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Policy stirs the heavy truck market
According to Xu Changming, director of the Information Resource Development Department at the National Information Center, the sharp drop in China's heavy truck sales in 2005 was a "rational correction." He explained that the surge in sales in 2004 was largely driven by macroeconomic policies. This view is echoed by many industry insiders who believe that government interventions played a key role in the decline.
Many heavy truck companies pointed to two major policy factors: macro-control measures and regulations on overloading. These policies significantly influenced market dynamics. Tong Dongcheng, a manager at Dongfeng Commercial Vehicle Corporation, noted that the 2004 sales spike was an overreaction, with production reaching 370,000 units—far exceeding their initial forecast of 280,000. He predicted a natural slowdown in 2005 due to these policy-driven fluctuations.
Wang Zhanchao, another industry expert, emphasized that national macro-control had a substantial impact. With GDP growth at 8.5% in 2004, demand for energy and steel surged, pushing prices up. The government then implemented tighter controls, especially on real estate, which led to reduced construction activity and, consequently, lower demand for heavy trucks.
In the short term, these policies created challenges for the automotive sector, which is highly dependent on upstream and downstream factors like fuel, raw materials, and credit. A drop in GDP growth from 9.5% to around 8% could further slow auto market growth.
Another factor contributing to the decline was the relaxation of power restrictions. Tong Dongcheng pointed out that the government eased regulations on engine power, leading to a shift in buyer preferences. Users now favored trucks with 170 kW engines instead of high-power models, as the policy allowed more flexibility.
Additionally, the push for a resource-efficient society led to reduced coal transportation, affecting demand. Many coal mines were shut down due to violations, further impacting the market. Industry experts also noted that some companies had overly optimistic expectations about the market, failing to adjust properly to policy changes.
In 2005, total heavy truck sales fell to 179,781 units, down 29.46% from 2004’s 254,874 units. Output dropped by 33.48%. Among the top seven producers—FAW, Dongfeng, Sinotruck, Beiqi Foton, Shaanxi Auto, Chongqing Hongyan, and Northern Mercedes-Benz—five saw year-on-year output declines, while four experienced sales drops.
Xu Changming described the situation as a shift from "dual power" to "single power," meaning that the heavy truck segment no longer drove overall auto market growth as it once did. Sales fell back to 2003 levels, he noted.
Interestingly, three companies—Sinotruck, Shaanxi Auto, and Chongqing Hongyan—saw sales increases, all producing Steyr-based trucks. Steyr models remained popular, with strong performance across the board. Wang Zhanchao, general manager of Shaanxi Hande Axle Co., confirmed that Steyr platforms continued to dominate the market, with products performing well in 2005.