Deutsche Bank Global Finance Co., Ltd. (hereinafter referred to as 'Deutsche Bank Global Finance') successfully listed on July 15, 2022, with a share offering price of HK$1.80 per share, raising approximately HK$892 million.
During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, sponsor, and other professional intermediary institutions in completing the writing of relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the issuer communicate with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and providing feedback on industry-related issues from the Hong Kong Stock Exchange for the issuer.
Definition and Classification of Truck Full Industry Chain Services
Truck full industrial chain services refer to a series of services centered around the truck industry chain, including raw material/component procurement and production, vehicle manufacturing, vehicle sales, and the downstream markets of trucks. The concept of truck full industrial chain services is very broad, covering supply chain management, financial services, after-market spare parts sales, as well as connected vehicle networks and data services. The aim of truck full industrial chain services is to provide relevant solutions to stakeholders at all links of the industry chain, helping them solve pain points in their business processes, and ultimately forming systematic empowerment capabilities to promote efficient operation of logistics, capital flow, and information flow within the industry chain. The following diagram depicts the full picture of the truck industry chain based on the product circulation process. The truck industry chain is long, with many intermediate links and demanders within each link. In addition, the downstream application fields of the truck industry are also very extensive, involving logistics transportation, construction engineering, specialized operations, passenger transport, and other application scenarios.
Source: Frost & Sullivan report
The growth of China's truck industry in the future has continuous momentum
The development of the full industrial chain service market for trucks is closely related to the truck industry itself. The Chinese truck market mainly consists of heavy-duty and light-duty trucks, with light-duty trucks primarily used for urban logistics or last-mile delivery, while heavy-duty trucks are used for construction projects and logistics transportation. Medium-duty truck products have seen their market gradually eroded by light-duty and heavy-duty trucks due to limited transport capacity in long-distance freight and insufficient flexibility in urban logistics scenarios. As a result, sales have been continuously shrinking, reaching a total of 165,400 units in 2021, a year-on-year decline of 6.5%.
In recent years, with the development of the domestic e-commerce industry and the improvement of urbanization levels, the sales volume of light trucks has been continuously growing. By 2021, it reached 2,978,500 units, achieving an average annual compound growth rate of 8.4% compared to 2017; the heavy truck market has developed rapidly in recent years due to the drive of national infrastructure construction projects and the development of trunk line logistics transportation. In 2021, China's sales volume of heavy trucks reached 1,395,300 units, maintaining an average annual growth rate of 7.3% compared to 2017.
In the future, driven by the growth of the e-commerce industry and the corresponding growth of urban distribution logistics, the light truck market in China still has strong development momentum. By 2026, sales are expected to reach 3,189,500 units, a compound growth rate of 1.4% compared to 2021.
The heavy truck market is driven by positive factors such as the phase-out of old trucks under National III emissions standards, the implementation of National VI emission standards in stages, and the construction of new infrastructure. In addition, the continuous tightening of overloading and speed limit policies across regions will also promote a trend towards standardization and the renewal of lightweight heavy trucks. The Chinese heavy truck market reached a peak in sales during the policy window period in 2020, with sales slightly declining in the following years but still maintaining a high level. In 2026, sales are expected to reach 1,277,500 units. The overall truck market is expected to continue growing until 2026, reaching 4,615,400 units, with an average annual growth rate of 0.3% compared to 2021.
China truck sales, forecast from 2017 to 2026
Source: Frost & Sullivan report
The penetration rate of truck finance leasing in China has been rapidly increasing.
The penetration rate of truck financial leasing (the proportion of trucks sold through the financial leasing model to the total number of trucks sold) has shown a clear upward trend in the past five years, mainly due to the following reasons: (1) Favorable policies (for example, in September 2015, the State Council issued the 'Guiding Opinions on Accelerating the Development of Financial Leasing Business', encouraging the development of auto financial products through financial leasing, and supporting financial leasing companies to raise funds through bonds, issuing stocks, and asset securitization to reduce capital costs); (2) Further reduction in annualized interest rates; (3) Changes in the purchasing concepts of downstream customers such as individual drivers and fleet owners; (4) Increased promotional activities by manufacturers; (5) The application of fintech, gradually improved credit review processes, and risk control.
