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New energy bus market to see rapid recovery in H2 2017 (I)

Will the new energy bus market recover in the second half of 2017 after a dismal first six months?

The answer is definitely yes.

There were several large orders for new energy buses from late May to June, indicating a market rally is ongoing. According to relevant personnel from bus makers, purchasing bidding from many public transport groups restarted in droves, giving new hope for the bus market in June and H2 2017. How many new energy buses will be sold eventually for the year and can growth return to the positive territory?

 

June will be turning point, but both new energy and traditional buses to see negative growth

As is shown in the 2011-2017 bus market annual sales chart, Chinese bus market has shown a marked slowing growth in the last five years due to economic slowdown and competition between highway and railway transport, with a compound average growth of merely 4 percent during the period. Only the year 2015 witnessed a two-digit growth of 16 percent, which was mainly pushed up by the surge of new energy buses in 2015. From the perspective of historical development, the market in 2015 and 2016 posted an obvious feature of rise in new energy buses but reduction in traditional fuel powered buses. However, 2017 will be a year where both bus types will experience negative growth.

The entire bus segment has contracted this year, with a year-on-year reduction of 27 percent in the first five months. Sales of public transport buses were down 50 percent and those of school buses were down 14 percent. Therefore in spite of the order rally in May and June for new energy bus with marked month-on-month growth, the entire bus market will fall for the year. 

 

Bus market monthly sales in 2014-2017

As can be seen in the table below, nearly all bus segments showed a downward trend with 8-meter bus experiencing the largest fall of 65 percent, a sharp contrast to its surge last year. It indicates significant influence of national policy on this market. Meanwhile, the competition of traditional bus giants and strong newcomers in the new energy market is getting fierce, with a new pattern reshaping the fading market pattern.

In terms of seat buses, it continued to fall under the adverse factors of high-speed railway and new energy vehicle subsidy reduction, posting a year-on-year fall of 27 percent in the January-May period. In terms of market share, sales of seat buses slid to the historical lowest point of 40.2 percent in 2016 from 65.3 percent in 2011 and were surpassed by public transport buses for the first time. In the first five months of 2017, the seat bus market share posted a short-term reversal back to over 50 percent but would still be surpassed by public transport buses.

As for public transport buses, its market share shrank to 29.3 percent in the January-May period but would see rapid rebound after June driven by the demand recovery in the new energy bus market. The upward trend of the electrification of public transport buses pushed up by the national policy on supporting new energy vehicles has rapidly replaced traditional fuel powered buses.

It’s worth mentioning that sales of seat buses powered by traditional fuel remain in downward channel due to such impacts as high-speed railway and economic slowdown, with a 19 percent decrease in 2016 and further decrease in 2017. From January to May 2017, new energy seat bus sales were merely 337 units, down 92 percent. Moreover, its prospect for the entire year is far from upbeat dragged down by the significant fall in new energy bus subsidies and the statuary requirement of 30,000 km accumulated operational mileage before subsidies can be given.

The electrification rate for new public transport bus sales in 2016 was 82 percent and that for the existing fleet on the market was 27.1 percent. But the rate in the first five months of 2017 retreated to 37 percent although it will increase to a range of 60-70 percent for the entire year. Specifically, most of the segmented markets of different lengths in the January to May period showed a reduction but the public transport bus market in H2 is expected to see a month-on-month surge with the rally in June in spite of a slight drop for the entire year.

In the field of eye-catching school bus, the national fiscal subsidy on school bus purchasing has not been launched, obstructing the stable and continued development of this segment. Its sales remain in downward channel with a year-on-year decrease of 14.1 percent in spite of a share rise in the first five months. Annual sales for 2017 are expected to be between 23,000 and 25,000 units.

In addition, the cheap light-weight school bus with length longer than 5 meters but less or equal to 7 meters has maintained its high proportion, rising from 64 percent last year to 73 percent in January-May 2017. Majority of the mainstream bus makers except Yutong, which owns a large market share as high as 37 percent, are not paying so much attention on this segment of the school bus market.

Output and sales of natural gas buses have posted consecutive years of reduction, with output experiencing a sharp decline of 59 percent to less than 10,000 units in 2016. Output in the first five months of 2017 picked up slightly to nearly 4,000 units with a year-on-year rise of 17 percent. But according to analysis of cvworld.cn, the prospect for rapid recovery in the clean energy bus market is not bright at all as the national and local purchasing focus is shifting to new energy buses.

(Rewritten by Xu Jun based on author’s article on cvworld.cn

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