Shulou(Shulou.com)11/24 Report--

Chinese carmaker BYD and SAIC are clearly preparing for the export of large quantities of cars, according to news on December 5. To ensure that their cars can be delivered from Chinese factories to customers anywhere, they are buying ships to build their own transport fleet.

BYD is sparing no effort to build the "last mile" delivery capacity of its supply chain, ordering at least six ships, each carrying 7700 cars, for 5 billion yuan in October. SAIC already operates the world's fifth-largest fleet through SAIC Anji Logistics Co., Ltd., but the company is bidding for seven new carriers, each capable of carrying 8900 cars.

Representatives of SAIC and BYD declined to comment.

Given that the ships are not expected to be operational for several years, the move shows that the two companies are confident that global consumer demand for Chinese cars will continue to grow. China recently overtook Germany to become the world's second-largest car exporter, exporting nearly 2.6 million cars overseas in the first 10 months of 2022, surpassing the whole of 2021. Even if global demand for Chinese goods fell unexpectedly in October, it did not change the upward trend, with car and chassis exports rising 60 per cent year-on-year to 352000 vehicles, a record high of $7.1 billion.

"despite the surge in car exports, there has been little increase in the number of global car carriers," said the head of Clarkson Research Services (Clarksons Research Services) in Shanghai. "as transport costs soar and current supply and demand trends continue, a lot of investment is pouring into building new ships for vehicle transport."

The car supply chain is stretching because of a lack of ships, coupled with a shortage of semiconductors, labour shortages caused by outbreaks and months of port congestion. As of October, daily rents for large cargo ships capable of carrying up to 6500 cars had soared to about $100000, more than 10 times the rent in 2020 and the highest since 2000, according to Clarkson Research Services.

Tobias Tobias Bartz, chairman and chief executive of Rhenus Logistics, said it was crucial for Chinese carmakers to build their own transport fleets with the disruption of the "last kilometer" of the supply chain. On the sidelines of a conference in Singapore last month, he said ships had become "very scarce".

The shortage of transport ships means that many ships that have been in use for nearly 30 years are still in operation rather than being scrapped, increasing the risk of accidents and making it more difficult to put out fires caused by lithium batteries.

Chinese carmakers are not the only ones hoping to get more transport ships. Tesla, who uses Anji logistics to transport cars, is also in trouble. "at the end of last quarter, there were not enough ships, not enough trains, not enough car carriers to support the wave of car delivery," Elon Musk, chief executive of Tesla, said on a third-quarter earnings call. "whether we like it or not, we actually have to make the delivery of cars smooth during the quarter because there is not enough means of transportation to transport them."

This sense of urgency is growing, but BYD and SAIC are not the first automakers to decide to operate their own transport fleets. Toyota of Japan owns Toyofuji Shipping shipping company, while Hyundai Motor Company of Korea owns logistics group Hyundai Glovis. However, the self-built fleet can be seen as a clear sign of the growing export ambitions of Chinese carmakers.

Just a few years ago, China sold cars mainly to developing countries in Africa and the Middle East. But the increase in electric vehicle production has boosted Chinese car sales in Europe, which is now the largest market for Chinese car exports. In the first 10 months of this year, China exported more than 852000 electric vehicles, up from almost nothing not long ago. More than 1/5 of them are models made by Tesla in a super factory in Shanghai.

Of course, some people are not entirely convinced that buying a transport ship now is the right decision.

Craig Fuller, founder and chief executive of FreightWaves, a supply chain market intelligence provider, said: "as risks in the car market shift from backlog to oversupply, car transportation costs will fall." Moreover, with the alleviation of supply chain bottlenecks, "risks will appear more on the demand side".

Until this inflection point, however, Chinese carmakers seem keen to control as much of the supply chain as possible. It is reported that electric carmakers Lai and Chery are also keeping an eye on shipping orders.

Among the Chinese brands, SAIC's overseas success is the most noteworthy. Boosted by the acquisition of the UK brand MG in 2021, the company sold 697000 cars overseas, with a target of 800000 this year. This is still a long way from SAIC's capacity of about 10 million vehicles a year, but at the same time, its ships can also serve other carmakers, including Ulay.

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