June 23, 2024

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Expansionary Policies Provide a Tailwind to Mainland Chinese Truck Market, but Challenges Remain



The pre-loaded intake and provide chain disruptions have
clouded the mainland Chinese medium- and major-responsibility truck (MHDT)
market due to the fact past summer. With gradual easing of energy shortages
and modern injection of coverage stimulus, creation of MHDT observed
narrowed contraction from November 2021 and will accelerate
restoration in 2022. In our February forecast, we enhanced the
mainland Chinese MHDT production for 2022 by 5% to 1.18 million
models, even now a decline of 19% as opposed with 2021.

Expanding fiscal spending adds to new demand

To counter mounting financial advancement headwinds, fiscal actions
have been shifted from de-risking to stimulative considering that the fourth
quarter of very last year. According to the 2022 federal government operate report,
the tax rebate and cut offers for homes, small- and
medium-sized firms, as very well as industries these as
production, companies, and transportation are prolonged from CNY1
trillion in 2021 to CNY2.5 trillion in 2022. In the transportation
sector, preferential freeway tolling and incentives for logistics
will continue on to be a part of the plan, facilitating trucking
restoration to the pre-pandemic norm. In addition, community governments’
borrowing, the most important source of infrastructure expense, could
access CNY4.14 trillion under loosened oversight and early issuance
of special-reason bonds. Coupled with CNY640 billion of central
spending budget for important development initiatives, these will enable a balanced
growth of infrastructure financial commitment in 2022. Concurrently, the actual
estate financial investment will be accelerated by the ongoing relaxation of
limitations on the housing current market, reflected in consecutive
reduction of mortgage rates and improve of town-degree supports to
shore up purchases. Building truck desire is as a result expected
to go up by 4-6% in 2022 from a 1% expansion in 2021, adding about
15,000 units to the February outlook.

Fine-tuned environmental procedures speed up replacements

The rigorous implementation of the “Dual Control” of power
use amount and intensity across vitality-intense industries
in 2021 that has significantly aggravated energy shortages and curbed
industrial output is eased in 2022 to stabilize industrial progress.
The objective of “Twin Manage” coverage, turned focus on reduction of
carbon emission. Present limitations on annual vitality expenditure
of industrial enterprises will be eradicated, and some of them will be
subsidized with inexperienced loans. Meanwhile, the decarbonization agenda
for industries these types of as metal is altered to be fewer aggressive,
with the deadline of peaking carbon emission remaining postponed by
five yrs to 2030. In distinction, downstream restrictions on diesel
vehicles turn out to be stringent. Following forcing out close to 1.3 million models
CN1-3-amount trucks in vital areas by 2021, the Condition Council vows
to mainly section out all underneath-CN4-amount vans across the nation
by 2025. In unique, Shandong Province, which promises to have
concluded elimination of CN3-degree trucks, will start off to thoroughly clean
CN4-degree vehicles from this 12 months. Also, for apps these as
transport of bulk commodities, municipal building, and
sanitation, CN5-stage trucks are ordered to be upgraded or
electrified in some regions through 2022-25. Looking at our
preceding assumptions on ongoing clearance of CN1-3-degree trucks,
the new procedures are believed to deliver about 50,000 units extra
truck replacements to 2022.

Higher inventories and multimodal transport weigh on the

Owing to OEMs’ rate-off promotions, the pre-purchase activity in
planning for the CN6-a diesel emission principles ended up enormously
magnified, ensuing in an above-storage of CN5-stage trucks throughout
vendor channels in the very first 50 percent of 2021. By December 2021,
nationwide MHDT inventories are calculated at 275,000 units, continue to
way greater than the normal rates of 150,000-170,000 models. Roughly
a person 3rd of them are CN5-stage trucks, irrespective of a nationwide closure
of registrations on January 1, 2022. As envisioned, the significant
inventory pressure will deepen into the initially quarter of this yr,
right before total clearance of CN5-stage new vans (offered as made use of vans)
in the market. On the other hand, the changeover of 440 million
tons of road transport to railway and waterway transport have produced
share of highway freight turnover among all transportation modes to slide
from 36% in 2018 to 32% in 2021. These framework will be even further
optimized with projected acceleration in railway and waterway
transport for bulk commodities and containers all through 2025.
Accordingly, long-time period baseline demand for significant trucks will be
weakened by up to 30,000 units .

With de-stocking of CN5-stage new vehicles and policy stimulus
taking effect, we predict MHDT output to pick up steam from the
second quarter. Even so, current outbreaks of Omicron variants and
geopolitical tensions could raise pitfalls in the current market. By significantly, the
pandemic lockdown has led to FAW’s Changchun plant to suspend
manufacturing for at the very least four days in March. In the meantime,
industrial source chain and logistics are dealing with raising
problems from surging vitality and commodity costs caused by the
Russia-Ukraine conflict. Even though nearby OEMs could advantage from
increased exports to Russia all through the Western sanctions, the
incremental creation will be confined, presented a gloomy outlook for
the region in normal.


Posted 22 March 2022 by Cassie Liu, Automotive Analyst, IHS Markit&#13


This article was released by S&P World wide Mobility and not by S&P Worldwide Rankings, which is a separately managed division of S&P International.


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