Heavy-duty demand to rise after adjustment

China’s heavy-duty market is to remain soft in 2011 as suggested in the review articles on the heavy-duty truck and large and medium bus markets.

The country sold 591,300 heavy-duty trucks in the first seven months, down 9.6 percent compared with the same period in 2010. Large and medium bus sales in the first six months were up year-on-year by 9 percent, but this is a far cry from last year’s growth rate of close to 46 percent for large and 26 percent for medium buses.

Inflation, tightened monetary and financial policies, termination of incentives, tightened fuel consumption level and new safety regulations on overloading have contributed to the market setback.

Manufacturers and analysts believe that 2011 would be a down year after two consecutive years of high growth driven by the government’s ¥4 trillion worth of stimulus investment. Most likely the heavy-duty truck market would face a negative growth in 2011 even though that of large and medium buses may see a slight positive growth. Yang Guotao, Beiqi-Foton’s general manager for sales, believes that this year’s heavy-duty truck demand is unlikely to reach last year’s total.

But according to many analysts, the current slump in demand is a necessary adjustment after two years of explosive growth. Such an adjustment may end towards the end of 2011, as suggested by Li Yuheng from the China Chamber of Commerce (CCC), “when the economy begins to recover after a successful rein-in of inflation.”

Analysts believe that the current adjustment also represents a normal market cycle because the country still enjoys a fundamental and solid demand for heavy-duty vehicles. As pointed out by Tie Zhihai, also from the CCC, infrastructure construction in China remains active even in first-tier cities despite the current macroeconomic control and may very well rebound in the foreseeable future.

China’s heavy-duty sector has an intimate relationship with the level of the country’s GDP and macroeconomic development, suggested Beiqi-Foton’s Yang. “The heavy-duty truck segment may see an increase of 8-9 percent over the next few years in proportion to GDP growth,” he said.

As forecast by She Zhenqing, a noted bus analyst, China will have a huge market potential for rural, school and public buses in the next five years.