Shipping shortage constrains Chinese car hopes

18 May 2005

China wants to become a motorcar exporting powerhouse, but even if overseas demand for its cars soars, its ambitions may be constrained by a global shortage of car-carrying ships. These PCTCs (pure car and truck carriers) are in tight supply as car manufacturing becomes increasingly globalised while shipbuilders are already struggling to meet a backlog of newbuilding orders for container vessels and bulk carriers.

One Chinese manufacturer, Geely Automobile, hopes to double exports to 10,000 units this year after shipping 4,846 cars last year, mostly to Syria and Egypt. A spokesman for the company said Geely could export up to 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 small exporter selling only 9,335 saloon cars mainly to countries in the Middle East and Africa. Foreign car makers did not begin exporting production from China until late last year but plan to spend over $15 billion to triple output capacity by 2008 to seven million cars, with most destined for export. GM and Volkswagen are taking initial steps to export China-made cars to other Asian countries, while DaimlerChrysler is in talks to set up a venture to make cars for North America. The current shipping bottlenecks add greatly to costs at around $1,000 to ship a car from Shanghai to Africa.

The car carrying market, with some 425 ships, is dominated by a handful of players including Nippon Yusen Kaisha, Kawasaki Kisen Kaisha, Mitsui OSK Lines, Wallenius Wilhelmsen Line and Hoegh Fleet Services, all of which have little capacity to spare for China. Globally, car carrier companies have ordered more than 100 new ships, a 26% rise in the existing fleet but the lead-time for orders is long with yards quoting 2008 and 2009 delivery dates while many of today's ships are due for scrapping in the next few years.

Last year, NYK Line, Japan's largest shipper, said it was in talks to build a 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 complains that the development of ro-ro services in China is not fast enough.

COSCO Shipping, the special vessel operating arm of China's largest shipper, has three ro-ro vessels with capacity for 700 to 1,000 cars each that are used mainly on domestic routes.

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