Heavy Truck Factory Sales in China by Month, SAARs
source: CAAM and TIR Analysis
China’s Heavy Truck Market: where now?
The last 3 months have seen the world’s attention turned firmly towards China’s slowing industrial economy, with some Western comment, at least, seeing this as a major feature of the deteriorating global economic outlook. Does heavy truck sales data available for the same period mirror the downshift in economic sentiment? After all, truck sales have some ‘leading indicator’ quality – they are the results of many individual decisions, made with relatively little leadtime in a market with China’s product characteristics, and are highly (even notoriously) sensitive to changes of economic momentum. Surprisingly, perhaps, recent truck sales data is so far a picture of modest improvement…
In fact, measured by our preferred metric of seasonally adjusted trend, December and January were slightly better months taking the market appreciably above earlier running rates. They certainly do not suggest any negative step change, rather they speak of underlying slight improvement. February, for which we already have preliminary data, has too much noise to be treated as a clear indicator of trend: Chinese New Year (CNY) seems to take an increasing toll on volumes. But it was slightly up year-on-year on a seasonally adjusted basis (and 16% up on an actual basis according to preliminary data). But the SAAR of 440,000 running rate is still much lower than any other recent month (averaging over 600,000 units) as shown on our chart. February 2015 was an almost ‘off-the-scale’ weak month, and against this comparative February 2016 indications offer no comfort, despite the positive delta on year-ago. As usual we will need to wait until March, the seasonally strongest month of the year, to provide a much more reliable steer. But early indications are not dire.
In 2015 the industry sold 551,000 vehicles, down 26% on 2014 and close to the 565,000 we forecast back in our April 2015 report, and very close to the 545,000 we forecast in November (when of course we had the benefit of 10 months preliminary data to assist our perspicuity). The industry’s favourite viewpoint, for public consumption at least, is that heavy truck factory sales could reach 600,000 this year. This year’s mild optimism is typically justified by an expected further rise in logistics vehicles (one of the reasons cited last year) and some re-equipment to take advantage of the new size and weight regulations in GB1589 (which effectively reduced maximum weight of course to 49 tons GVW, but included some useful lesser changes). We are published on -4%, a modest enough fall, but noting the potential to dive much further perhaps to -11% if the economy does hit a hard landing, an event we are not forecasting. On our preferred higher estimate, 2016’s market would be just 53% of its 2010 peak of 1.03 million trucks. Of course, the truck decline in 2015 was particularly brutal in response to China 4 emission regulations belatedly imposed from last January which raised both purchase prices and running costs for all trucks. But much of this had worked its way through the system by end year, when SAARs of 600,000 were being achieved. We would love to be proved over-gloomy on our 530,000 forecast. So far, the data is running slightly better, though we doubt the industry will ultimately escape the weight of economic gravity bearing down on it. >