China Commercial Vehicle OUTLOOK
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China State Information Center ACT Research Co., LLC • www.actresearch.net COMMERCIAL VEHICLES Forecast China Commercial Vehicle OUTLOOK Q3 2017 Contributor to Blue Chip Economic Indicators and WSJ Economic Forecast Panel The China Commercial Vehicle OUTLOOK is published quarterly by Americas Commercial Transportation Research Company, LLC (ACT), 4400 Ray Boll Blvd., Columbus, IN 47203. Phone: 812-379-2085, Fax: 812-378-5997, e-mail: [email protected] Copyright 2017 by ACT with all rights reserved. Reproduction, copying, or publication of this report in whole or part is not permitted without prior approval. This document is for internal use only. Questions and subscription requests should be directed to K.W. Vieth, Publisher. TABLE OF CONTENTS Page(s) Report Highlights ............................................................................................................................................................. 1 Preface: China Market Changes and Exchange Rate ...................................................................................................2 Macroeconomic Analysis .......................................................................................................................................... 3-10 Economic Overview Short-term Forecast Macroeconomic Analysis to 2021 Transport Environment & Industrial Policies ........................................................................................................ 11-19 Market Environment Industry Policies Commercial Truck & Bus Market Performance ..................................................................................................... 20-23 Forecast Summary ................................................................................................................................................... 24-32 Forecast Data .................................................................................................................................................... 33-34 Short Term Forecast to Q4’17 Long Term Forecast to 2021 Market Competition ................................................................................................................................................. 35-40 Appendix ....................................................................................................................................................................... A-1 Data Specifications OEM Alliances The China Commercial Vehicle OUTLOOK is published quarterly by Americas Commercial Transportation Research Company, LLC (ACT), 4400 Ray Boll Blvd., Columbus, IN 47203. Phone: 812-379-2085, Fax: 812-378-5997, e-mail: [email protected] Copyright 2017 by ACT with all rights reserved. Reproduction, copying, or publication of this report in whole or part is not permitted without prior approval. This document is for internal use only. Questions and subscription requests should be directed to K.W. Vieth, Publisher. Q3 2017 • China CV OUTLOOK Copyright 2017 • All rights reserved HIGHLIGHTS Click paragraphs to zoom to more details MACROECONOMIC ANALYSIS MEDIUM & HEAVY TRUCK MARKET PERFORMANCE China’s GDP in Q2’17 grew by 6.9% y/y, exceeding expectations. Driven by the impact of the GB1589 regulation, the tractor segment continues to fare well, with Consumption was a source of positive nearly 56% expansion in Q2. momentum, accounting for more than 63% of the In Q2’17, domestic sales of heavy duty trucks quarter’s GDP growth. (excluding tractors) totaled 136,561 units, Overall, investment provided nearly 33% of Q2’s increasing nearly 69% y/y. Export sales were GDP uptick. 17,683 units. Prices as measured by CPI rose by 1.5% y/y in Domestic tractor demand increased nearly 56% Q2, primarily driven by lower food prices. in Q2. Export sales were 5,498 units. After hitting 7.8% y/y in February, PPI has fallen Q2'17 medium duty trucks’ growth rate was since hitting a trough bottom at 5.5% in May, nearly 10% y/y, with 54,769 units sold June, and July. domestically. Export sales stood at 7,099 units. China will hold its 19th National Congress during Q2’17 domestic sales of large and medium buses Q3, but with no change in leadership, the totaled 25,306 units with 32% y/y contraction. government is expected to maintain the current Export volume reached 8,715 units. trend of economic momentum. FORECAST Economic growth is expected to return an The largest impact of recent policy changes is the average annual increase of 6.5% throughout the dramatic shift from HD trucks to tractors as the next five-year period. power unit of choice for logistics. TRANSPORT ENVIRONMENT & INDUSTRIAL In the short-term, heavy trucks and tractors, as POLICIES well as medium-duty trucks, are