Global truck makers struggling to get a grip in Chinese market: S&P

03 April 2008

China's truck market--now the world's largest--has little room for global players, says Standard & Poor's Ratings Services in a report published today "Why The Big Global Truckmakers Can't Get Traction In China."

"The world's top six global truck manufacturers eked out just a tiny 1.4 per cent market share in the first half of 2007," said Standard & Poor's credit analyst, Werner Staeblein.

Although locally produced trucks have less advanced and less powerful engines, lower fuel efficiency, and higher maintenance costs, they also cost considerably less than Western trucks with premium features. In addition, global truck manufacturers lack widespread distribution and service networks needed to considerably increase business in the region.

Perhaps recognising their disadvantages, the global giants have moved cautiously in China, making only minor investments relative to the size of their operations. They have entered the market through low-risk and less capital-intensive joint ventures, partnering with established local players. This is in stark contrast with the sizable foreign direct investments global carmakers have poured into China.

For the next few years, at least, the minimal progress in China isn't likely to change. Therefore, S&P's Ratings Services expects that despite the vast size and huge future potential of the Chinese HDT market, it probably won't provide a new source of growth and profits for the major global truck makers anytime soon.

"That's particularly frustrating for these outsiders, considering the Chinese HDT market's stellar growth in 2007, with a year-on-year market expansion of 62 per cent to 498,000 units," said  Staeblein.