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China's automotive engine market is strong
In 2005, the engine market reached 4.71 million units, marking a significant milestone in China's automotive industry. Over the years, China's auto market has experienced rapid growth, which has directly driven the expansion of engine production. From 1.56 million units in 1998, engine output surged to 4.71 million by 2005. Today, the Chinese automobile market, especially in the passenger car segment, predominantly relies on gasoline engines. Diesel engines, on the other hand, are mainly used in commercial vehicles, meaning that the overall growth of the engine market is largely fueled by the rising demand for gasoline engines.
One notable trend is the growing gap between total vehicle production and engine output. This gap increased from 80,000 units in 1998 to nearly one million units in 2005. A major reason for this discrepancy is the reliance of many joint-venture brands on imported engines. As China’s auto market continues to expand, more manufacturers are setting up production facilities within the country. However, critical components like engines are still often sourced from abroad, contributing to this imbalance.
Looking at production and sales figures, both gasoline and diesel engines have maintained a balanced relationship in recent years, indicating a healthy development trend. In 2005, a total of 4,710,661 automotive engines were produced, representing an 8.65% increase compared to 2004. Meanwhile, 4,725,043 engines were sold, showing an 8.99% year-on-year growth. The sales rate for that year was 100.31%, slightly exceeding production levels, which led to a reduction in inventory.
Gasoline engine output in 2005 reached 3,433,652 units, up 13.59% from the previous year, while sales climbed to 3,447,713 units, a 13.85% increase. On the diesel engine side, production dropped slightly to 1,274,560 units, down 2.94% year-on-year, with sales also declining by 2.51% to 1,272,536 units.
In terms of engine application, there is a clear distinction between passenger cars and commercial vehicles. Most passenger cars use gasoline engines, while commercial vehicles, particularly large and medium-sized ones, rely heavily on diesel engines.
The passenger car engine market is diverse, with gasoline engines categorized into three main types: those for passenger cars, mini vehicles, and light vehicles. Among these, gasoline engines for passenger cars are experiencing the fastest growth and hold the largest market share. As the sedan market expands, the demand for these engines is expected to rise even further.
Mini vehicle engines, once dominating half of the domestic market, have seen their market share shrink in recent years due to the rapid growth of the sedan sector. Companies like Changan and Harbin Dongan remain key players in this segment.
Light-duty gasoline engines have also seen strong development, with companies like Shenyang Aerospace Mitsubishi Motors and Shenyang Aerospace Shinko Group leading the way. Their popular models, such as the 4G6 and 491 series, may not be the most advanced but still have a wide range of applications in light vehicles.
In the commercial vehicle engine market, diesel engines dominate, with Yuchai, Dongfeng, and Yunnei accounting for over 54.9% of the market. These top manufacturers cover almost all of the diesel engine sector. Yuchai has emerged as a leader, ranking second globally and first in China. However, some manufacturers, like FAW, have seen declines in production due to weaker commercial vehicle sales.
During the "Ninth Five-Year Plan" period, the production of automotive diesel engines grew significantly, reaching 2.66 million units—up 67% compared to the previous plan. This growth highlights the dominance of low-power diesel engines in China’s market, driven by the increasing demand for medium and light passenger vehicles.
With China's infrastructure projects expanding, the demand for heavy trucks and construction machinery is rising, leading to higher demand for high-power diesel engines (210–280 horsepower). Companies like Weichai, Yuchai, and Dongfeng Cummins are well-positioned to benefit from this trend. However, very few domestic manufacturers can produce engines above 300 horsepower, so the market still relies heavily on imports. This is likely to become a key focus for future development.
Diesel light trucks have dominated the light truck market, holding over 88% of the market share. Their strong sales performance is a major driver of demand in the diesel engine sector.
In the passenger car diesel engine market, high-end models typically use imported engines or products from Dongfeng Cummins. Domestic diesel engines are primarily used in mid-to-low-end passenger cars.
Looking ahead, the domestic engine market is expected to reach 5.35 million units in 2006, reflecting continued growth. According to forecasts from the HC Network Automotive Market Research Institute, engine production will exceed 5 million units, reaching 5.35 million in 2006.
Before 2005, the engine market was characterized by high concentration, limited product diversity, and a polarized diesel engine market. These trends are expected to persist in 2006. With the government encouraging independent R&D and phasing out local protectionist policies, the industry is shifting toward environmental sustainability, energy efficiency, and the adoption of high-tech solutions.
Engine manufacturers are intensifying R&D efforts, aiming to develop clean-fuel engines and domestically produced alternatives. In the coming years, more engines powered by alternative fuels and developed by Chinese companies are expected to enter the market.
However, the profitability of the engine industry has declined. According to data from the China National Internal Combustion Engine Industry Association, the profit margin fell by 21% year-on-year in November 2005, reaching its lowest level ever. With rising raw material costs and pressure from downstream vehicle companies, the downward trend in profits is expected to continue in 2006.