The internal combustion engine industry entered a period of adjustment to support policy values
The internal combustion engine industry, once experiencing a period of rapid growth, is now entering a phase of adjustment. Experts suggest that the golden era of fast expansion has passed, but China's industry still lags significantly behind global leaders. To bridge this gap, government support at the policy level is essential for driving industrial upgrades and innovation.
In 2008, China’s internal combustion engine sector produced 57 million units with an output value of 1 billion kilowatts. However, the financial crisis and trade barriers have impacted the sector, signaling the end of years of continuous growth. As 2009 began, companies faced new challenges, including stricter environmental regulations, rising costs, and increased domestic competition.
According to the China Internal Combustion Engine Industry Association, the industry is expected to grow by 6% to 8% in 2009, with total output exceeding 60 million units. The year is anticipated to show a "low before high" trend, with slower growth early on followed by a stronger finish. While the automotive sector remains dominated by international players, growth has slowed. For example, light commercial vehicle engines are expected to see a surge in the first half of the year due to the implementation of National 3 emission standards, but will likely decline in the second half.
Meanwhile, non-road machinery engines—especially those used in agriculture and construction—are expected to grow more rapidly. In contrast, low-speed truck diesel engines and single-cylinder models may face negative growth similar to 2008. Export growth for small gasoline engines and components is expected to remain modest, with single-digit increases.
The industry structure is also changing. Focus is shifting toward advanced technologies such as fuel systems and post-treatment solutions. Additionally, foreign enterprises are acquiring Chinese firms, increasing competition and prompting local companies to adapt quickly.
Experts believe that national policies, such as the Automobile Industry Revitalization Plan and the “Three Rural Issues†policy, will help stabilize the industry. Government stimulus measures, including infrastructure projects, are expected to maintain demand for diesel engines. Companies like Xichai, Yuchai, Laidong, and Jianghuai have already seen positive effects from agricultural machinery incentives. Even during the worst months of 2008, sales of small trucks showed strong growth, suggesting that light diesel engines may be among the first to recover.
Looking ahead, the heavy-duty truck market is expected to rebound in the second half of 2009. Although overall demand may fall by 5%, growth rates are projected to exceed 15% in the latter half of 2009 and into 2010.
Despite these opportunities, the industry still faces significant challenges. Market pressures include stricter environmental rules, rising material costs, and intense competition. Low-end diesel engines are struggling, while small engines face difficulties meeting both domestic and international demands. High-power engines require technology imports and re-innovation to meet growing needs in sectors like shipbuilding.
Technologically, the focus is on energy efficiency and emissions reduction. With stringent national standards aligned with international levels, companies are under pressure to innovate rapidly. This shift requires not only investment in research but also a long-term strategy to stay competitive in a dynamic global market.
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