In the diverse landscape of China’s freight industry, a seismic shift is underway, driven by the alluring prices of natural gas. The once-dominant diesel-powered trucks are quietly yielding to their cleaner, gas-fueled counterparts, signaling a noticeable reduction in the nation’s thirst for oil. This transition contributes to what industry insiders are labeling a “catastrophic” drop in sales for one of the global giants in truck manufacturing, Germany’s Daimler Truck.
While much of the spotlight has been on the swift rise of electric vehicles populating China’s roads, an equally profound metamorphosis is taking place behind the scenes in the trucking sector. Analysts are captivated by the rapid adoption of natural gas-powered trucks, particularly heavy-duty models tipping the scales at 14 tonnes or more. This transformation has catapulted China beyond the peak of diesel demand, nudging it ever closer to reaching peak oil consumption.
The repercussions of this trend have reverberated throughout Daimler Truck, a company historically preoccupied with optimizing diesel engines and venturing into electric and hydrogen technologies. Sun Yang, a liquefied natural gas analyst at OilChem, noted, “Diesel demand peaked earlier than we anticipated,” pinpointing the watershed moment as early as 2018. He elaborated, “The pace at which LNG is supplanting diesel in heavy-duty trucks has been astonishing.”
Forecasts indicate that China’s diesel consumption will plummet by 4 percent this year, with expectations of a gradual decline in subsequent years. Analysts from investment bank CICC, in their September report, revealed that the burgeoning fleet of LNG trucks is poised to displace around 9.2 million tonnes of diesel in 2024, marking a shift equivalent to approximately 4 percent of last year’s overall demand.
This pivot towards natural gas not only alleviates Beijing’s anxieties regarding oil imports—an estimated three-quarters of which come from overseas, chiefly Russia and Saudi Arabia—but also supports government initiatives to clean the air in heavily polluted urban centers. For two decades, Chinese policymakers have channeled efforts into enhancing domestic gas production, establishing extensive pipeline networks, investing in gas liquefaction plants, and developing a comprehensive array of natural gas fueling stations.
Wang Peng, who oversees a platform for trading used trucks in Beijing, painted a vivid picture of the evolving landscape in western China. “Diesel trucks have nearly disappeared; they’ve been utterly supplanted by natural gas,” he said. The shift is palpable. “This year, northern provinces have fully embraced the purchase of natural gas heavy-duty trucks. Diesel trucks are increasingly rare,” he noted, while acknowledging a slower transition in the south, hampered by fewer fueling stations.
Remarkably, from January to August, natural gas trucks represented a staggering 42 percent of all heavy-duty truck sales in China—a colossal leap from a mere 9 percent just a year prior, according to CV World, a commercial vehicle research authority based in Beijing.
Logistics expert Wayne Fung attributed the growing allure of LNG to its financial advantages. Presently, natural gas is 23 percent cheaper than diesel, thanks to an abundance of domestic gas and increasing imports through pipelines from Russia, Turkmenistan, and Myanmar. With prices hovering around $8 per million British thermal units for pipelined gas—drastically less than the costs for imported LNG—Fung noted the attractive economics of LNG trucks. Earlier in the year, the payback period for buyers of LNG trucks was purportedly one year faster than that for diesel, notwithstanding a higher upfront cost of around 25 percent.
Faced with these changing dynamics, Daimler’s China division has contracted significantly, a company spokesperson revealed, citing “continuously weak market demand” as the impetus for laying off numerous employees.
The once-lofty expectations for diesel’s role in China now find themselves dashed against the harsh reality of an oversaturated market fueled by “floods” of cheap imported natural gas—a sentiment echoed by Daimler Truck’s former chief, Martin Daum. He lamented, “Sluggish sales and our absence of a natural gas engine have rendered this market an absolute catastrophe.”
As the tide of LNG trucks rises, diesel demand in China has commenced its descent, with OPEC acknowledging that diesel may account for a startling 20 to 25 percent of the nation’s daily oil consumption. In a sobering revelation from July, China’s diesel requirements plummeted nearly 6 percent from the previous year, landing at 3.5 million barrels daily. Analysts foresee that the increasing prevalence of LNG trucks and electric vehicles will continue to exert pressure on diesel and gasoline consumption, compounded by a languishing property market.
Contrary to the domestic narrative, international analysts remain divided on whether China has breached its peak diesel threshold. The International Energy Agency anticipates that diesel demand will plateau in 2025 and peak oil around 2030. However, juxtaposed with reports of a 3 percent decline in actual crude oil imports within the first eight months of the year, a 12 percent uptick in both pipeline gas and LNG imports suggests a dramatic shift in energy consumption patterns.
“I rarely saw LNG trucks making a stop at my station,” reminisced a fill-up attendant in Beijing. “But the surge in activity over the past year has been nothing short of explosive.”