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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.
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