May heavy-truck sales reach 70,000 units, up 40% year on year! Can the second-quarter market exceed 210,000 units?

        Although the heavy-truck sector continued to post year-on-year growth in May, the second quarter is shaping up to be a period of intense pressure. In particular, the weak recovery in the economy and consumer spending, coupled with lackluster performance in fixed-asset investment, has left this most closely watched commercial-vehicle segment feeling as though it is enduring a “severe winter in summer.”

How many heavy-duty trucks were actually sold in the market in May? Will there be further turning points in the market? In particular, will cumulative sales for the second quarter exceed 210,000 units?

May heavy-truck sales up 42% year on year, down 16% month on month
The macroeconomic environment over the recent period has indeed been cause for concern. In March, fixed-asset investment fell by 0.75% year on year; in April, it declined again, by 17.41%. In April, the manufacturing Purchasing Managers’ Index stood at 49.2%, below the boom-bust threshold; in May, it dipped further below that threshold to 48.8%, a month-on-month decrease of 0.4 percentage points. Also in April, total retail sales of consumer goods fell by 7.78% month on month…

Fixed-asset investment and the manufacturing sector serve as the “shippers” for the downstream logistics and transportation industry, acting as the two primary drivers of freight supply. With both investment and manufacturing in a downturn—indeed, even contracting—the volume of goods available for transport by the logistics sector is bound to decline on a month-over-month basis. Consequently, the heavy-truck industry, which supplies transportation equipment to the road-haulage sector, is facing immense pressure.

According to preliminary data compiled by the First Commercial Vehicle Network, China’s heavy-truck market sold approximately 70,000 units in May 2023 (based on invoicing figures, including exports and new-energy vehicles), a month-on-month decline of 16% compared with April 2023 but a year-on-year increase of 42% from 49,200 units in the same month last year, representing a net addition of about 21,000 units. This marks the fourth consecutive month of year-on-year growth this year, following February. From January to May, cumulative sales in the heavy-truck market reached 395,000 units, up 21% year on year, with the year-on-year growth rate widening by more than three percentage points. A sales volume of 70,000 units is the second-lowest on record over the past seven years, surpassed only by May 2022, and significantly lower than the May sales levels seen from 2017 to 2021.

In May, the heavy-truck market posted year-on-year growth for two main reasons: last year’s pandemic control measures drove end-demand to a historic low; with the easing of restrictions this year, the market has gradually returned to normal, resulting in a year-on-year rebound in monthly sales. In addition, exports have maintained strong momentum, increasing by more than 50% year on year. However, the market has experienced substantial month-on-month declines for two consecutive months, primarily due to the weak recovery of the economy and consumer spending, which has led to a sustained drop in vehicle-purchase demand on a month-over-month basis. As a result, order volumes at the retail level, among manufacturers, and among dealers have all fallen short of earlier expectations and lack sufficient momentum going forward.

Terminal demand continues to decline month over month—can June sales break 60,000 units?
In fact, since February 2023, the heavy-truck market has been on a sustained year-on-year growth trajectory, making it highly likely that the market will post year-on-year gains for all 11 months of the year—primarily because both market conditions and sales were highly abnormal throughout nearly the entire previous year. However, as end-demand has declined sharply on a month-over-month basis, even though the heavy-truck market still posted double-digit year-on-year growth in May, the outlook for the second quarter is far from optimistic: April sales fell 28% month over month, May sales declined 16% month over month, and June is expected to see another month-over-month drop.

The weak performance of the market in the second quarter remains directly tied to the broader economy. After all, as an industry highly correlated with macroeconomic conditions and manufacturing, the trajectory of the macroeconomy is the primary determinant of the heavy-truck sector’s outlook—especially given that this year has seen no significant favorable or adverse industrial policies for the sector. On the one hand, although economic fundamentals have begun to recover following the Spring Festival, domestic demand remains markedly insufficient, resulting in a sluggish recovery across both consumption and the wider economy. Weak consumer confidence and diminished effective purchasing power have pushed the road freight market back into a downturn since late March, eroding the profitability of fleet operations for logistics users—and in some cases, even leaving operators reporting worse results than last year. On the other hand, fixed-asset investment has shown virtually no improvement, with construction trucks, specialized engineering vehicles, and certain tractor units closely linked to investment being particularly hard hit: the real estate sector has remained sluggish in recent years and has yet to rebound; meanwhile, infrastructure investment has been hampered by widespread funding shortages, leading to delays in securing project financing and suboptimal project commencement rates.

In addition, inventory levels in the heavy-truck industry remain high, and “de-stocking” continues to be a key priority for many heavy-truck manufacturers in the second and third quarters, thereby constraining new-vehicle sales on the supply side.

Based on this, the First Commercial Vehicle Network preliminarily estimates that the heavy-truck market will experience a slight month-over-month decline in June, with total industry sales for the second quarter expected to be around 215,000 units—up approximately 46% year over year but down about 10% month over month.

(The above industry news is reprinted from First Commercial Vehicle Network.)