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Manufacturers, Exporters, Wholesalers - Global trade starts here.
Car Export Goals Hurt by Ship Shortage

China wants to become an auto-exporting powerhouse, but even if overseas demand for China-made cars soars, its ambitions could be constrained by a global shortage of car-carrying ships.

 

Known as roll-on, roll-off — or ro-ro vessels — car carriers are in tight supply as auto manufacturing is increasingly globalized. New ships take years to build and shipyards are already struggling to meet a backlog of orders for container and bulk carriers.

 

We would like to export more, if we can get freight space at a reasonable price,” said Lawrence Ang, executive director at Geely Automobile Holdings Ltd., which hopes to double exports to 10,000 units this year after shipping 4,846 cars in 2004, mostly to Syria and Egypt.

 

Ang said the company could export as many as 20,000 cars this year — if it could find enough reasonably priced carrier space.

 

China is the world’s third largest car market, but so far it is a tiny exporter. Last year, Chinese companies shipped just 9,335 sedans, mainly to the Middle East and Africa.

 

Foreign makers didn’t export from China until late last year. But foreign firms will spend over US$15 billion to triple output capacity by 2008 to 7 million cars, with most set for export.

 

The shipping bottleneck adds greatly to costs. Geely, for example, makes some of the cheapest cars in China, priced at US$4,000 to US$10,000 each, but shipping firms charge up to US$1,000 to carry a car from Shanghai to Africa. Ang said that was too high.

 

Another local player, privately-owned Chery Automobile Co., has signed a deal with U.S. importer Visionary Vehicles to export 250,000 cars and trucks to the United States by 2007.

 

Chery exported more than 6,000 vehicles last year, mainly to Malaysia and Iran, but General Motors Corp. has accused Chery of copying one of its cars — a charge Chery denies. That legal dispute could complicate the China firm’s U.S. ambitions.

 

The ro-ro niche shipping market, with some 425 ships, is dominated by the three big Japanese lines of Nippon Yusen Kaisha, Kawasaki Kisen Kaisha Ltd. and Mitsui O.S.K. Lines Ltd., which have little capacity to spare for China right now.

 

Exports from Japan are also busy, with car exports rising for the third straight year in 2004 to just below 5 million.

 

Tonnage is very tight all over the world. China is a new market, so we cannot guarantee a lot of decks for Chinese makers,” said Shuji Konishi, a MOL executive in Guangzhou.

 

Guangzhou is home to factories run by Japan’s top three carmakers. China’s first export-focused car plant, operated by Honda Motor, will start production this year in the city.

 

Global liners have ordered over 100 ro-ro vessels, a 26 percent rise in the existing fleet. But the lead-time for orders is long, and many of today’s ships are ready to be scrapped.

 

An order today would not be ready for delivery until 2008 or 2009, said H.J. Seok, general manager in the sales department of South Korea’s Hyundai Heavy Industries Co.

 

Automobile carriers are mostly built by mid-sized shipyards in Japan, South Korea and Europe.

 

Last year, Xiamen, China-based Shipbuilding Industry Co. said it was building a 13-deck ro-ro vessel with a capacity of 4,300 cars for a U.K shipping company. It will be the first ro-ro freighter to be built by a Chinese shipbuilder in 20 years.

 

Despite China’s vaunted cheap labor, it still costs more for many foreign auto giants to make a car there than it does in their home markets. Poor logistics, lower volumes, and the cost of imported parts still weigh, although the gap is shrinking.

 

Despite stagnant demand in China, foreign manufacturers with local joint ventures are joining domestic carmakers to step up production and exports.

 

General Motors and Volkswagen are taking initial steps to export China-made cars to other Asian countries, while DaimlerChrysler is in talks to set up a China venture to make and export cars to North America.

 

Liners are gearing up to export as many cars as they can.

 

Last year, Japan’s largest shipping firm, NYK Line, said it was in talks to build a joint-venture car terminal in Guangzhou’s Nansha port. It is also involved in plans for a terminal in Tianjin that will begin operations this year, moving vehicles made by Toyota to other parts of China.

 

For its part, Geely hopes to export two-thirds of its production eventually, but Ang said the development of ro-ro services in China was not fast enough to meet export growth.

 

I hope more Chinese shipping companies enter this market as more State-owned carmakers join the export drive,” he said.

 

COSCO Shipping Co. Ltd., the special vessel operating arm of China’s largest shipping group COSCO, has three ro-ro vessels with capacity for 700 to 1,000 cars each, used mainly on domestic coastal routes.

 

One ship travels once a month from Chinese ports to Africa and the Middle East, a COSCO Shipping executive said. China’s exports remain small, and he said market demand would determine whether it expands its ro-ro business.

 

(Shenzhen Daily May 19, 2005)

 

Small Auto Makers Aim for High Exports in 2005
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China Sets Goal for Auto Export
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