As expected, global bus sales declined ~14% YoY in the first quarter of 2017. Much of this decline can be attributed to China and India, following the introduction of more stringent emission standards in early 2017. Also noteworthy, bus and coach sales in Brazil and Eastern Europe fell ~34% and ~9% YoY in Q1, respectively. By contrast, the Triad economies of Western Europe, North America and Japan have started the year strongly, and there was a robust outturn from Argentina and South Korea.
China bus and coach sales fell by nearly 11,000 units (-35% YoY) in the first quarter of 2017. The drop in sales can largely be attributed to a period of “payback” following a demand pull-forward in 2016Q4, prior to the implementation of the State V emission standard and the reduction in the electric vehicle subsidy at the turn of the year. This impacted demand for electric buses. For example, electric bus and coach manufacturer BYD saw YoY sales fall in the first quarter of the year, with demand expected for the electric bus manufacturer to remain well below 2016 levels for the remainder of the year. Between 2017 and 2020 the Chinese bus and coach market is forecast to grow modestly, with a CAGR (Compound Annual Growth Rate) of 3.8%. This growth will be driven by a variety of factors such as the continual overhaul of the hukou system – driving urbanisation – subsequently increasing the demand for transit buses, and ultimately supporting China's goal of becoming a consumer-driven economy. In addition, demand will be fuelled by an increase in tourism and the purchase of more environmentally friendly buses and coaches to help reduce pollution in urban areas.
India, the world's second largest market for buses and coaches, saw sales fall by 2% and 11% in the first and second quarters of 2017. With the nationwide implementation of the Bharat Stage (BS) IV emission legislation, a level of demand distortion had been expected. However, we expect strong macroeconomic conditions in India to go some way in offsetting this slowdown and anticipate FY growth to be 2%. The new goods and service tax (GST), which rolled out in July 2017, will have a positive impact on both the economy and the bus market. With a unified tax system replacing state and federal taxes, we expect an improvement in tax compliance and an increase in receipts. In addition, the reform will encourage further investment, with businesses welcoming the further cutting of red tape. Looking forward to 2020, the Indian bus and coach market is forecast to grow by a CAGR of 6.9%. Factors that are going to drive the bus market are: further government expenditure into improving the road network/infrastructure, changing consumer preferences – with increasing demand for comfort (air conditioning, comfy seating etc.) – and a drive to reduce emissions in densely populated areas, with government-backed schemes and subsidies under the FAME (Faster adoption and manufacturing of hybrid and electric vehicles in India) umbrella.
Looking at Mercosur, Brazil saw domestic bus and coach sales fall by 34% YoY in Q1 2017. However, sales in Q2 rebounded, posting 5% YoY growth compared to the same period last year. The political situation in Brazil still remains on tenterhooks, but economically the situation seems to be improving somewhat, with GDP growth expected to turn positive this year. Bus and coach exports have increased in the first half of the year, with bus and coach manufacturers taking advantage of the weak currency and strong demand from Argentina, Africa and the Middle East. Over the forecast period we anticipate the Brazilian bus market to rebound, following 3 years of decline. This growth will be stimulated by positive economic activity, increasing Foreign Direct Investment (FDI) from bus manufacturers, fleet renewals, and continued long-standing government support and expenditure into the bus transportation network.
Russian bus and coach sales increased by over 30% in the first half of the year, compared to the same period last year. The improving economic climate, boosting consumer demand, and industrial production growth, has bolstered bus sales. Noticeably, market leaders GAZ Group have seen domestic sales double YoY, as well as a surge in demand from Asia and the Middle East, driving exports. Over the forecast period we anticipate positive and stable growth, and, with the FIFA World Cup next year, we expect an acceleration in bus renewals.
In North America, bus and coach sales started the year strongly in Q1, with a growth rate of 5.4%, however in Q2 sales fell by -5.2% YoY. Sales are predicted to remain flat for the remainder of the year, and over the forecast period we expect a CAGR of 1%. The vast majority of bus sales in North America occur in the U.S. with Type C School buses dominating sales. Subsequently, a degree of seasonality is expected, with bus sales increasing before the start of the school year in Q3. Over the forecast period, we expect demand for more environmentally-friendly transit buses to rise. Typically, fleet buyers have been reluctant to purchase hybrid buses, and in particular electric buses, due to the high selling prices compared to a typical diesel bus. However, with technology improving, lower operational costs, and battery durability increasing, demand for electric buses is growing. This is noticeable, as bus manufacturers, such as Proterra and BYD, are investing more into developing lower-emitting transit buses in the region. In addition, there have been a number of recent federal and state-led grants and incentives introduced, such as the R2ZE (Race to Zero Emissions), which aims to encourage transit agencies to develop and promote non-polluting zero emission buses across the U.S. and China.
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