China’s Heavy Duty Truck Market

Passenger cars are a hot item in China these days. With car sales up by 45 percent through July, it seems that everyone in China is buying a car this year.

It’s no wonder then that more than 800,000 people visited the Beijing auto show during the last week in April, making it the best-attended motor show in the world. This year’s show displayed a total of 990 cars from all over the world, and featured 89 new models, along with 95 energy-saving vehicles and 65 concept cars.

Unlike their passenger car cousins that receive all of the media attention, however, heavy-duty trucks are the quiet, seldom discussed, workhorses in any economy. They haul the steel, coal and other raw materials to manufacturing plants around the country; get building materials to construction sites, wherever they may be located; and carry finished goods to market. With a booming economy, and a land mass of 9.6 million square kilometers, approximately the same as the United States, China seems to have an insatiable appetite for these vehicles. Heavy duty trucks are generally defined as those with a gross vehicle weight of 15 tons or more.

Although not as sexy or glamorous as passenger cars, the numbers for heavy-duty trucks are no less impressive. Through July, sales of trucks of this size led the commercial vehicle category with a staggering 99 percent increase compared to last year. For the first seven months, Chinese assemblers sold a total of 4.0 million commercial vehicles, including 2.3 million trucks and 1.7 million buses of all sizes. Of this total, heavy-duty trucks accounted for approximately 650,000 units. Most experts believe that China’s heavy duty truck sales will reach 900,000 units for the full year.

How do these numbers compare to those in the United States, the other large economy in the world with a big land mass? Sales of heavy duty trucks peaked at approximately 330 thousand units in 2006, but the global economic crisis has taken its toll since then. Industry analysts predict that sales of heavy duty trucks will increase by 14 percent this year, but year-to-date sales of 58,846 Class 8 trucks, the largest size category, are still significantly below the 162,545 sold in the first seven months of record-setting 2006.

In developed markets like North America, Europe, Japan and Australia, the major producers of heavy duty trucks are famous companies that include the likes of Daimler AG, which builds the Mercedes Benz and Freightliner models; Volvo with its Volvo, Mack and Renault brands; Fiat trucks under the IVECO label; PACCAR with its Kenworth, Peterbilt and DAF truck brands; and Hino of Japan. Despite their dominance of the truck business in developed markets, however, these global leaders are scarcely present in China, except through joint ventures that account for a relatively small amount of industry production.

In China, the top five producers of heavy-duty trucks are all local companies: First Auto Works (FAW), SinoTruk, Dongfeng, Foton and Sha’anxi Truck. For all intents and purposes, the heavy duty truck market is a purely local affair in China, and it is likely to stay that way.

The obvious reason is price. While a truck manufactured by one of the global assemblers might cost upwards of $100,000, the average heavy-duty truck manufactured by SinoTruk sold for less than $40,000 in 2009. Granted, trucks used in developed markets are not quite comparable to those in China because they must comply with higher emission standards and include many, many more features than their Chinese counterparts. Nonetheless, the domination of the Chinese heavy-duty market by the local players demonstrates once again the importance of price and the issue of affordability in the China market.