According to different types of vehicle models, the penetration rate of truck financial leasing in China shows significant differences. The penetration rate of financial leasing for heavy trucks, which have higher vehicle prices, is significantly higher than that for light and medium-sized vehicles. The penetration rate of financial leasing for heavy trucks reached about 55.8% in 2021 and is expected to reach 67.3% by 2026. The penetration rate of medium-sized trucks reached 41.2% in 2021 and is expected to reach 52.1% by 2026. The penetration rate of light trucks reached 17.3% in 2021 and is expected to reach 22.4% by 2026.
China's truck finance lease penetration rate, forecast from 2017 to 2026
Source: Frost & Sullivan report
Policy and technology drive together:
The China truck connected vehicle market is experiencing rapid growth
The development momentum of China's truck connected vehicle network mainly comes from the government's regulatory needs for transportation management. For instance, starting from 2011, the Ministry of Transport and the Ministry of Industry and Information Technology required 'two passengers and one dangerous goods' vehicles to install satellite positioning devices with driving record functions; in 2014, the Ministry of Transport and others issued the 'Regulations on the Dynamic Supervision and Management of Road Transport Vehicles', stipulating that starting from July 1 of the same year, new heavy-duty trucks or semi-trailer tractors entering the road transport market must connect to the public platform for road freight vehicles. Tourist buses, charter buses, Class III and above scheduled passenger cars, dangerous goods transport vehicles, heavy-duty dump trucks, and semi-trailer tractors must install standard satellite positioning devices, namely the Beidou system, before leaving the factory. Starting from January 1, 2015, those that were not installed before leaving the factory will not receive the 'Road Transport Certificate' from road transport management agencies. The demand for policy regulation and technological progress together have driven a rapid increase in the penetration rate of China's truck connected vehicle network.
The application and promotion of China's truck networking have clear driving forces, mainly due to: 1) Trucks, as means of production, have an even more urgent need for control over transportation costs and safety; 2) Trucks are mostly used for trunk line transportation and short-distance shuttle transportation within industrial parks, ports, or mining areas, with relatively simple driving scenarios and point-to-point transportation being the main mode; 3) The government's strong control over 'two passengers and one dangerous item' has promoted the networking of trucks.
In the next few years, government supervision over road transportation will be further strengthened. Coupled with the demand from downstream fleet users for intelligent and refined management of road transportation and the promotion of new National VI models, connected vehicles are expected to become standard equipment for mainstream manufacturers. The penetration rate of pre-installed connectivity will continue to rise to 97.5%.
China's truck connected vehicle penetration rate and corresponding new vehicle sales
Forecast from 2017 to 2026
Source: Frost & Sullivan report
China's full industrial chain service industry for trucksdriving factors
The commercial vehicle full industrial chain service industry is a service market developed around the complete industrial chain of commercial vehicles. It is highly correlated with the needs of various participants in the industrial chain. The development of upstream, midstream, downstream, and other sectors within the commercial vehicle industrial chain is conducive to consolidating the steady progress of the full industrial chain service market. Below are the key demands at each link of the commercial vehicle industrial chain and the driving forces brought by macro factors on related services:
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Upstream:
1) Upstream component suppliers require logistics and supply chain management services to deliver and store their pre-production and after-sales components;
2) There is a certain lead time for transactions between upstream component manufacturers and vehicle manufacturers. Some suppliers with capital turnover needs require financial services such as factoring;
3) Upstream component suppliers may face capital turnover issues during business operations, thereby generating a demand for credit services.
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middle stream
1) Vehicles produced by vehicle manufacturers based on downstream demand rely on service providers for the shipment of complete vehicles, thus generating a need for logistics and supply chain management services;
2) Vehicle manufacturers and dealers actively provide consumer credit or financial leasing services to end customers in order to promote vehicle sales. Therefore, midstream participants play an important role in driving the development of the commercial vehicle financial services market;
3) Vehicle manufacturers are increasingly investing in emerging technologies such as connected vehicles, autonomous driving, big data, and online freight transportation to enhance product competitiveness in the ever-changing market environment. Therefore, midstream participants play a crucial role in promoting the development of the data-driven service market.
