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?
New energy bus market to rally in H2
As for the new energy bus market, there were only 5,383 new energy buses produced in the first five months of 2017, according to factory production certificate data from the Ministry of Industry and Information Technology (MIIT), a sharp drop of 80 percent. Reasons include slack season of purchasing for the bus company at beginning of year, local bus companies waiting for clearer local policies on new energy buses and the after-effects of centralized market purchasing in advance at the end of 2016.
Altogether 2,660 domestic hybrid buses were produced through to May 2017, shedding 30 percent on a yearly basis. The proportion of hybrid buses in the same period however rose to 49 percent, which was mainly due to the smaller national subsidy fall on hybrid buses than on battery electric buses. For instance, the maximum national subsidy on a 10-m large hybrid bus was reduced from ¥250,000 per unit in 2016 to ¥150,000 per unit in 2017, a fall of ¥100,000 per unit. But the maximum national subsidy on a 10-m large battery electric bus was reduced from ¥500,000 per unit in 2016 to ¥300,000 per unit in 2017, a fall of ¥200,000 per unit excluding local subsidies. Against the increasingly severe policy environment, some local bus companies with less money have chosen plug-in hybrid buses instead, which met the government requirement on energy saving and emissions reduction and bought as many new energy buses as possible with limited budgets.
However, the proportion of hybrid buses is expected to fall rapidly with the recent increase in battery electric bus orders, which was a highlight toward the end of Q2 2017. The proportion of hybrid buses will rise to just over 20 percent for the entire year, a growth of 5 percentage points on a yearly basis, according to cvworld.cn estimate.
Monthly trend of hybrid bus market in 2014-2017
Production of battery electric buses in the first five months of 2017 plunged 88 percent to just 2,723 units, which was mainly driven by the slack season for bus purchasing at beginning of the year and after-effects from the end of last year. But it’s worth noting that the purchasing order for new energy buses especially battery electric buses is increasingly growing in May and June. Bidding plans of local public transport companies started with new energy (mostly battery electric) buses, which will greatly benefit the bus market in H2 2017.
For example, Howo Bus under CNHTC obtained all the 2,569 purchasing orders of Jinan Public Transport Group and this batch of buses are all battery electric or hybrids. On June 5, the delivery ceremony of Yinchuan BYD new energy bus jointly organized by Yinchuan municipal government and BYD was held in Yongning County, marking the beginning of operation of the K8 battery electric public transport bus. It is planned that Yinchuan will put altogether 600 BYD e-buses and 2,000 e-taxis in 2017 and strive for the comprehensive electrification of all buses and taxies in Yinchuan within three years. On May 27, the Bengbu Public Transport Group revealed the bidding information that 300 BYD K8A battery electric buses, 200 BYD K9FE battery electric buses and 250 sets of charging facilities won the bidding, valued at ¥739.4 million. The first batch of 60 new buses have arrived with a length of 10.5 meters each, 30 seats inside and a maximum passenger capacity of 83 people.
A major driver for the launch of new energy bus market is rigid demand. The demand for vehicle update for the bus company in many places is rigid in spite of the sharp decline of the ¥200,000 in national subsidy on new energy bus since January 1, 2017. Local governments have requirements on the new energized rate of local bus company and most of the buses are bought by local governments, thus having less sensitivity on subsidy fall than private bus companies. With the continuous launch of local subsidy policy on new energy vehicles in 2017, the bidding and purchasing demand for new energy bus started in late May and is expected to accelerate after June.
Monthly trend of PE bus market in 2014-2017
Based on the above analysis, new energy bus sales will not be that pessimistic for the whole year and favorable factors for sustainable development remain. It is expected that new energy bus sales will shed 33 percent for the year to about 90,000 units with Q3 sales expected to show positive growth. On the other hand, the marginalization trend of hybrid buses last year has been weaker and their proportion has been lifted, but the battery electric buses remain dominant.
Meanwhile, it’s worth noting that the profitability of new energy bus products also declined with the significant drop of national subsidies, marking the end of dividend policy and golden era of making money. However, the long-term favorable industrial development, especially the gradual growth in market share of such industry giants as Yutong, Zhongtong, BYD and Foton will benefit the industry’s sustainable development. It can be predicted that the normal and rational development of new energy buses will benefit the industry’s intensive growth, strengthen the technological input and product development, thus propelling the technological breakthrough of buses and their key components.
(Rewritten by Xu Jun based on author’s article on cvworld.cn)