CICC: In August, terminal wait-and-see sentiment is strong, and the number of new licenses in the heavy truck industry has decreased by double digits compared to the previous month.

CICC released a research report stating that the registration volume of heavy trucks in the industry has decreased by double digits month-on-month, mainly due to end users waiting for detailed guidelines on the policy of replacing old vehicles with new ones and the implementation of local policies, leading to a strong market wait-and-see sentiment. Looking ahead, the orders for heavy truck industry chain manufacturers have improved in the latter half of September compared to the beginning of the month, with industry total volume expected to improve month-on-month from September to December; since the third quarter of 2024, industry channel inventory and price competition have entered a reasonable range, and dealers are expected to increase inventory to welcome the peak season. On September 24th, the State Council Information Office proposed a package of proactive monetary policies. The team believes that if the stable growth policy effectively boosts the real economy, the domestic demand for heavy trucks may improve. The China Association of Automobile Manufacturers shows that in August, the wholesale sales volume of heavy trucks was 62,000 units, with a month-on-month change of -12.2% / +7.1%; according to compulsory insurance data, the number of new registrations for heavy trucks in August was 40,000 units, with a month-on-month change of -23.2% / -13.4%; according to the General Administration of Customs, the number of heavy trucks exported in August was 31,400 units, with a month-on-month change of +35% / +26%. In August, there was a strong wait-and-see sentiment among end users, and channel inventory and end-user prices entered a reasonable range, expecting policy support. Looking ahead, orders for the industrial chain manufacturers of heavy trucks improved in the latter half of September compared to the beginning of the month, and it is expected that the industry total volume from September to December will improve month-on-month. Since the third quarter of 2024, industry channel inventory and price competition have entered a reasonable range, and dealers are expected to increase inventory to welcome the peak season. On September 24th, the State Council Information Office proposed a package of proactive monetary policies, and CICC believes that if the stable growth policy effectively boosts the real economy, the domestic demand for heavy trucks may improve. The China Association of Automobile Manufacturers shows that in the first eight months of 2024, Sinotruk Jinan Truck, FAW Group, Shaanxi Heavy Duty Truck, Dongfeng Motor, and Beiqi Foton Motor had market shares of 27.6%, 20.6%, 16.4%, 16.2%, and 7.6% respectively, with a CR5 of 88.4%, maintaining a concentrated competitive situation. In August, the sales volume of natural gas heavy trucks experienced a year-on-year decline for the first time this year, and it is expected that the penetration rate of domestic sales will remain around 30% during the winter heating season. According to compulsory insurance data, in August, the number of new registrations for natural gas heavy trucks decreased by -35%/-31% to 12,000 units month-on-month, and the monthly penetration rate decreased by -5pct/-7pct to 31% month-on-month. CICC observed that in mid-September, domestic LNG prices gradually declined. Looking ahead to the winter heating season, there may be some disruption to the penetration rate of natural gas, but the long-term trend of improvement in LNG supply and demand, coupled with the economic advantages of natural gas heavy trucks, leads them to continue to maintain a high penetration rate under the background of "low operating costs" and "oil and gas price differentials". It is expected that the full-year sales volume in 2024 will increase by more than 50% compared to the previous year to over 200,000 units. The penetration rate of new energy vehicles remained high in August, with exports exceeding 30,000 units. According to compulsory insurance data, in August, the sales volume of electric/hydrogen fuel cell heavy trucks was 5,692/584 units, an increase of +122%/+71% year-on-year, with a penetration rate of new energy heavy trucks of 15.6%, an increase of +10.1pct./+1.4pct. month-on-month. In terms of competition in the electric heavy truck market, XCMG and Sany have remained in the leading group, while traditional vehicle manufacturers such as FAW, JAC, Yutong, and Foton are accelerating production. According to the General Administration of Customs, in August, exports to the Eurasian Economic Union were strong, mainly due to the increase in scrap tax rates for imported vehicles from October in relevant countries, leading local dealers to increase inventory in advance; the quantity of heavy trucks exported to countries outside the Eurasian Economic Union in August increased by +23%/+13% month-on-month, showing resilience. It is maintained that the annual export volume of heavy trucks in 2024 will reach 300,000 units. Valuation and recommendations The policy of replacing old vehicles with new ones is currently driving industry growth, and leading companies in the sector have good valuation and cost-effectiveness. We recommend Weichai Power (000338.SZ/02338), Sinotruk Jinan Truck A (000951.SZ)/H (03808), and CIMC Vehicles (45855). Related stocks in the heavy truck industry chain include Beiqi Foton Motor (600166.SH), Hunan Meihu Intelligent Manufacturing (603319.SH), Xiangyang Changyuandonggu Industry (603950.SH, not covered), Tianrun Industry Technology (002283.SZ), SINOTECH (688737.SH), and Wuxi Longsheng Technology (300680.SZ). Risks The effectiveness of the policy of replacing old vehicles with new ones may be lower than expected, and the production and sales of heavy trucks may not meet expectations. Risks include changes in export tariffs and other policies, as well as fluctuations in natural gas prices.