.73 percent. Meanwhile, sales of heavy-duty vehicle chassis reached 372,982 with an 8.51 percent rise.

Unexpected sales growth of heavy-duty and medium trucks

It’s always been said that the heavy-duty and medium truck market in China does’t respond to forecasters’ predictions. This was proven once again by last year’s sales. At the end of 2008 and the beginning of 2009, most industry experts offered a pessimistic view for the new year. There were even voices predicting a 20 percent year-on-year sales drop. However, driven by the government’s stimulus package and a series of policies, sales for medium and heavy-duty trucks last year leaped beyond expectations, ending with an estimated annual growth rate of 15 percent.

In the first 11 months of 2009, cumulative sales of heavy-duty trucks (including finished vehicles, semi-trailers and chassis) reached 572,923 units, up 9.91 percent over the same period in 2008 (521,255 units). Finished trucks and heavy-duty chassis contributed the most to the sales growth, having sold 119,760 and 266,814 units respectively, up 18.07 and 16.45 percent. Sales of semi-tractor trailers experienced a 1.73 percent fall over the same period, standing at 186,349 units.  

 

Due to the implementation of the State III emission standards in China and the global financial crisis, the heavy-duty truck market suffered a 13-month continuous sales decline from June 2008 to June 2009. But just when manufacturers and dealers got ready for a painful second half, the heavy-duty truck market in July started to pick up by selling 53,288 units, up 85.7 percent over July 2008. Sales in the following four months continued to soar, finishing at 572,923 units for the first 11 months, already surpassing the whole-year sales total for 2008, which rang in 541,460 units. With December sales estimated at 63,000 units, cumulative sales in 2009 were expected to pass 630,000, pushing the annual record to a new high.

Sales of medium trucks (including finished trucks and chassis) stood at 233,591 units for the first 11 months, up 18.83 percent year-on-year. With this trend, another 22,000 units were expected to sell in December, bringing sales in 2009 to a total of 255,591 units with a 23 percent rise over 2008.

To fight the economic recession and boost domestic demand, China launched its ¥4 trillion economic stimulus package at the end of 2008, half of which was funneled to transportation infrastructure and power grid construction projects. The fund was gradually allocated to construction projects, including reconstruction in Sichuan after the earthquake, new airports in smaller cities and a national high-speed rail network, resulting in escalading demand for heavy-duty vehicles. Meanwhile, the ongoing process of waiving toll fees of second-grade highways, which started from early 2009, also boosted the heavy-duty and medium truck market. What is more, this winter the power shortage in most provinces additionally resulted in an urgent need for highway transportation of coal. All of these factors contributed to the flourishing of the heavy-duty and medium truck market in 2009.

 

Market Competition

In the first 11 months of 2009, FAW, Dongfeng Commercial and Sinotruk took the top 3 positions in sales of heavy-duty and medium trucks, with a combined market share of 55.02 percent. Beiqi-Foton surpassed Shaanxi Automobile to take up the 4th position, with 76,244 units sold and a 9.45 percent market share. Because of its management reshuffle in the second half of 2009, Shaanxi Automobile experienced a 2 percent year-on-year drop in total sales from January to November, ending up with 63,079 units and a 7.82 percent market share.

A year of new joint ventures

With almost every international heavy-duty truck manufacturer investing in China, the market in 2009 saw formation of a number of new joint ventures. Up till now, major international heavy-duty players have all entered the Chinese market with similar approaches: cooperating with a certain domestic truck maker as a shareholder and technology provider.

Since the official contract between SAIC and IVECO was signed in 2007, SAIC-IVECO-Hongyan launched the TAMPA series targeting the low-end heavy-duty truck market at the beginning of 2009 and then GENLYON for the medium and high-end segment in March. It is also believed that a product line under the brand IVECO will be introduced in a few years. After three years of integration and reshuffling, SAIC-IVECO-Hongyan has built enough confidence to compete for a real market share.

