Zhongtong Finance app learned that Soochow Securities released a research report stating that if China's economic growth does not slow down, the demand for highway freight will grow in sync, and the central effective maintenance volume of corresponding heavy trucks will continue to rise. With the shift in economic growth rates and the increase in the proportion of the service industry, the growth rate of freight demand and the growth rate of heavy truck maintenance volume will slow down, and heavy trucks will transition from an incremental market to an inventory updating market. As the effective maintenance volume central continues to rise, the central sales volume of heavy trucks will continue to rise. When the sales volume central of heavy trucks continues to rise under the impact of economic cycles and policies, the high points of each cycle will continue to set new historical highs.

How has the central point of domestic heavy truck sales and cycles changed?

Soochow Securities is trying to find the commonality of heavy truck cycle rules by benchmarking the United States, Japan, and Germany. The current stage of China's economic growth can be compared to and performs better than the United States and Germany before 2000 and Japan before 1990. In the historical period, the heavy truck markets in the United States, Japan, and Germany showed the following characteristics: GDP growth, synchronized growth of highway freight turnover; growth of heavy truck maintenance volume; growth of central sales volume, and the sales volume of each round of cycle high points can reach new highs.

If China's economic growth does not slow down, the demand for highway freight will grow in sync, and the central effective maintenance volume of corresponding heavy trucks will continue to rise. With the shift in economic growth rates and the increase in the proportion of the service industry, the growth rate of freight demand and the growth rate of heavy truck maintenance volume will slow down, and heavy trucks will transition from an incremental market to an inventory updating market. As the effective maintenance volume central continues to rise, the central sales volume of heavy trucks will continue to rise.

As the effective maintenance volume central continues to rise, the central sales volume of heavy trucks will continue to rise.

When the sales volume central of heavy trucks continues to rise under the impact of economic cycles and policies, the high points of each cycle will continue to set new historical highs.

How to view the changes in the domestic maintenance volume and sales volume of heavy trucks in this round of cycle?

Domestic heavy truck sales are driven by four factors: demand side (freight demand + maintenance/upgrade demand + freight structure + capacity structure), supply side (overloading control), profit environment (freight market prosperity), and policy impacts (emission standard switch/ old-for-new). Among them, demand-side and supply-side factors affect the effective maintenance volume and sales volume center, while profit environment and policy factors affect the sales volume rhythm and magnitude.

Looking at heavy trucks from the perspective of logistics vehicles/construction vehicles, the growth rate of logistics vehicle maintenance volume is highly correlated with the growth rate of industrial GDP, and the growth rate of construction vehicle maintenance volume is highly correlated with the growth rate of real estate investment. At the same time, the proportion of road freight turnover and heavy trucks in China is basically stable and is not a key influencing factor. So Soochow Securities believes that the current road freight market is still in the stage of continued clearance, with more trucks than cargo and low freight rates. The real estate market is still at the bottom, and the turning point has not yet appeared. Therefore, Soochow Securities predicts that the effective maintenance volume of heavy trucks will continue to decline until the road freight market is balanced, from 8.94 million at the end of 2022 to 8.81 million at the end of 2024; from 2024 to 2026, the effective maintenance volume of heavy trucks will increase to 9 million, consistent with the trend of economic total output.

Domestic heavy trucks are gradually shifting from incremental demand to updating demand. Judging from the 8-9-year scrapping life, Soochow Securities predicts that 2025-2026 will usher in a concentrated scrapping turning point corresponding to the upward period of 2016-2018. Starting in 2025, the elimination of National V will release considerable elasticity, and the sales volume center of heavy trucks in 2016-2018 will reach 0.91 million. Soochow Securities predicts that the wholesale sales volume of heavy trucks in 2024-2026 will decrease by -0.07 / 0.06 / 0.14 million vehicles for incremental demand and increase by 0.81 / 0.78 / 0.82 million vehicles for updating demand, and exports will be 0.3/0.32/0.34 million. The wholesale sales volume will be 1.03/1.15/1.3 million vehicles, with a year-on-year growth rate of +12.7% / +12.1% / +13.1%.

Investment advice: the total sales volume of heavy trucks in 2024 is stable and rising due to the joint support of natural gas heavy trucks, exports, and the old-for-new policy. In 2024, with the weak recovery of domestic demand with the economy, the growth of highway freight volume is providing support for the maintenance volume. The oil and gas price difference remains high, and the economic-driven natural gas heavy truck is continuing to grow rapidly. The policy-driven new energy heavy truck is accelerating its sales. Exports, excluding Russia, have grown rapidly and have resilience throughout the year. The elimination of old and outdated trucks may have substantial subsidy policies and will drive the scrapping of National III/National IV trucks. In the medium and long term, construction vehicles have bottomed out, and bullish on future real estate recovery and infrastructure growth to drive bottom-up recovery appeal. The concentrated release of accumulated updating demand may contain greater elasticity. Soochow Securities predicts that the wholesale sales of heavy-duty trucks in 2024-2025 will be 1.03/1.15 million, with a year-on-year growth rate of +12.7% / +12.1%. Investing in the heavy truck sector focuses on strong alpha (natural gas heavy truck + export) and highly certain varieties of performance realization to layout 【Weichai Power + Sinotruk + FAW Jiefang Group/Beiqi Foton Motor].

Risk warning: The degree of recovery in the domestic freight market is lower than expected; the degree of global economic recovery is lower than expected; and the risk of geopolitical uncertainty increases.