According to the China Association of Automobile Manufacturers, domestic commercial vehicle sales fell by 7% in June from the previous month, and the rate of decline slowed. Among commercial vehicles, passenger car sales were 31,400, up 7% from the previous quarter; sales of trucks and semitrailer tractors were 238,000 and 34,500, respectively, which fell by 7% and 1% respectively. Affected by the sales volume, the inventory of commercial vehicles began to decline: the total inventory of commercial vehicles was reduced by 24,000, of which 2,600 and 16,600 were respectively reduced for passenger cars and trucks, and 1,200 for semitrailer tractors.

We believe that due to the fall in overall fixed asset investment growth, the sales volume of trucks will slow down, but with the recovery of the economy and the growth of highway freight turnover, the growth rate of semitrailer tractors will increase. In addition, due to the newly-increased investment in western development of the country amounting to 682.9 billion yuan, the heavy-duty auto companies with good distribution in the western region will benefit more. We are more optimistic about the related industry leader China National Heavy Duty Truck (03808.HK). In addition, domestic passenger cars have continued to improve and Yutong buses, the leading company, are worthy of attention.