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downstream
1) The incremental and replacement demand for vehicles will drive the development of upstream and midstream parts supply, vehicle manufacturing, sales, etc., thereby boosting the service demand in the intermediate link;
(2) The steady growth in the ownership of commercial vehicles has spawned demand for after-market services such as after-sales maintenance, after-sales parts sales, insurance, ETC, credit, finance leasing, used car services, etc.;
3) Users and shippers seek more convenient online services, which has led to the emergence of online lifestyles or transportation services.
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macro factors
1) The Chinese economy is in a stable phase, and there are no systemic economic risks that pose a threat to industries;
2) The government's requirements for vehicle emissions and overloading are becoming increasingly strict in terms of regulations and policies, prompting the emergence of more replacement demand; policies related to new infrastructure drive the stable development of related industries such as logistics transportation and engineering construction; the gradual improvement of regulations for niche markets promotes rapid industrial development, such as the 'Guiding Opinions on Accelerating the Development of Financial Leasing Business' in 2015;
3) Technological advancements have made more value-added services available and more convenient;
4) Customers have undergone significant changes in their car-buying habits, gradually adopting car purchase methods such as consumer credit and financial leasing.
Development Trend of the Whole Industrial Chain Service Industry for Trucks in China
The trends in the China truck full industrial chain service market mainly include two aspects:
(1) The aftermarket service segment will become an important growth area in the future.China's commercial vehicle industry has a wide range of full industrial chain services, among which after-sales market services are an important component. There is huge potential for penetration between China and developed countries. In the automotive industry chains of developed countries, after-sales business, such as automotive finance, after-sales maintenance, and used car transactions, contributes up to 67% in profit. Developed countries have lower dependence on new car sales from OEMs and dealers, which is conducive to combating the impact of cyclical industry fluctuations and has a higher risk resistance capability.
In the domestic commercial vehicle industry chain, the profit contribution rate of after-sales market businesses such as auto finance, after-sales maintenance, and used car transactions only accounts for 31%, indicating significant room for development. In the future, sectors such as after-sales maintenance, auto finance, and used cars will embrace favorable development opportunities.
2) The connected vehicle and digital service industries are gradually emerging.In the field of commercial vehicles, new industrial forms driven by data are gradually emerging. Connected vehicles and digital services involve a wider range of data collection, storage, computation, and cloud-based services based on data, enabling communication between vehicles and roads, between vehicles themselves, and between vehicles and the cloud. The gradual rise of connected vehicles has made more digital services possible to implement and promote, with more online transportation services and software applications expected to further penetrate into commercial vehicle application scenarios in the future.
The connected vehicle and digital services industry is an emerging field in the industry, and its future development trend is expected to drive more related service providers to participate, in order to meet the digital service needs of relevant users. The 'hardware + software/service or software/service' model will form new revenue growth points.
Frost & Sullivan has extensive research experience in the automotive and transportation industries, assisting well-known companies in successfully listing on capital markets. Successful listings include: Kuaodian Taxi (2246.HK), NIO Automobiles (NIO.SGX), NIO Automobiles (9866.HK), Canggang Railway (2169.HK), Yanguang Pearl (YGMZ.NASDAQ), Asia Express (8620.HK), InfinityL&T (1442.HK), TOMOHOLDINGS (6928.HK), Ehang Intelligent (EH.NASDAQ), Aodima (8418.HK), Xiangxing International (8157.HK), CIMC Vehicles (1839.HK), Xunlong (1930.HK), CSSC Leasing (3877.HK), Chengdu Expressway (1785.HK), Tianrui Automotive Interior (6162.HK), Baren Holdings (2885.HK), Huazi International (2258.HK), Pulin Chengshan (1809.HK), NIO Automobiles (NIO.NYSE), Wanlida (8482.HK), Qilu Expressway (1576.HK), Yingheng Technology (1760.HK), Asia Industry (1737.HK), Ruifeng Power (2025.HK), Gaomeng Technology (8065.HK), Hebei Yichen (1596.HK), Zhengli Holdings (8283.HK), Junao Holdings (8035.HK), Yadi Group (1585.HK), Yihai Car Rental (EHIC.NYSE), Xincheng Power (1148.HK), Zhengxing Wheels (ZX.NYSE), Shuanghua Holdings (1241.HK), Changche Bridge (1039.HK).
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