Zhongtai: The domestic sales cycle of heavy-duty trucks is increasing, with vast export opportunities.

Zhongtai released a research report stating that in the next three years, there will be a continuous phase-out policy for National IV emission standards, as well as the brewing of National VII policy, and potential National V policy. At the same time, the peak sales of heavy trucks from 2017 to 2020 will gradually reach a 10-year replacement cycle, increasing the certainty of domestic sales. There is significant growth potential for exports to Africa and Southeast Asia. With domestic sales in an upward cycle and significant export growth potential, it is recommended to focus on investment opportunities in leading companies in the industry. Key points from Zhongtai: Domestic Sales: Central forecast of 860,000, currently in an upward cycle for domestic sales Currently, there are approximately 8.6 million heavy trucks in operation, and considering a replacement cycle extending to 10 years, the central sales forecast is 860,000. Looking back over the past twenty years, sales have fluctuated significantly around the central point, influenced by factors such as National standard policies, overloading policies, trade-in policies, real estate market conditions, and replacement cycles. Looking ahead for the next three years, there will be a continuous phase-out policy for National IV emission standards, the brewing of National VII policy, and potential National V policy. Additionally, the peak sales period from 2017 to 2020 will gradually reach a 10-year replacement cycle, providing strong certainty for increasing domestic sales. Exports: Africa and Southeast Asia drive overall demand, while Latin America and Europe aim to increase market share Africa and Southeast Asia are in the early stages of urbanization, similar to China in the 80s, 90s, and early 2000s, resulting in sustained high demand for heavy trucks due to economic development. The core drivers in Africa are mineral resource development and infrastructure construction, while in Southeast Asia, it is industrial transfer and infrastructure development, both with strong certainty. Latin America and Europe have high urbanization rates, but low market share for Chinese brands, which offer high value for money. For example, in Peru, Chinese brands are half the price of foreign competitors, with Shanxi Guoxin Energy Corporation proving strong competitiveness, laying a solid foundation for increasing market share in Latin America and Europe. Additionally, Central Asia benefits from the Belt and Road Initiative and mineral resource development, with continuous growth in demand; Russia has passed the period of maximum impact from scrappage taxes, and with clear overspending, there is also significant room for growth compared to 2025. Competitive Landscape: Sinotruk Jinan Truck leads in complete vehicles, while Weichai Power leads in engine manufacturing Sinotruk Jinan Truck has maintained its position as the dominant player in exports and overall sales for many years, with a nearly 50% export market share and nearly 30% total sales market share; Weichai Power is the leader in self-branded engine production, particularly in natural gas heavy truck engines, where they have consistently held a market share of over 50%. Risk factors Extended replacement cycles; lower-than-expected replacement intentions; lower-than-expected exports; risk of outdated public information used in the research report; risk of distorted third-party data; risk of industry space miscalculations.