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Will heavy-duty truck sales hit 1 million units again in 2017 after a record February?

It is a foregone conclusion that heavy-duty truck sales just had its best February performance ever (Update: China sold 86,400 and 169,400 heavy-duty trucks in February and the first two months of 2017, up 150 and 140 percent respectively, according to data released by China Association of Automobile Manufacturers on March 10.)

 

Prior to 2006, annual heavy-duty truck sales never exceeded 300,000 units. Sales in the year 2000 were merely 82,000 units, less than what was sold in February 2017. After 2007, the best February in terms of sales volume was February 2012 when sales reached 78,000 units. 

Moreover, total sales for January and February also hit more than 170,000 units. Based on past data, the last time January-February sales reached a record high was in 2010, with 160,000 units. The entire sector that year sold a record 1.017 million units. Does that mean sales in 2017 will exceed 1 million units again? In order to try to answer that question, we must look at the reasons behind the record sales in the first two months of this year.

 

Three reasons behind record sales in February

First, the manufacturing industry is under constant improvement due to physical economic recovery. Manufacturing PMI in February climbed 0.3 percentage point from last month to 51.6 with a comprehensive rally of several indicators, signaling a stronger trend in economic recovery.

Production indicator has been growing since 2016 and maintaining its highest score among other four indicators, in sound expansionary trend. Moreover, generating capacity and price of raw materials have also continued with their rising trend since 2016, pointing to recovery of the manufacturing industry.

From the perspective of heavy-duty truck industry, implementation of the new GB1589 and strict government control on oversizing and overloading led to replacement of vehicles. A large number of users remain waiting to see if the country has determined to control oversizing and overloading in spite of the booming trend of vehicle replacement since September 2016.

Just in February 2017, 36 national ministries and departments signed an MOU on Joint Punishment of Relevant Vehicle Subject Responsible for Illegal Breach of Integrity Regarding Overloading and Oversizing, which proposed 26 measures as punishments from three aspects to limit the parties involved in market access, financing, administrative permission, some high consumption and preferential policies.

Second, it is reported that new polices have been implemented across several provincial borders, which indicates over 31 tons for four-axle vehicle as overloading and over 49 tons for six-axle vehicle as overloading. For overloading of within 3 tons, a penalty of ¥3 ($0.44) will be levied for each ton; for over 3 tons, a penalty of ¥5,000 to ¥30,000 will be levied and 12 points will be taken off of drivers.

Some reluctant users also started to replace their old vehicles with new ones under the strict national control on overloading.

Third, from the perspective of heavy-duty truck replacement cycle, the peak of vehicle purchase is 2010 and 2011. Some of them are vehicles that have not been replaced in 2014 or 2015, so it is time to be replaced.

 

Booming market will continue in April

Will the booming trend continue for long?

Actually, it has already been questioned since end of last year. It was estimated then that the boom could not last long. However, February sales were proved that was wrong.

There was also bad news that diesel vehicles for coal transport would be limited in the Beijing-Tianjin-Hebei corridor in spite of an explosive market at the beginning of 2017. But according to internal sources from find800.cn, some vehicles for coal transport are relocated to Huanghua Port, exerting no influence on the entire market. Moreover, some users have changed to natural gas heavy-duty trucks, which means that the limit will promote some users to change their diesel vehicles into natural gas ones.

As for how long this booming market can last, insider sources tell find800.cn that supply shortage is the main conflict at FAW Jiefang. Orders in April have been signed already, according to one of its insiders.

Moreover, engineering dump truck sales have also started to rise and there remained many users buying tractors since the Spring Festival in February. Meanwhile, the document on controlling overloading released by the 36 national ministries and departments, and the vehicle inspection trend across the country is also promoting the rise of vehicle replacements.

The traditional peak months of March and April will definitely be a booming period and March sales are highly possible to break the 100,000-unit plateau. It is likely that H1 sales can reach 500,000 units but no strong evidence points to the possibility of sales breaking 1 million units again.

(Rewritten by Xu Jun based on author’s article on find800.cn)

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