expected to see y/y growth continue in Q3. The GB1589 regulation and its enforcement, as well as China’s NEV policy shift, continued to In the next five years, China’s economic have an impact on commercial vehicle demand. restructuring and upgrades to its industrial sector will mean a weakening demand for trucks used Infrastructure investment remained on its growth for construction, but an increase in those vehicles trajectory, albeit at a slightly slower pace. for freight hauling and logistic purposes. After spending five consecutive months in In the next five years, the expansion of China’s negative y/y territory, the ytd y/y growth of both urban population and areas, as well as favorable planned total investment of new projects and the policies, will make public buses the primary amount of accumulative new projects returned to driving force of growth in the bus market. the positive side of the ledger in June. MARKET COMPETITION After relatively hot investment earlier this year, China’s real estate investment slowed in Q2 from China’s top two straight truck manufacturers its April peak, as expected. maintained their market share positions in Q2’17. FAW was able to maintain its top position in the Railway transport investment grew 4% in April tractor segment, despite its market share taking a and 3% in May 2017. two ppts hit in Q2 and falling to around 30%. Road transport investment reached almost 25% Although all three leaders held their respective in April, 23% in May and June, and 24% in July. market positions in the MD segment at the end of Domestic consumption in Q2 continued to grow, Q2’17, the actual concentration by each gyrated up 10%-plus in each month this year. significantly. In Q2’17, road passenger volume and turnover Yutong was able to hold onto the top bus volume decreased at a slower rate than in the segment position, although the group’s market previous quarter, an overall improvement. penetration dropped ten ppts to 31%. Q3 2017 • China CV OUTLOOK • Page 1 Copyright 2017 • All rights reserved PREFACE 2. Enforcement of size and weight laws (+) 3. Electronic logistics systems (-) 4. Build of the major highway system (-) 5. Shift from brick and mortar stores to ecommerce (+) 6. Higher quality vehicles and components (-) a. Longer product life b. Safer vehicles 7. Construction of high speed rail (-) 8. Shift to NEVs for city transit buses (+) ACT Research and China’s State Information Center (SIC) will continue to evaluate these and other changes and their impact on the market and forecast. The single largest impact in the last three CHINA MARKET CHANGES: The China quarters was the GB1589 regulation and related Commercial Vehicle Market continues to be the enforcement strategy changes. The primary largest in the world, at roughly two times the size result was to drive tractor sales (6X4) up, of the developed world’s two leading regional returning capacity taken away by weight limit markets (Western Europe and North America). reduction in the regulation, and to initiate an China’s market has been undergoing structural early replacement program exchanging 6X2 with changes for more than a decade. These 6X4 tractors. Unlike earlier regulations, GB1589 changes are impacting the total market volume, enforcement was delegated through five as well as the types of vehicles being ministries, of which two have police power. purchased, and will continue to impact the EXCHANGE RATE: The exchange rate forecast for the foreseeable future. Taken in between the Chinese Yuan (¥ or RMB) and the total, the market will shrink from its peak of 1.45 $US is shown in the graph below. From the million units in 2010 to the forecast just under 1 middle of 2008 to spring 2010, the exchange million units in 2021, a decline of 31%. Heavy rate remained at approximately ¥6.80 for each duty truck demand will decline 54% over that $US. By the end of January 2014, as reported time frame, while tractor volume will contract by the Federal Reserve, the exchange rate had 11%. As a result, total heavy duty demand will weakened to ¥6.05/USD. After oscillating slide 39%. Medium duty trucks will fall by 25%. upward the past three years, the exchange rate The better performance of the tractor segment was relatively constant in 1H’17, at a ¥6.88/USD will occur particularly through the impact of size pace. The rate continued to fall after April, and weight enforcement, along with changes in ending August at ¥6.68/USD. domestic logistics. As urban transportation is China/U.S. Foreign Exchange Rates addressed from the NEV (new energy vehicle or Chinese RMB to U.S. Dollar alternative fuel) perspective, medium/heavy bus January 2008 - August 2017 Yuan per Dollar volume will expand by 8% from 2010 to 2021. 7.50 Bus volume, however, did not peak until 2013; 7.30 volume in 2021