31 January 2011

China SignPost™ (洞察中国) #20–Counting the Barrels: Heavy truck sales are a better barometer than car sales of China’s oil demand growth

Gabe Collins and Andrew Erickson, Counting the Barrels: Heavy truck sales are a better barometer than car sales of China’s oil demand growth,” China SignPost™ (洞察中国), No. 20 (31 January 2011).

China SignPost 洞察中国–“Clear, high-impact China analysis.”©

–Chinese dealers sold more than one million heavy trucks in 2010 and sales could hit 1.2 million vehicles in 2011.

–New heavy trucks sold in China during 2011 could add 380,000 barrels per day of diesel fuel demand.

–Truck buyers have high incentive to maximize their trucks’ use and we believe that there is tighter correlation between heavy truck sales and diesel fuel consumption than is the case for cars and gasoline.

In 2010, heavy truck sales in China rose by roughly 60% versus 2009 levels, driven in part by the government’s 4 trillion RMB stimulus plan. Truck sales are important to watch because they offer real-time and forward looking insights into oil demand and industrial and construction activity. Chinese oil demand growth is especially relevant in light of the oil price spike triggered by Egypt unrest, with Brent crude hitting US$100 per bbl for the first time since 2008.

Sales of new heavy trucks in China have grown rapidly in recent years, rising from roughly 86,000 vehicles in 2000 to roughly one million in 2010. Truck sales are likely to slow in 2011 as stimulus-related investment projects wrap up and the government works to reign in food and real estate price inflation. Based on our analysis of Chinese company statements and sales forecasts by Chinese vehicle sector experts, we believe heavy truck sales in China during 2011 will be approximately 1.2 million vehicles, for a year-on-year sales increase of slightly under 18%. …