The Impact of the Top 3 Strategic Imperatives on the Commercial Truck Industry

Transformative Megatrends

• Why:

  • With environmental sustainability goals advocating for the adoption of non-fossil fuel powertrain solutions to enable reduced carbon emissions, the adoption of electric commercial vehicles, including commercial trucks, will be a long-term trend.
  • Operators use electric commercial trucks to navigate and serve short distances for logistics and transportation. Other commercial vehicles include special-purpose ones, such as those for urban sanitation.
• Frost Perspective:
  • Frost & Sullivan expects the adoption of electric powertrains in China’s commercial truck industry to increase from 0.08 million units in 2022 to 1 million in 2030.
  • Battery electric vehicles (BEVs) have the highest penetration rate in China, reaching 94.2% in 2022. The sales of fuel-cell electric vehicles (FCEVs) will grow with their popularity and industry promotion.

Geopolitical Chaos

• Why:

  • International conflicts and economic contraction have increased the global recession’s severity, worsening the tense trade relations between China and major economies.
  • Other impactful developments include foreign investors withdrawing from China, weak real estate performance due to slow economic growth, soft business activities from domestic and international customers, and lower gross domestic product (GDP) growth.
• Frost Perspective:
  • Slowing business activities and the economic environment have limited the sales of commercial trucks, especially in the raw materials, construction, and trading segments.
  • The share of alternative powertrains in commercial trucks will continue to grow in response to the rise in crude oil prices caused by geopolitical crises.

Competitive Intensity

• Why:

  • Dominated by domestic original equipment manufacturers (OEMs), China’s commercial truck industry is highly competitive with 50 OEMs. In 2022, 2.4 million heavy, medium, and light-duty trucks were sold.
  • The top 5 OEMs—Foton, Dongfeng, CNHTC, JAC, and FAW Jiefang—accounted for 55.2% of total commercial truck sales in 2022.
  • Over 40 OEMs have less than a 2% share each of the overall commercial truck industry.
• Frost Perspective:
  • Leading OEMs have substantial advantages in their respective commercial truck segments, such as Foton in the medium and light-duty segments. In contrast, CNHTC is relatively dominant in the heavy-duty truck segment.
  • In the long term, industry competition will continue to be fierce, and the industry concentration of OEMs will be low. For example, the share of the top 5 OEMs dropped from 60.1% in 2021 to 55.2% in 2022.

Segmentation and Definition

Off-highway Vehicles

This study defines commercial trucks as vehicles that transport goods for commercial purposes.

Gross vehicle weight (GVW) combines vehicle weight and load. It categorizes commercial trucks into 3 segments: light, medium, and heavy-duty.

• Light-duty trucks refer to smaller-sized trucks primarily utilized for short-distance journeys (usually less than 500 km) to transport goods, parcels, and farm products. They transport lightweight loads and are easy to drive and park on narrow roads.
• Medium-duty trucks encompass various types used for activities such as home delivery, logistics, parcel delivery, utility services, waste and recycling collection, and airport operations. They transport medium-weight loads and are ideal for a wide range of industries because the cabin, body, and chassis equipment are customizable.
• Heavy-duty trucks encompass large trucks commonly employed for demanding tasks, such as line haul freight, refuse management, mining and construction operations, and other situations requiring trucks with high GVW. They tow and transport heavy loads.

Competitive Environment

Growth Drivers

Logistics and transportation needs:

Post-pandemic infrastructure development and the gradual recovery of retail sales of consumer goods drive these needs. The total retail sales of consumer goods dropped in 2022 compared to 2021. The end of China’s zero-COVID-19 policy in January 2023 prompted the total retail sales of consumer goods to increase.

Periodic replacement of commercial trucks:

Including general life cycle and stricter emission standards. The Chinese government proposed that by 2025, the share of operating commercial trucks that combine electric and China VI emission standards will achieve more than 40%.

Government encouragements and subsidies:

The Hangzhou city government is providing replacement subsidies for China IV diesel trucks from May 2023 to June 2024.

The rise of heavy-duty trucks with swappable batteries:

This has minimized truck charging time and improved transportation efficiency. It has also enhanced the electrification development, accelerating the use of electric heavy-duty trucks.

Popularity of electric commercial trucks in more application scenarios:

Including heavy-duty trucks used at ports, mines, steel factories, and highway transportation, as well as light-duty trucks that increase with urbanization and logistics needs.