Sinotruk (HK) signed a series of legal documents with MAN on July 16, 2009, allowing MAN to purchase 25 percent of Sinotruk’s shares. The cooperation also gave Sinotruk seven-year exclusive access to MA’s technologies, including the use of the German company’s D08, D20 and D26 engines, following Euro III, IV and V standards respectively, which provided Sinotruk a shortcut to emission cutting solutions.

In August 2009, a new joint venture company between Beiqi-Foton and Daimler AG was announced, as a starting point of their global partnership. The new venture will manufacture medium and heavy-duty trucks under Beiqi-Foto’s Auman brand and produce Daimler’s Euro V engine, OM457. Meanwhile, Caterpillar and Navistar’s JV NC2 signed a framework agreement with JAC in September to form a new JV in Anhui Province. The deal will not only strengthen JAC’s weak position in engine development, but also help Caterpillar and Navistar enter China’s heavy-duty truck market.

More preliminary JV agreements were signed in 2009, including Hyundai’s cooperation with North Benz and DAF’s association with Hengtian Group. Cummins and Beiqi-Foton formed their 50:50 JV in Beijing, with an annual production volume of 400,000 units of light diesel engines. A new JV between Dongfeng Commercial and Volvo is also expected to be established in 2010, following long-lasting negotiations.

The sales record in 2009 boosted everyone’s confidence in China’s heavy-duty truck market. With further expansions of foreign truckmakers in China, the competition gets increasingly fierce. Homegrown manufacturers have greatly improved their products by cooperating with foreign companies. However, there is a growing concern that this trend in the market will have a negative impact on Chinese automakers’ own R&D abilities.

Medium and large bus market

Sales of large and medium buses reached 75,279 units for the first 11 months last year, up 5.28 percent year-on-year. Sales of large buses were 32,618 units in the same period, down 1.36 percent year-on-year. Large buses experienced a fruitful year in 2008 thanks to the roaring tourism industry brought on by the Olympics, so it is not surprising to see the market in 2009 with a slight drop. On the other hand, China sold 42,661 units of medium buses, up 10.99 percent over 2008, driven by the growing demand of public transportation in medium-sized and small cities.

For the large bus segment in the first 11 months, Yutong experienced a sales decline of 12.90 percent, but still remained the top player. Xiamen King Long sold 4,606 units in sharp contrast to 1,055 units in the previous year, ranking second among all large bus makers. Sales of Zhongtong Bus saw a 49.06 percent drop, losing 3.72 percent of its market share.

In the medium buses segment, Yutong registered sales of 10,247 units in the first 11 months with a 32.07 percent rise, surpassing King Long (Suzhou) to take the top position. Xiamen King Long had the largest growth rate, up 196.03 percent, which helped the company enter the top-3 list. On the contrary, Yaxing Bus, No. 5 in 2008, dropped to No. 8 with a sales decline of 37.77 percent year-on-year.

Outlook for 2010

China’s heavy-duty and medium truck market showed significant growth in 2009, especially in the second half of the year. For heavy-duty trucks, industry experts express strong confidence in 2010, considering most major truckmakers have already received pre-orders for January and February. Most manufacturers have already reset their targets for 2010 with higher expectations. The government will carry on its positive financial policies next year, which will continue to help the macro economy grow in China, together with the successful scrappage scheme. However, the impact of the implementation of the State IV emission standards (equivalent of Euro IV) on heavy-duty vehicles, which went into effect on January 1, 2010, remains to be seen.

For large and medium buses, a recovery is predicted. The further expansion of public transportation in medium-sized and small cities and the replacement of old buses in large cities may be the driving force behind a sales expansion. World Expo 2010 in Shanghai and 16th Asian Games in Guangzhou will also drive demand for buses and bring in large orders for manufacturers. Looking at the market by segment, medium and light buses are expected to keep expanding in the new year, while large buses might see a further decline or remain at the same level of last year, due to the country’s expansion of the high-speed rail network and service.

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