The Global bus and coach market witnessed growth of 2% in Q1 2019. The most noteworthy gains were in Brazil and China, whilst conversely, declines were registered in Argentina and Turkey.
In China, new bus sales picked up by 10% YoY in Q1, following a double-digit decline of 36% YoY in Q4 2018. The market rallied, largely due to low base effects and the gradual ramp down of the New Energy Vehicle Subsidy, which over the last few years has had a distortionary effect on demand. This year, the new subsidy is set to be effective from late June 2019, with a three-month transition period currently in place to enable manufacturers to adjust their production capabilities. The subsidy – roughly 50% lower than the old scheme – is expected to have a pull-forward effect on demand, with a number of pre-buys in Q2’19, offset by a period of payback in the second half of the year. Looking at the full-year picture, the forecast remains largely unchanged, with growth anticipated at around 2%. Nevertheless, there remain some downside risks, such as falling ridership levels and the on-going trade tension between the U.S. and China.
In India, the market buoyed, as sales grew by 1% in the first quarter of 2019. This modest growth rate was largely unsurprising considering the cyclical nature of the Indian bus market (in recent years). Nevertheless, towards the end of the year we expect a degree of distortion as demand gradually picks up ahead of the expected emission standards upgrade and scrappage scheme in April 2020. These policies are largely expected to result in higher production costs, which inevitably will be passed on to customers. Thus, the forecast this year remains relatively optimistic at roughly 8% - ahead of the anticipated payback period from Q2 onwards in 2020. Whilst the forecast remains positive, there are some potential headwinds, centred on the political uncertainty surrounding the general election, whilst on the flipside, upside risks include election-driven policy measures, which could well boost demand.
In Brazil, new bus sales skyrocketed 70% YoY in Q1 2019. The market has grown YoY over the last two years, in line with the improving macroeconomic environment - although still on tenterhooks. These growth rates are somewhat flattening considering low base effects, however the market has been supported by a range of incentives - ranging from urban and school bus financing to average fleet age requirements. We expect these factors to continue to have a positive effect on renewals over the course of the year, and we forecast growth of around 20%. Looking forward, the next round of emission standards (P-8) are expected to come into effect for new type approvals in 2022, and for all new sales and registrations from 2023. This is likely to have a distortionary effect on demand over this period, but the overall long term trend remains upbeat.
On the global outlook, it remains similar to a few months ago, with growth of 2% forecast in 2019, however risks to the forecast linger.
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