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



The pre-loaded use and supply chain disruptions have
clouded the mainland Chinese medium- and hefty-responsibility truck (MHDT)
market place considering that past summer time. With gradual easing of electricity shortages
and new injection of plan stimulus, production of MHDT saw
narrowed contraction from November 2021 and will speed up
restoration in 2022. In our February forecast, we enhanced the
mainland Chinese MHDT manufacturing for 2022 by 5% to 1.18 million
models, continue to a drop of 19% in contrast with 2021.

Increasing fiscal paying provides to new demand

To counter mounting financial expansion headwinds, fiscal steps
have been shifted from de-risking to stimulative because the fourth
quarter of final 12 months. In accordance to the 2022 government work report,
the tax rebate and cut offers for homes, compact- and
medium-sized companies, as nicely as industries such as
manufacturing, products and services, and transportation are extended from CNY1
trillion in 2021 to CNY2.5 trillion in 2022. In the transportation
sector, preferential freeway tolling and incentives for logistics
will keep on to be a aspect of the plan, facilitating trucking
restoration to the pre-pandemic norm. In addition, local governments’
borrowing, the main supply of infrastructure financial commitment, could
get to CNY4.14 trillion beneath loosened oversight and early issuance
of particular-reason bonds. Coupled with CNY640 billion of central
spending plan for significant design assignments, these will allow for a healthier
advancement of infrastructure expenditure in 2022. Concurrently, the authentic
estate expense will be accelerated by the ongoing rest of
restrictions on the housing industry, reflected in consecutive
reduction of home loan premiums and enhance of city-degree supports to
shore up buys. Building truck desire is therefore envisioned
to go up by 4-6% in 2022 from a 1% expansion in 2021, introducing all around
15,000 units to the February outlook.

Fine-tuned environmental policies speed up replacements

The strict implementation of the “Dual Manage” of power
consumption amount and depth across energy-intensive industries
in 2021 that has drastically aggravated electricity shortages and curbed
industrial output is eased in 2022 to stabilize industrial progress.
The target of “Twin Control” coverage, turned concentrate on reduction of
carbon emission. Present limits on annual vitality expenditure
of industrial enterprises will be taken out, and some of them will be
sponsored with environmentally friendly loans. Meanwhile, the decarbonization agenda
for industries these as metal is modified to be significantly less intense,
with the deadline of peaking carbon emission becoming postponed by
5 many years to 2030. In distinction, downstream regulations on diesel
vehicles become stringent. After forcing out around 1.3 million units
CN1-3-level vehicles in important areas by 2021, the State Council vows
to basically phase out all down below-CN4-amount vans across the country
by 2025. In particular, Shandong Province, which statements to have
concluded elimination of CN3-stage vehicles, will start off to thoroughly clean
CN4-stage vans from this year. Also, for apps these as
transport of bulk commodities, municipal construction, and
sanitation, CN5-degree vans are ordered to be upgraded or
electrified in some regions all through 2022-25. Taking into consideration our
prior assumptions on ongoing clearance of CN1-3-degree vehicles,
the new insurance policies are estimated to carry about 50,000 models extra
truck replacements to 2022.

Substantial inventories and multimodal transportation weigh on the

Owing to OEMs’ cost-off promotions, the pre-obtain action in
preparing for the CN6-a diesel emission policies had been considerably
magnified, resulting in an around-storage of CN5-stage trucks throughout
dealer channels in the first fifty percent of 2021. By December 2021,
nationwide MHDT inventories are calculated at 275,000 units, however
way larger than the regular premiums of 150,000-170,000 models. Approximately
just one third of them are CN5-stage vehicles, inspite of a national closure
of registrations on January 1, 2022. As expected, the significant
inventory pressure will deepen into the initial quarter of this year,
just before full clearance of CN5-level new trucks (offered as employed trucks)
in the market. On the other hand, the transition of 440 million
tons of street transportation to railway and waterway transport have manufactured
share of street freight turnover between all transport modes to fall
from 36% in 2018 to 32% in 2021. This kind of structure will be even more
optimized with projected acceleration in railway and waterway
transport for bulk commodities and containers throughout 2025.
Accordingly, very long-term baseline demand from customers for large trucks will be
weakened by up to 30,000 models .

With de-stocking of CN5-amount new vehicles and plan stimulus
having outcome, we forecast MHDT generation to decide up steam from the
2nd quarter. Nevertheless, latest outbreaks of Omicron variants and
geopolitical tensions may increase threats in the current market. By considerably, the
pandemic lockdown has led to FAW’s Changchun plant to suspend
production for at least 4 times in March. In the meantime,
industrial supply chain and logistics are experiencing increasing
issues from surging power and commodity prices induced by the
Russia-Ukraine conflict. Despite the fact that nearby OEMs could benefit from
bigger exports to Russia in the course of the Western sanctions, the
incremental output will be limited, specified a gloomy outlook for
the region in general.


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


This article was revealed by S&P World wide Mobility and not by S&P World Scores, which is a separately managed division of S&P Global.

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