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The recently concluded Central Economic Work Conference has brought a wave of optimism to the Chinese people, as it clearly emphasized the government's commitment to increasing financial support for improving people’s livelihoods and fostering social harmony. However, commercial vehicle manufacturers are now facing a more uncertain outlook. The conference highlighted concerns about preventing economic growth from becoming too rapid and overheating, controlling price increases from structural trends to noticeable inflation, and shifting monetary policy from expansionary to tighter. These measures could signal a potential downturn in the commercial vehicle market.
FAW Trade Corporation’s marketing department predicts that the total truck market may contract by 5% to 10% next year. Wang Wenbing, deputy general manager of Yutong Bus, is not optimistic about the overall growth of the bus industry in 2024. Deng Ping, general manager of Chongqing Hengtong Bus Co., Ltd., believes that with the changing macroeconomic environment, the "survival of the fittest" will become more pronounced in the bus sector next year.
Major players such as China National Heavy Duty Truck, Dongfeng Liuzhou Automobile, and Shaanxi Zhongqi are closely analyzing the conference’s outcomes and preparing for the challenges ahead. Looking back, a similar situation occurred in the heavy truck market two years ago. In 2004, high fixed asset investment and excessive credit expansion led to an overheated economy. By mid-2005, the government intensified its macro-control, leading to a sharp drop in investment and a severe decline in the heavy truck market—its first negative growth in eight years, with a nearly 40% drop.
According to some industry experts, the medium and heavy truck market has historically mirrored the national economic growth curve and aligned with China’s five-year development plans over the past three decades. Statistical analysis shows that in 1979, 1985, 1989, 1999, and 2005, each of the five major macro-control periods had a tightening effect on the truck market. This time, the regulatory intensity is even greater than before.
This marks the first time in 10 years that China has adopted a tight monetary policy. The central bank has already raised interest rates five times this year, with a sixth hike expected soon. The deposit reserve ratio was recently increased to 14.5%, the 10th time this year, setting a record high in over 20 years and making it one of the highest globally.
Analysts at FAW Trading Corporation’s marketing department note that while domestic infrastructure investment remains strong and large-scale projects continue to drive demand, new projects under the new macroeconomic policies may face significant cuts, directly impacting the truck market. Additionally, changes in consumer credit policies have also affected the industry. It is reported that 40% to 50% of truck buyers rely on loans, especially in regions like Tangshan, Shaanxi, and Inner Mongolia. With higher interest rates, loan approvals have become more difficult, which could significantly reduce demand and have a substantial impact on the market.
Although passenger cars are primarily used for personal travel and are less affected by declines in fixed investment, Deng Ping believes that the overall tightening of capital supply will still affect the passenger car industry. He recalls how macro-control in 1995 and 2005 had a major impact on the sector. During the early 1990s, many local bus projects were launched, but after a round of controls, many small businesses disappeared. Today, the bus industry may face a similar clean-up, which could be beneficial for larger companies.
In addition, some industry insiders believe that due to China’s large trade surplus, export policies may be further adjusted next year, including the possible cancellation of export tax rebates. While China’s commercial vehicles have strong price competitiveness globally, these policy changes and the accelerating appreciation of the RMB could hinder their overseas expansion.
Furthermore, Deng Ping warns that this round of macro-control could negatively impact bus companies that are expanding. Companies investing in new production capacity or building new factories may face severe financial pressure under the new economic policies. Some ongoing projects might even be temporarily suspended.