Mainland Chinese medium & heavy commercial-vehicle market to fall in 2021

After peaking at 1.88 million units in the 2020 pandemic year,
mainland Chinese sales of new trucks and buses above 6 tons gross
vehicle weight (GVW) is expected to decline by more than 30% y/y in
2021, to reach the lowest rates since 2017. The heavy-truck
segment, which accounts for nearly 80% market share, represents the
key dragger of the weak prospect. Meanwhile, demand of medium
trucks and buses is forecast to rise by 8% y/y and 11% y/y,
respectively, yet the gains will be too small to reverse the
downward trend.

Although the sustained recovery of road freight transport and
infrastructural construction under the government’s effective
containment measures, fiscal incentive packages, as well as
initiation of 14th Five-Year-Plan will support a solid incremental
demand for heavy tractors and construction trucks, the replacement
demand, contributing to over 70% of new truck sales in mainland
China, may lose steam in 2021 with stimulus from anti-pollution
campaigns and the expressway tolling reform fading away. In
contrast to the massive environmental governance in 2020 that
forced out above 600,000 units pre-2015 trucks meeting the China
I-III emission standards, the enforcement actions in 2021 will be
regional and are estimated to bring up to 200,000 units truck
replacements under extended traffic bans on pre-2017 China IV
trucks. The heavy truck replacements will decrease further with the
weight-to-axle expressway tolling becoming normalized. On the other
hand, the intensified overloading and oversize control on
light-duty trucks may generate some upsize demand for medium
trucks.

According to the latest data released by the China Association
of Automobile Manufacturers (CAAM), sales of new trucks above 6
tons GVW reached 130,000 units in February 2021, down 35% from
January. IHS Markit anticipates the truck market downside to
accelerate in the second half of 2021, as fixed-asset investment is
expected to slow down under tightening property financing
regulations and local governments’ debt overhang, and moreover,
there are several stimulus opportunities remaining in place before
July. The main driver is nationwide implementation of the China
VI-a diesel emission standard on July 1, 2021, which will lead to
about 100,000 units de-stocking of China V diesel trucks during the
first half. Another 30,000 units pre-purchase is projected,
considering around 2% price inflation after the mandatory
installation of electronic stability control systems and autonomous
emergency braking systems on new heavy tractors from May, as
required by the safety specification for towing vehicles and
trailers for cargo transportation. In addition, the upgrade of
heavy dumper trucks to full-enclosed and intelligent ones in the
city of Dongguan will trigger 5,000 units truck replacements ahead
of the deadline in June.

In terms of buses, the market is forecast to return gloomy
during the first quarter of 2021, given overdrawn demand after
pre-buy in response to the downhill of new energy vehicle (NEV)
subsidies from January and subdued public transport services under
tightened containment measures against the epidemic resurgence from
late last year. Sales of new buses above 6 tons GVW, as per CAAM
update, plunged successively by 67% in January and 45% in February
to 3,000 units, from 17,000 units in December 2020. IHS Markit
expects the market to rebound from the second quarter supported by
the mass vaccination campaign and the government’s policy objective
to expand NEV penetration in the public transport sector of key
regions to 80% by end-2021.

Mainland Chinese medium and heavy commercial-vehicle exports are
projected to experience double-digit growth in 2021 with the
revival of global demand, but it will stay below 10% of total
production. Therefore, IHS Markit anticipates mainland Chinese
production of trucks and buses in 2021 to be corrected with
domestic demand by 34% y/y to 1.21 million units and 11% y/y to
114,000 units, respectively.

Posted 19 March 2021 by Cassie Liu, Automotive Analyst, IHS Markit

Source: http://ihsmarkit.com/research-analysis/mainland-chinese-mhcv-market-to-fall-in-2021.html