Equipment

Chinese Truck Market: Opportunity For North American OEMs?

September 18, 2009

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While Class 8 orders for North American OEMs have been slowly showing signs of improvement, the numbers for 2009 still do not look good in comparison to previous years. In fact, analysts say North American OEMs shouldn't expect things to get back up to normal levels for several years out.

Despite the bleak outlook for equipment sales in North America, things are looking rosy overseas, especially in the Chinese commercial vehicle market
, according to Sandeep Kar, program manager for heavy-truck technologies at Frost & Sullivan. Kar says truck makers and suppliers should go global if they're trying to stay afloat during the tough economy.

Kar is spearheading several studies on global commercial vehicle markets, the latest of which is China. The business research and consulting firm will also tackle the Russian and Indian markets.

Kar reveals that while the North American market is suffering, the Chinese truck market shows much promise, and he says OEMs would be smart to go after business there. According to Kar's research, heavy-duty production in China is expected to grow from 540,000 units in 2008 to 807,000 units by 2015. This is a compound annual growth rate of 5.9 percent.

According to recent data released by ACT Research and China's State Information Center, the country's commercial truck market is experiencing a fast turnaround, with second quarter sales of heavy- and medium-duty trucks at the highest over the last 10 quarters.

Good TIming

Kar says now might be the best time for North American manufacturers to move in on the Chinese market. Chinese truck manufacturers are lagging on truck technologies, including engines, aftertreatment technology, telematics and safety, he says. As a result of China's aging trucks and new regulations for emissions, North American manufacturers can find a market there. With harmonized regulations, North American trucks can be sent all over the world and meet emissions regulations and technology requirements. Chinese truck manufacturers do not have the technology in place to meet 2010 standards, Kar says, and this offers North American OEMs a chance to partner with Chinese truck makers.

In addition, the Chinese government hiked fuel taxes at the beginning of this year, creating increased demand for fuel-efficient trucks. Beginning January 1, 2009, the fuel tax on diesel was increased from 0.1 yuan (about 1 cent) to 0.8 yuan (about 12 cents) per liter. Kar says North American trucks can meet this demand because they are built to be more fuel-efficient.

As a result of investing billions in infrastructure, the Chinese government implemented a "charge by weight" policy, which penalizes owners for overloading trucks. Because the government doesn't want to destroy the infrastructure, it has been cracking down on trucks that are hauling more than their weight limit, Kar says. This policy gives owners the choice of using either two smaller trucks or one larger one. Frost & Sullivan predicts that by 2015, many Chinese truck owners will trade in their medium-duty trucks for either light- or heavy-duty models, in order to be within the legal limit. As a result, the light- and heavy-duty markets should grow while the medium-duty segment shrinks, Kar says.

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