Structure and Markets
Breakdown of Chinese HDT Exports by Geographic Destination, 2014, and by Destination Type

Positive 2014 Export Performance by Truck Industry, but much to do again

Chinese truck companies are giving a lot of attention to truck exports in 2015. This an obvious potential escape route from the daunting over-capacity of the heavy truck industry at home. With President Xi Jinping’s vision of a re-invigorated China internationally, too, and exhortation to make use ‘along the way’ of the ‘one belt, one road’ focus, it seems the truck SOEs also have every incentive to demonstrate increasing international focus and competitiveness.

Chinese truck exports have remained strong recently (while imports, of course, have collapsed). In 2014 customs data showed exports of a very respectable 77,000 heavies, up from 64,000 in 2013 and 74,000 in 2012. That’s around >10% of total factory sales in the period, up from 8.5% in 2013. We can analyse this data in a couple of interesting ways geographically (Figure 3). It shows the expected focus on developing Asia, and China’s increasing trading relevance in Africa, plus a successful push towards South America and the Middle East. Advanced economies absorb just a few hundred units.

Figure 3: Breakdown of Chinese HDT Exports by Geographic Destination, 2014, and by Destination Type

 

Source: China Customs Data and TIR Categorisation.

An alternative way to analyse the data is to check exports against per capita income of recipients, which shows (Figure 4) that over 90% of exports are made to countries with less than $7000 (at current prices) per capita income. Other than a few oil states where China has attracted attention, much of the volume is in even lower income territories, where purchase price is paramount. Vietnam was a particular success in 2014, on a clampdown on overloading. With border relaxation as part of the forthcoming ASEAN Economic Area launch, road transport may play a more prominent role in the entire Mekong subregion, though such high volumes may be difficult to repeat.

Figure 4: China HDT Exports, Share of 2014 Export Volume by income of importer, current US$

Source: China Customs Data, IMF World Economic Outlook, October 2014

In terms of outlook, the 32% recent dependency on oil-rich countries leaves this flank exposed (as Figure 4 demonstrates, it is a relatively small number of oil-wealthy states contributing to these volumes), while developing economies are generally seeing slower growth in prospect. 2014’s success was built on some opportunistic gains, as is often the way, but this leaves much to be achieved to build on the volume base achieved. China is capable of selling at the lowest price points into many markets worldwide, but knows that to develop the repeatable performance it needs, service and maintenance will be ever more important. Hence some more innovative schemes to involve some of their more international suppliers (and their service nets) in the sales pitch process. While Cummins and Foton who will expand together in Brazil is a particularly high profile example, other suppliers such as Knorr, Wabco and SKF have all moved in a similar direction. Chinese company strategists know perfectly well that the first priority must be to secure the low-income ground, and Japanese, Korean and Western peers have counter-strategies in low cost platforms to try to deny that success. Development into middle and higher income countries may prove difficult until more similar technical standards, including emission standards, are established in China.

In the longer term, the joint ventures of at least two of the Big Five HDT makers in China may also provide some ‘structural’ lift to exports if their partners deliver on potential plans to fast track market entry and service capacity in additional markets with active help from existing distribution assets. We see few rapid moves in this direction pending a more mature evaluation of how well these joint ventures are able to deliver the needs of all parties involved.