China's Truck Market: New Opportunities for Europeans

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Until recently, there was almost unanimous consensus within the truck industry that the days of premium import trucks in China were numbered. With joint ventures expected to grow stronger and domestic brands closing the quality gap, even the most enthusiastic proponents of European import trucks in China foresaw only narrow niche applications in the premium segment.

However, recent research by Bain & Company into the preferences of China’s truck buyers, owners and fleet managers paints a different picture, one that is more optimistic about the prospects for European premium brands in China. While Europe’s truck makers will need to invest in several new capabilities and find some smart ways to overcome challenges before they can fully capitalize on new opportunities, our findings warrant a fresh look at China’s market.

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First, our research finds China’s truck market moving up, with more than 20% of buyers planning to upgrade to a higher-value product segment with their next truck purchase. Most plan to upgrade within domestic or JV brands, boosting the newly emerging upper-middle segment, which we expect to grow significantly over the next few years. However, about one in five of those looking to upgrade want to buy a European import truck, which could double the premium segment by 2022. Almost three-quarters of those expecting to upgrade plan to do so within the next years, creating a sizable near-term opportunity.

Second, China’s truck buyers are focusing more on total cost of ownership (TCO)—which may explain the intention to upgrade. Performance and quality are still the primary decision factors, with 34% of our survey respondents ranking this as the top criterion. But the relative importance of performance and quality has declined (down 19 percentage points), whereas total cost of ownership, including fuel, has become nearly as important, up 12 percentage points to 33%. Especially for truck fleets, which typically achieve high utilization rates on their vehicles, TCO advantages turn into big profit levers, creating demand for European import trucks and their lower ownership costs. As fleets continue to gain importance, we expect the focus on TCO to increase, as it has in Europe.

A third finding is that European truck brands are perceived very positively, especially when compared with JVs and domestic brands—much more so than some in the industry might have expected. The high customer loyalty scores of European brands, which we measured using the Net Promoter System®, indicate a strong base of promoters who may be willing to pay more for a better truck, stay longer with the brand and repurchase more often, while also generating positive word of mouth and referrals. This finding points to a growing opportunity for Europe’s truck makers and would, on its own, be sufficient reason for cautious optimism among them.

China’s heavy-duty truck market shows signs of healthy growth, especially among medium and larger fleets that are planning to expand. Across all market segments, we found that about one in four fleet managers and owners were considering upgrading to higher-value trucks, creating significant upmarket sales potential. The search for better performance and quality is still the top reason for switching up, followed closely by operating costs.

These numbers reflect the fact that China’s truck fleets are becoming increasingly professional and adopting a broader and more long-term perspective. Although European trucks have a much higher purchase price than their domestic competitors, they are typically more fuel efficient, which lowers a vehicle’s total cost of ownership. Even within the premium segment, which includes some JV vehicles from the special application category, we find customers looking to upgrade to European brands.


Click here to download the study.