MainlandChina’sMHCV

truckpowertraintrends

MinJI,SeniorResearchAnalyst,Min.JI@+861065534662

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Vehiclesegmentsandcategories

MediumandheavycommercialvehiclesegmentsstartatClass3(6.0metrictons)

Vehicleweightsegmentsandcategories

Class1

Class3

Class4

Class5

Class6

Class8

Class7

6,000lbandbelow

2.7metrictons

Car

Crossoverutility

10,001–14,000lb

4.5–6.4metrictons

Class3deliveryvan

14,001–16,000lb

6.4–7.3metrictons

16,001–19,500lb

7.3–8.8metrictons

19,501–26,000lb

8.8–11.8metrictons

33,000lbandover

15.0metrictons

26,001–33,000lb

11.8–15.0metrictons

Class4straighttruck

Class5straighttruck

Class3straighttruck

Class7vocational

Class6vocational

Vocational

Long-haultractor

Class7straighttruck

Class6straighttruck

Class8straighttruck

Class7vocational

Class2

6,001–10,000lb

2.7–4.5metrictons

Minivan

Full-sizepickup

Source:IHSMarkit

?2022IHSMarkit

2

3

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Agenda

?Heavycommercialvehicledemand

?Electrificationdrivenbygovernment'stargets

?Anotherzero-carbontechnology:Hydrogenengine

2022growth(%)

Globaltruckdemand

Region

Europe

-8%

GreaterChina-37%

Japan/Korea-15%

MEA

+2%

NorthAmerica-1%

SouthAmerica+1%

SouthAsia+8%

Total

-18%

Source:IHSMarkit?2022IHSMarkit

Heavycommercialvehicledemand

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Globalmediumheavy-dutytruckdemand

ThemarketisprojectedtogrowataCAGRof2.5%during2022–29.Thenextfewmonthswillbechallengingformanyfreightcompanies

Millions

Globalsalesoutlookformedium-andheavy-dutytrucks

202120222023202420252026202720282029

4

3.5

3

2.5

2

1.5

1

0.5

0

MainlandChinaRestoftheWorld

Source:IHSMarkit

?2022IHSMarkit

4

????

?

?

?

?

?

MediumheavydutytruckdemandS&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

MainlandChina’smedium-&heavy-dutytrucksalestotakedeepdivein2022

Positivetrendwillbeseenstartingin2023,butvolumesarenotreturningtothepreviousheights

Millions

-7%

4%

6%

MainlandChina’smedium-&heavy-dutytrucksalesoutlook

3%-0%

6%

7%

-37%

1.8

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

202120222023202420252026202720282029

HeavyMedium

?2022IHSMarkit

Source:IHSMarkit

Slowingeconomicgrowth

ZeroCOVID-19policy

Easingofstatesupport

Strongpre-purchaseofChinaVtrucks

Highvehiclepopulation

Low-emissiontruckreplacementsin2020

Road-to-railwaytransportshiftforbulkmaterials

Overloadingcontrol

Improvementoftruckqualityandlogisticsefficiency

5

Electrificationdrivenbygovernment'stargets

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Centralgovernment’stargetsaredrivingNEVMHCVsinspecificareas

CentralgovernmentpromotesNEVsinpublicfleetsanddecarbonizationneedsurgeBEVsandFCVsinotherindustries’vehicledemand

China30-60carbontarget

@2030Carbonpeak

@20255,000FCVsparc

%2)Newlypublicfleetvehiclehas≥

%;2)NEVcitylogisticsvehicleninternationalseaport≥60%,4)…

s

@2035100%NEVinpublicfleet

Phase4from

Eachcityclusterwillhavemaximu

Tangshan,Yibin,andBaotouarebat

@20251)NEVcitybusinurban≥7280%NEVinbigcities

@20251)NEVcitybusinurban≥72

≥72%;3)NEVandclean-fuelHCVsiJuly2024(Draft)

mCNY1.65billionsubsidy

teryswappingtruckdemonstrationcitie

From2017~Greenfactorhaspolicyin

centive

2020

Note:NEV=new-energyvehicleincludingBEVs,PHEVs,andFCV.

