Mainland China, as the world’s largest manufacturer and market for medium and large buses (length > 7 meters), is playing a leading role in the electrification of the commercial vehicle industry. In recent years, its bus market has remained concerned about rising rates of car ownership, the expansion of ride-sharing and bike-sharing services, as well as the expansion of high-speed and subway networks. As of 2020, the persistent COVID-19 pandemic and mobility restrictions further prevented people from commuting or riding the public transportation system. In parallel, bus producers have faced challenges from falling subsidies for new energy vehicles (NEVs) and supply chain constraints. In our November forecast, we cut mainland China bus production for 2022 by 5% to 80,000 units, a 15% decrease compared to 2021 and a 43% nosedive compared to the year before the 2019 pandemic (see Annex 1).
The urban bus segment represents the biggest drag, as the market share fell significantly from 60% in 2020 to 45% in 2021. Since most of the operators in the segment are state-owned, the performance of the market is closely related to government policies, particularly with regard to the electrification revolution. . Although subsidies for the purchase of NEVs continue to accelerate urban bus replacements, the momentum is slowing with the reduction in allocations since 2016. In 2022, the average central subsidy per electric and plug-in electric bus is further reduced by 20% relative to the 2021 level. Meanwhile, the prolonged pandemic and intermittent closures have caused local governments to cut the fiscal budget for the public transport sector. As a result, urban bus production contracted 8% year-on-year (yoy) during January-August even with a low base effect. Pre-purchase activities in preparation for the discontinuation of NEV purchase subsidies in 2023 are expected to generate further production in the fourth quarter. However, the stimulus effect could be undermined by budget deficits. The resulting demand overdrafts will likely put pressure on the segment in the first half of 2023, followed by a conventional recovery supported by revival of exports and national plans to build more than 50 bus metropolises and improve the electrification of buses. public transport fleets from 66% by 2021 to 72% by 2025. More production will shift to the medium bus sector (7-10 meter buses) as incentive policies tilt towards NEV application in transport suburban and rural public.
The coach segment regained market dominance and accounted for around 55% of the market share by 2021. Unlike city buses, coaches are generally used for long-distance line services and are therefore not suitable for battery electric application given battery mileage limitations. and charging infrastructure. The segment has been affected by the increasing penetration of high-speed trains, as evidenced by the widening of the “scissor gap” between passengers traveling by coach (20% less during 2015-2019) and by rail ( 44% more during 2015-19). ; see Annex 2). Amid the pandemic since 2020, the segment has been hit hard as mobility restrictions have brought the public transport and tourism industries to a near standstill. Buying ahead of the nationwide switch to CN6-a emission standards for new vehicles, effective July 2021, supported a transitory segment reversal in the second quarter of 2021 before returning to depression for the first eight months of 2022. The weakness is anticipated to deepen in early 2023 under the continuation of the “dynamic zero-COVID” approach despite vaccination progress. Future recovery remains to be seen and will depend on the relaxation of containment measures and the implementation of the 2020-35 medium-long term plan for the hydrogen power industry, which specifies a target of 50,000 fuel cell electric vehicles. operational by 2025.
In addition to the downturn in demand, busmakers are enduring similar supply chain disruptions as truckmakers due to inflationary pressures and semiconductor shortages. In fact, bus manufacturers suffer more because customized products are unfavorable to modular design and economies of scale. Although the market concentration has become quite high with the top 10 bus manufacturers having a market share of around 85% in 2021, there are still more than 30 players across the country, which intensifies the competition in the industry. Moving forward, bus manufacturers have been working with operators to explore diversified transport modes that integrate features such as cargo delivery and ride-sharing services. On the other hand, leading manufacturers such as Yutong, King Long, Golden Dragon and Higer have expanded their business scope by manufacturing trucks. With the end of the subsidy regime, we anticipate further consolidation in the bus industry in the short term.
Publisher’s note: The bullet points in this article were chosen by the editors of Seeking Alpha.