Car markets around the world are recovering.Thomas Cullen, Chief Analyst, reports.
Toyota has seen sales increase in February by 10.5%. This represented the largest-ever number of cars sold in February by Toyota. Sales in major markets such as the US are growing even faster, with GM seeing a 17.6% year-on-year rise for the first quarter of 2023.
Such a market rebound is having an impact on the car-carrier shipping market. The past several years have been difficult for a sector once known for its impressive profitability. The fall in production caused by the shortage of semiconductors put the sector into something resembling a crisis, with insufficient passenger cars to ensure profitable utilisation. Now the prospects for the car carrier sector seem to be recovering.
Higher sales in large markets such as the US are resulting in higher exports from economies such as South Korea and Japan. This requires more car-carrier shipping capacity. But the most notable development has been a sudden flow of electric vehicles (EVs) exported from China to Western markets. Up until a couple of years ago China was mainly a consumer of passenger vehicles, with few exports to developed markets. Now, the Chinese Customs Agency estimates that the country exported 500,000 EVs in 2021 and volumes appear to be more than doubling every year. Although there must be spare capacity on the vessels returning from China, it appears that this is insufficient.
The response by shipping lines has been a sudden interest in purchasing car -carriers and operating them. For years the market was characterised by specialist shipping operations of the likes of NYK and WWL. Now others are looking to enter the car-carrier sector. For example COSCO, the Chinese state-owned container line, has established its own car carrier division and ordered 24 new ‘Pure Car and Truck Carriers’.
Even more remarkably the Chinese EV manufacturers SAIC and BYD have commenced plans for their own fleets. The actions of the latter seems to be an attempt to introduce a degree of vertical integration into the EV supply chain. It is also rumoured that CMA-CGM is interested in entering the market in some way, whilst established car-carrying shipping lines players such as HMM continue to order new vessels.
How successful the new entrants will be is unclear. Car-carrying is a specialist trade with close relationships between key-customers and the shipping lines. However, it should be noted that the sector was transformed by the entrance of the Japanese in the 1980’s and the south Koreans in the 2000s, with both starting-out as dedicated ‘industrial carriers’ for their respective car manufacturers.
Author: Thomas Cullen
Source: Ti Insights
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