The internal combustion engine industry entered a period of adjustment to support policy values
Experts believe that the golden era of rapid growth for the internal combustion engine industry has passed, and it is now entering a phase of adjustment. Despite this, the gap between China's internal combustion engine sector and global leaders remains significant. Therefore, the government should provide policy-level support to help enterprises upgrade and modernize the industry.
In 2008, China's internal combustion engine industry achieved an annual output of 57 million units and 1 billion kilowatts. However, many experts argue that the industry has been impacted by the financial crisis and trade barriers, marking the end of years of continuous high-speed growth. In 2009, internal combustion engine manufacturers will have to navigate a complex landscape, including stricter environmental regulations and intensified domestic competition.
**Entering the Adjustment Phase**
According to the China Internal Combustion Engine Industry Association, the growth rate of industry-wide profits and output in 2009 is expected to be only slightly higher than the previous year, signaling the start of an adjustment period. The overall industry growth is projected to be between 6% and 8%, with total product output exceeding 60 million units. This trend reflects a "low before, high after" pattern throughout the year.
Although the internal combustion engines used in motor vehicles are still largely dominated by international markets, their growth rate has significantly slowed. Light commercial vehicle engines, for example, will experience a surge in the first half of the year due to the implementation of the National 3rd emission standard on July 1st, but may decline sharply in the second half. Engines for medium- and heavy-duty commercial vehicles, especially those with 6 to 12 liters, are expected to see a drop in demand.
The production of non-road mobile machinery engines, particularly for agricultural and construction equipment, is expected to grow more rapidly. Meanwhile, low-speed truck diesel engines and single-cylinder diesel engines may face negative growth similar to that of 2008.
Exports of non-road diesel engines, small general-purpose gasoline engines, and basic components are expected to continue growing, though at single-digit rates.
New developments are also emerging in the industrial structure. On one hand, there will be a greater focus on technological advancements in diesel engine fuel systems and post-treatment systems. On the other hand, foreign-funded enterprises in China may undergo mergers and acquisitions, leading to new joint ventures entering the market and increasing competition among domestic companies.
Some experts believe that the implementation of the National Automobile Industry Revitalization and Adjustment Plan, the Equipment Manufacturing Revitalization and Adjustment Plan, and the Shipbuilding Industry Revitalization Plan, along with the country’s “Three Agricultural†policies, will further promote stable development in the internal combustion engine industry. In addition, to stimulate the economy in 2009, both central and local governments have introduced supportive measures. Although a trillion-dollar bailout plan has been announced, only a few hundred billion yuan has been allocated so far.
Industry insiders note that there are numerous infrastructure projects underway in China this year, which means diesel engines still have a strong market demand. Companies like Xichai, Yuchai, Laidong, and Jianghuai have already seen initial results from policies aimed at boosting agricultural machinery. According to vehicle sales data, even during the most challenging period after September 2008, the sales growth of trucks with a load capacity of less than 1.8 tons remained above 15%. As a result, light diesel engines may be the first to recover from the downturn.
According to analysis, the heavy-duty truck industry is expected to resume its upward trend in the second half of 2009. While demand for heavy-duty trucks is expected to decrease by about 5% in 2009, the growth rate is likely to exceed 15% in the second half of 2009 and into 2010.
**Increased Challenges**
“This year, the industry still faces more challenges,†an expert said. China’s internal combustion engine industry is encountering difficulties on both the market and technology fronts.
On the market side, stricter environmental regulations, rising energy and raw material costs, and fierce competition have placed small diesel engines in a difficult position. The development of small internal combustion engines has been constrained, making it hard to meet domestic and international demands. High-power diesel engines require imported technology for absorption and re-innovation to address the rapid development of the shipbuilding industry and the slow supply of domestic brand engines.
From a technological perspective, the focus of innovation in internal combustion engines is on energy efficiency and emissions reduction. The country’s overall energy conservation and emission reduction standards, aligned with international research and development levels, have created considerable pressure on companies.
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