Sales and output of natural gas heavy-duty trucks and buses kept on declining this year. For example, natural gas bus output dropped 40 percent to 16,600 units through to July, a decrease of 11,000 units on a yearly basis. Sales of natural gas heavy-duty trucks decreased 33 percent to 8,469 units in the first half. An industrial institution predicted that LNG vehicle parc will be around 205,000 units in 2015, with a reduction of 20.82 percent.
This gloomy scenario could last for another two to three years.
First, the sluggish macro economy dragged down the whole commercial vehicle industry. According to CAAM, commercial vehicle output slid 14.86 percent to 1.76 million units in the first half while sales declined 14.41 percent to 1.75 million units. Heavy-duty truck and bus markets have been heavily hit and so have related LNG products.
Falling oil prices is the direct factor depressing the natural gas commercial vehicle market. Natural gas prices were on a par with oil prices or were even cheaper in some districts. The continuous decline of domestic oil prices since last year offset cost advantages of natural gas buses in the short run.
The central government’s preferential policy on EVs is also a negative effect to the natural gas vehicle market. China has kept on pushing the application of new energy vehicles in public service industry. As 2015 is the last year of the three-year promotional period from 2013 to 2015, local governments and public transportation companies are purchasing more new energy buses, especially electric buses to fulfill final evaluation. As limited purchase funds have been applied to purchase the comparatively expensive electric buses, very small room is left for the purchase of traditional diesel and natural gas buses.
As international oil prices remain low and domestic raw gas prices are bound to rise, sales of LNG vehicles in the second half could get further depressed. With a not-yet-recovered economy and sluggish manufacturing industry, natural gas commercial vehicle market may not recover in the next two to three years without new policy incentives or external influences such as oil prices.
Considering the positive attitude of the country to clean energy resources and the contingency of international oil price cuts, the natural gas market will still rebound in the long run. It might be a good opportunity for investors to purchase natural gas plants at lower cost now but they need to be prepared for a long investment return cycle.