In 2008, the prosperity of the commercial vehicle industry in the country will decline

The recently concluded Central Economic Work Conference has brought hope to the hardworking Chinese people, as it clearly emphasized that the government will allocate more financial resources to improve people's livelihood and foster social harmony. However, commercial vehicle manufacturers are facing a more challenging outlook. The conference highlighted the need to prevent economic growth from becoming too rapid and overheating, avoid a structural rise in prices turning into noticeable inflation, and shift monetary policy from "sound" to "tight." These measures could signal a market downturn for commercial vehicle companies. FAW Trade Corporation's marketing department predicts that the total truck market may decline by 5% to 10% next year. Wang Wenbing, deputy general manager of Yutong Bus, is also 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 changes in the macroeconomic environment, the survival of the fittest will become more intense in the bus sector next year. Major players like China National Heavy Duty Truck, Dongfeng Liuzhou Automobile, and Shaanxi Zhongqi are closely analyzing the conference's messages and preparing for potential market shifts. Two years ago, a similar scenario unfolded in the heavy truck market. In 2004, high fixed asset investment led to resource shortages and excessive credit expansion. By mid-2005, the government intensified its macro-control, leading to a sharp drop in fixed asset investment and new project funding. This caused the heavy truck market to enter a downturn, recording its first negative growth in eight years with a nearly 40% decline. "The market trend for medium and heavy trucks aligns with the national economic growth curve and matches China’s five-year development plan," an industry expert noted. Historical data shows that since 1979, each major macro-control period—such as in 1985, 1989, 1999, and 2005—has had a tightening effect on the truck market. This time, the regulatory intensity is even greater than before. This marks the first time in a decade that China has adopted a tight monetary policy. The central bank has raised interest rates five times in one year, with a sixth hike expected soon. In just two days, the deposit reserve ratio was increased to 14.5%, the 10th time this year, hitting a 20-year high and making it rare globally. Analysts at FAW Trading’s marketing department believe that while domestic infrastructure investment remains strong and demand for large-scale projects is still significant, the implementation of new macroeconomic policies will likely reduce new project approvals, which could severely impact truck demand. Additionally, changes in consumer credit policies have already affected the market. It is reported that 40% to 50% of truck buyers rely on loans, especially in areas like Tangshan, Shaanxi, and Inner Mongolia. With higher interest rates, loan approvals have become harder, potentially dampening demand and significantly impacting the market. Although passenger cars are primarily used for personal travel and less affected by declining fixed investment, Deng Ping argues that tighter capital supply across the economy will eventually affect the passenger car industry. He recalls that the macro-control in 1995 and 2005 had a major impact on the auto sector. After the 1993 controls, many local bus projects were abandoned, and numerous small businesses disappeared. Today, the industry may face another round of consolidation, which could be beneficial for larger companies. Some industry insiders also suggest that due to China’s large trade surplus, next year’s economic policy may further adjust export strategies, including the possible removal of export tax rebates. While Chinese commercial vehicles have strong price competitiveness globally, these policy changes and the accelerating appreciation of the RMB could hinder their overseas expansion. In addition to affecting the market, Deng Ping believes that this round of macro-control could negatively impact bus companies expanding their operations. Companies increasing production capacity or building new factories may face severe financial pressure under the new economic conditions. Some ongoing projects might even be temporarily suspended.

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