Source:IHSMarkit

2025

2030

2035

TheDevelopmentPlanoftheNEVIndustry2021–35(TheNEVPlan)

TheMediumandLong-termPlanforDevelopmentofHydrogenEnergyIndustry

The14thFive-YearModernComprehensiveTransportationSystemDevelopmentPlan

The14thFive-YearGreenTransportationDevelopmentPlan

Fuelconsumptionlimit

NEVCredit(TBC)

Fuel-celldemonstrationproject

BatteryswappingBEV

demonstrationproject

Greenfactor

2040

?2022IHSMarkit

6

7

Electrificationdrivenbygovernment'stargets

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

TraditionalBEVsandbattery-swappingBEVscansupportthecentralgovernment’smedium-termandshort-termtargets

NEVcategoriesfordifferentapplicationsbefore2030

Vehiclesinpublicarea

Vehiclesinotherindustries

Driving

Centralgovernment’sNEVtargets

Industrydecarbonizationtarget

Vehiclecategory

Municipal/sanitaryvehicle

Maildeliveryvehicle

Logisticsvehicleinmine,port,airport,steelplant

Constructionvehicle

Energyconsumption

Medium

Medium

High

High

Vehicleworkingstyle

Fixedworkingtimeandroute

Fixedworkingtimeandroute

Fixedworkingtimeandroute

Long-timeworkingmode

Unfixedworkingtimeandroute

Long-timeworkingmode

NEVcategorybefore2030

TraditionalBEV&FCV

TraditionalBEV&FCV

Battery-swappingBEV&FCV

Battery-swappingBEV

Source:IHSMarkit?2022IHSMarkit

?TraditionalBEVs’maturetechnologyandbusinessmodeincitybuscanpromotetheiruseinpublicfleetvehicles.

?Battery-swappingBEVsaremorewelcomebecausethereisnochargingtimeinlogisticsvehiclesforotherindustries.

?FCVswillbeinthedemonstrationphaseforalongtime.FCVs’applicationsmainlydependontheinfrastructureavailabilityduringthedemonstrationphase.

?Withthepopularityofhydrogenmetallurgyinthesteelindustry,FCVscanriseinthesteelindustrybecauseofthehydrogenenergysynergy.

?FCVsareunlikelytobeusedforconstructionvehiclesbecauseofthehighenergyconsumption.

Electrificationdrivenbygovernment'stargets

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

TruckmanufacturersaredevelopingtheirownNEVtechnologiesportfolio

Leadingtruckmanufacturershavecomprehensiveproductlayoutofpropulsionsystems;newplayersfocusingonelectrificationtechnology

Truckmanufacturers’productlayoutsofpropulsionsystemsbefore2030

ManufacturerDieselNG(P)HEVBEVFCVComments

FAW

FAW‘15333’NEVstrategyreleasedin2021targets20%,50%,and70%ofsalesofNEVsby2025,2030,and2035.*

Dongfeng

DongfengGroup’s14thfive-yearplanistargeting1millionNEVsby2025.*

CNHTC

WorkedwithWeichaitopromoteFCVdevelopment

ShaanxiAuto

BAICFoton

BAICFotontargetsthelayoutofthefullcoverageofBEVs,FCVs,andhybridvehicles

SAICHongyan

SAICcommercialvehicle14thfive-yearplanistargeting38%ofsalesofNEVsby2025.*

BeibenTruck

Amongthetraditionaltruckmanufacturers,BeibenTruckhasthehighestpenetrationrateofNEVs

Sany

DevelopingNEVproductssuchasconstructionvehiclesandtractors

Xugong

Zoomlion

NEVproductsaremainlyoff-roadproducts

Skywell

BYD

BYDhasnoFCVproduct.However,BYDappliedapatentoffuelcell-relatedtechnologythisyear

YutongBus

Geely

HualingwillstopmakingtraditionalICEsfrom2025

GreatWall

ChangzhengstoppedtraditionalICEproductsfromJune2022

Feichi

HeavyinvestmentonR&Dandlaunchseveralproducts

LightinvestmentonR&Dandlaunchseveralproducts

LimitedinvestmentonR&Dandlaunchfew/noproduct

NoinvestmentonR&Dandlaunchnoproduct

Note:*ThetargetisincludingLVsandMHCVs.

