Commercial Vehicles January 2023

Chinese OEMs Look for Export Opportunities amid Sluggish Domestic Demand

Shirly Zhu
Shirly Zhu

Shirly has worked across multiple industry sectors in her 10+ year career, conducting projects requiring primary and secondary research, as well as quantitative and qualitative analysis. She’s primarily focused on Industrial Automation topics including motion and industrial controls.

The Chinese domestic commercial vehicle market is experiencing a period of stagnant growth. It is new energy vehicles and export sales that provided growth opportunities for Chinese OEMs in 2022 and will continue to drive market growth in the future. Sales of commercial vehicles in China have declined continuously since May 2021, and in 2022 the number of units sold fell to 3.3 million. In contrast, following a 16% decline in 2020 due to the outbreak of the COVID-19 pandemic, export sales rebounded strongly in 2021 to nearly 400,000 units. The export market remained robust through 2022, exceeding 550,000 units over the year.

In this insight we will discuss the ongoing trend towards Chinese bus and truck exports to overseas markets and some of the driving forces behind it.

Internal and External Driving Forces:

Export has always played an essential role in China’s economic growth. As an important pillar of the national economy, exports of both passenger and commercial vehicles have demonstrated steady growth, but the domestic segment remains the largest market.

After the outbreak of the COVID-19 epidemic, a slew of policies was rolled out by the Chinese government, such as new infrastructure investment and China VI engine emission regulations. All of which have supported domestic sales of commercial vehicles, especially heavy-duty trucks.

However, multiple adverse factors have affected the sales of commercial vehicles since 2021, including weak downstream demand, rising fuel prices, lockdown measures for infection control and the negative impact of “last-minute rush buying” before the implementation of the more expensive China VI emission regulations. As a result, manufacturer sales of commercial vehicles have fallen since May 2021, leading to a 6.6% decline in total sales during the year and falling by a further 35% to 3.3 million units in 2022. In the wake of a stagnant domestic market, Chinese OEMs are focusing their efforts on pursuing overseas opportunities.

At the same time, overseas markets, which experienced a sharp drop in demand in 2020 due to the COVID-19 pandemic, witnessed a strong recovery in 2021. However, the global market has also faced many supply chain problems, such as large-scale production stoppages, labor force challenges, and shortages of parts and components. As a result of a stable domestic supply chain, Chinese automobile manufacturers quickly spanned the gap between supply and demand and achieved robust sales growth in overseas markets, particularly in Latin America and Southeast Asia.

In 2022, major European OEMs such as Volvo, Mercedes-Benz and Scania withdrew from the Russian market due to the Russia – Ukraine war, which provided an opportunity for Chinese enterprises to enter the market on a large scale. Data shows that Russia became the top destination for the export of trucks and buses from China in 2022 and Chinese heavy-duty truck OEMs such as Shaanxi Automobile and Sinotruk became top five OEMs in Russia. With domestic OEMs further developing the local market network in terms of service and sales channels, Russia is anticipated to become a long-term potential export market.

The new energy trend is growing in overseas markets, especially developed markets. The competitive advantages of Chinese OEMs – notably price – will drive their exports of new energy commercial vehicles. This will further expand export markets for Chinese OEMs to Western Europe and other developed markets, where the new energy market is beginning to mature.

Diversification and Focus

Diversification and focus are two important features of the export market for Chinese commercial vehicles, including factors such as vehicle type, export destinations and manufacturers.

In terms of export destination, Chinese Customs statistics show commercial vehicles are exported to more than 100 countries and regions around the globe, including (but not limited to) Bahrain, Cuba, Chile, Germany and Italy. The top ten export countries accounted for more than half of total exports, mainly in Southeast Asia, Latin America and Africa. Demand varies between different countries for different vehicle types. For example, heavy-duty trucks accounted for around 90% of exports of Chinese commercial vehicles to Russia; while pickup trucks are the main vehicle type exported to Chile.

Top 10 export destinations include Chile, Vietnam, Australia, Philippines, Peru, and so on

 

Of the hundreds of commercial vehicle OEMs in China, around 40-50 vendors have generated export business in the past two years, led by leading OEMs such as Foton, Sinotruk and JAC. According to data from the Chinese Association of Automobile Manufacturers, the top 10 OEMs made up approximately 90% of truck and bus exports. The development of overseas markets requires continuous investment in resources such as products, channels and talent. Leading manufacturers have substantial resources and have been striving to develop markets for many years, ultimately helping them to get a foothold overseas.

The top 10 truck and bus vendors in China made up approx. 90% of exports from China in 2021.

Export vehicle types and powertrains can also be characterized by diversification and concentration. Trucks spanning heavy-duty to light-duty, and buses ranging from large to medium and small-sized are all exported from China. Of these, light-duty vehicles make up almost 70% of total export units, in part due to much greater global demand for them. In addition, the large increase in export sales of pickup trucks in the past two years drove up the proportion of light-duty shipments, while exports of new energy vehicles to the overseas market have increased significantly in the past two years, especially buses. According to Chinese Customs data, new energy vehicles (including battery electric and hybrid vehicles) accounted for more than 10% of total bus exports in 2022, particularly large and medium-sized buses.

Light-Duty commercial vehicles accounted for the majority of China’s export shipments in 2021.

Looking to the Future

Undoubtably, Chinese commercial vehicle OEMs will remain highly committed to overseas market development in the future. Interact Analysis predicts China’s exports of commercial vehicles will reach 850,000 units in 2030, making up nearly 15% of all Chinese OEMS’ sales units, with trucks being the mainstream type and accounting for around 90% of the total. In the meantime, export sales of new energy vehicles will increase significantly, particularly after 2025, and are expected to account for more than 20% of total commercial vehicles exports in 2030. This will favor Chinese OEMs, allowing them to enter the overseas market more easily, particularly in developed countries and regions, such as Europe, North America, Australia and New Zealand, where the electrification trend is advancing more quickly. Competition in the global market is expected to intensify in the future.

By 2030, China will export almost 850,000 new energy truck and bus units.

For more information on the electrified truck and bus market, please contact Shirly Zhu, Principal Analyst at Interact Analysis.

Posted in: Commercial Vehicles.