Summarize：English.chinabuses.com: according to the newly released statistics, China’s bus & coach industry shrank by 32.5% y/y from Jan. to May 2009. The sharp falling trend has dragged most Chinese bus & coach builders into a variety of difficulties.
On the basis of the overall performance of China’s bus & coach industry, it is predicted that the sector will be faring better in the latter half of 2009. Signs of recovery were already in sight in recent two months. Some insiders were quoted as saying that the industry will be fully recovered in the third or fourth quarter.
A look at the domestic bus sales market indicates that the overall sales volume went down by 39% from Jan. to Apr. The city bus and tourist coach segments experienced the sharpest fall while the city bus and private coach went down slightly.
In terms of overseas bus & coach market, China also witnessed sharp declines in its sales volume in the first half of this year. In the meantime, the market structure experienced some big changes. Russia, once one of the top ten overseas markets for China’s bus & coach industry, made a nosedive in its sales volume while Iran, Syria, Egypt, Algeria, and Angola still maintained the leading positions in importing China’s buses & coaches.
Major factors affecting the domestic bus market
1. China’s overall economic landscape
Without any direct stimulus policy, the macroeconomic situation is the chief factor that determines the overall performance of the bus & coach industry. Usually the road transport passenger volume is closely related to a nation’s GDP growth. In 2009, some well-known economists have forecast that it would not be easy for China to grow 8% in its GDP. Given this, the bus & coach market will continue to be confronted with rising pressure before China’s overall economy is making a turn for the better.
2. The government revenue
From Jan. to Apr. 2009, China’s government revenue went down sharply compared with the same period last year. With decreased revenue, many local governments are more likely to tighten their purse strings and spend less on purchases of public transport facilities. Given this, the government’s revenue will also play an important role in determining the future development of the bus & coach industry.
3. Auto Industry Revitalization Plan
Early this year, Beijing rolled out Auto Industry Revitalization Plan in an attempt to pump much needed vitality into the anemic market. According to the plan, priorities should be given to the research & development of new energy vehicles. In addition, financial supports will be rendered many medium- and large-sized cities to popularize energy-saving and eco-friendly vehicles, esp. those for public transport. In doing so, China is striving to cultivate a growing new energy vehicle market, which will account for 10% of the overall auto market by 2012.
4. The integration of urban and rural areas
In recent years, development gap between the urban and rural areas has been widening, which is an increasing concern for the government policy makers. To reverse the situation, Beijing has made constant calls for the further integration of urban and rural areas across the nation. With the speed-up of the rural economy and the increased mobility of China’s 1.3 billion population, it is generally believed that the traditional passenger transport mode will undergo significant changes, which will bring new opportunities for China’s bus & coach industry.
5. The second- and third-layer cities in post-Olympic era
Before Beijing 2008 Olympic Games, big cities such as Beijing, Shanghai and Tianjin have replace huge fleets of old buses & coaches with new ones in order to give a face-lift to their city image. After the Olympic Games, it has been observed that more and more provincial capitals, namely Xi’an, Shijiazhuang, Hangzhou, Nanjing, Jinan, etc. are following suit. Moreover, a number of third-layer cities have joined the bus procurement team in response to the government’s call for “public transport first”. The purchases from various cities across China will be a big contributor to the sales volume of China’s bus & coach industry.
6. Bus & coach operators pressed to change their operating mode
Since early 1980s, China’s road transport is open to enterprises of various ownership nature. Since 2008, the wild fluctuations of the fuels, the reform of fuel tax and the intensified competition between road transport and railway transport have further sped up the marketization of the road transport market. Along with this, the operating mode of bus operators has yet to be changed to cater to the needs of passengers. Under such circumstances, bus & coach builders have their own share of responsibilities to help bus operators go through the transformation.
7. New growth points yet to be found after intensified competition between road and railway transport
According to the latest statistics, China’s high-speed trains newly operated across the nation’s railway networks have grabbed nearly 30% of passenger volume that previously belonged to road transport. In the near future, more high speed trains are expected to be put into service, which will pose a big challenge for the road transport market. Given this, it is advisable that bus & coach operators have to take the initiatives to readjust their route structure and fleet structure so as to project a new image and win more passengers.
Major factors affecting the overseas bus & coach market
1. The ongoing global financial crisis has already undermined the consumption power of almost every country to varied degree. The Middle East market, which enjoyed a boom in recent years, also fails to go unscathed amid the current the global economic climate. Before the world economy shows any signs of recovery, it will continue to be an uphill battle for China’s bus & coach builders to win more overseas customers.
2. The rising protectionism is partly to blame for the falling export volume of China’s bus & coach products. Take Russia for example, it started levying 10-20% tariffs on imported commercial vehicles (CV). Ukraine also has increased import tariffs on CV from 10% to 23% in a bid to protect its domestic enterprises. The import barriers set up by these countries will continue to exert considerable pressure on China’s bus & coach industry in the coming months.
3. The competitiveness of China’s bus & coach products has been undermined in recent months since China’s currency has been appreciating while China’s major bus & coach export destinations such as Russia, Mexico, and South Africa has seen their currencies on decline. Moreover, many overseas bus rivals have seen their products become increasingly competitive thanks to their countries’ falling currency value. Given this, it will become increasingly difficult for China’s bus & coach builders to market their products overseas unless substantial technological upgrading being made to catch up with the top-notch players in this field.
4. Risks have been running high given a host of overseas bus & coach dealers are now strapped with cash, which has in turn led to the rising trade disputes between China’s bus & coach builders and their foreign agents. Moreover, the deteriorating overseas market has made banking service providers tighten their credit assessment and control.
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