Source:IHSMarkit

?2022IHSMarkit

8

Growthrate,2021–29

Advantagesanddisadvantages

FCV

Strongfinancialandpolicysupportfromgovernment

1.4%

Highcost

Lackofinfrastructure

Under-developedmanufacturingecosystemLackofproductavailability

BEV

7.8%

Maturetechnologyandbusinessmode

Difficulttopromotelong-haulvehiclesduetothelackofinfrastructure

PHEV

0.0%

Potentialtoreleasefuelconsumptionlimitpressure

Notazero-carbontechnology

Complicatedsystemtomaintain

Electrificationdrivenbygovernment'stargetsS&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Before2030,BEVswillleadthegrowthofelectricvehiclesinMHCVtruckmarket

Electricvehicleproductionforecast,mainlandChina

12%

9%

6%

3%

0%

202120222023202420252026202720282029

BEVFCVPHEV

Source:IHSMarkit?2022IHSMarkit

9

10

Productionbyfueltypeshare,medium-dutytrucks

100%

90%

80%

70%

60%

50%

202120222023202420252026202720282029DieselNaturalgasElectricityHydrogen(FCV)Others

Source:IHSMarkit?2022IHSMarkit

Electrificationdrivenbygovernment'stargetsS&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

NEVgrowthwillacceleratethroughthe2030s;by2030,ICEshareisexpected

todropto82%and92%intheMDT&HDTsegments,respectively

Productionbyfueltypeshare,heavy-dutytrucks

100%

90%

80%

70%

60%

50%

202120222023202420252026202720282029DieselNaturalgasElectricityHydrogen(FCV)Others

Source:IHSMarkit?2022IHSMarkit

Anotherzero-carbontechnology:HydrogenengineS&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Anotherzero-carbontechnologyiscoming:Hydrogenengine

Thetwohydrogentechnologieshaveadvantagesanddisadvantages

Category

Variations

Hydrogenfuel-cellvehicle

Hydrogenenginevehicle

EnjoysNEVincentivesandis

Policyorientation

promotedbygovernmentasanew

SameastraditionalICEvehicle

Policy/regulation

industry

CO2emission

ZeroCO2withgreenH2

ZeroCO2withgreenH2

NOxemission

NoNOxemission

NOxemission

TCO

Purchasingcost

2–3timesofdieselvehicle

About1.2–1.5timesdieselvehicle

Efficiency

Systemefficiency:~60%

H2ICEBTE:~40%

Lifetime

3,000h*

10,000h*

Usageexperience

Easeofmaintenance

Highcleanlinessrequirementsforstackmaintenance

SimilarastraditionalICE

Infrastructureavailability

Sharedfacility

Sharedfacility

Failurerate

Unknown

Unknown

Note:*Reference:MichaelHandwerker,JourgWellnitzandHormozMarzbani,CombustionofHydrogenPowertrainswiththeBatteryPoweredElectricVehicleandInvestigationofSmall-ScaleLocalHydrogenProductionUsingRenewableEnergy,Hydrogen,2021,2,76-100.

Source:IHSMarkit?2022IHSMarkit

?HydrogenengineandFCVsharethesameeco-system.

?Hydrogenengineisazero-carbontechnologywithgreenH2butnotazero-emissiontechnology.

?Massiveproductionofhydrogenenginevehicleisunlikelybeforenexttailpipeemissionstandardconsideringpolicyenvironmentandinfrastructurereality.

?Enginemanufacturesaredevelopinghydrogenengines.

EnginemanufacturerHydrogenenginedisplacement

FAWJiefang

13L

Weichai

13L&15L

Yuchai

51L&15L

Dongfeng

13L

ShanghaiNewPower

13L

Cummins

67L&15L

11

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

Conclusionandtakeaways

12

Conclusionandtakeaways

S&PGlobalMobilityFall2022ClientBriefing|Shanghai|18October2022

S&PGlobalMobilityFall2022ShanghaiClientBriefing

MainlandChina’sMHCVtruckpowertraintrends

?TheMHCVmarket’spositivetrendwillbeseenstartingin2023,butvolumesarenotreturningtothepreviousheights.

?China’sMHCVNEVmarketisdrivenbygovernmenttargetsbefore2030,andOEMsarefollowingthetargetsintheirtechnologyportfolio.BEVscansupportthecentralgovernment’stargets.

?Dieselpowertrainswillcontinuetodominatethetruckmarketshareinthisdecade.

?HydrogenICEscouldbepossiblyintroducedintotheChinesemarketasoneofzero-carbontechnologies.

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