Re-edit Aug 28, 2023 09:00 am Published by Changjiu Logistics in Hamburg EDT
Original Aug 23, 2023 11:31 am Dong Jianwei China Journal of Logistics & Purchasing EDT
China’s automobile exports have entered a new era of dominance, surpassing Japan for the first time in the first three months of this year. Not stopping there, it has also claimed the top spot in the global market, outperforming Japan in semi-annual automobile exports. China’s auto exports remained strong after the rapid recovery of the auto market following quarantine measures.Despite the growth in automobile exports, car companies and cross-border logistics providers have always had concerns due to limited shipping capacity. On the morning of August 5th, Meng Qingwen, the Vice President of Changjiu Logistics, participated in an interview with China Logistics & Purchasing Magazine.
Meng Qingwen, Vice President of Changjiu Logistics
Part 1 Soaring Exports Continuing to Power Up
In recent years, China’s auto export market can be described as “soaring”. Based on data from the China Association of Automotive Management (CAAM), China’s auto exports experienced a significant milestone in 2012, surpassing the 1 million mark. Fast forward to 2021, and China’s auto exports reached an impressive milestone of 2 million units in a single year. Looking ahead to 2022, China’s auto exports are projected to reach an even higher level, with a whopping 3.111 million units being exported. The first half of this year alone saw China’s auto exports reach 2.341 million units, and it is expected that from 2021 to 2023, China will continue to see an annual increase of over 1 million units in auto exports.
Chinese commercial vehicles have cost-effective advantages over European products and can quickly gain market share abroad, supported by services and new products. “In these two years, commercial vehicle exports ushered in a concentrated release period. Meng Qingwen highlighted that in the future, the overseas market demand will likely maintain a strong momentum. ” Furthermore, Meng Qingwen emphasized that as the business competition in the domestic automobile market intensifies and Chinese car companies accelerate their internationalization process, there will be abundant production capacity and product releases to overseas markets, which will bring new opportunities and challenges to logistics providers. While Chinese logistics enterprises are well-versed in collaborating with domestic automobile companies, it is highly probable that professional domestic logistics companies will dominate the corresponding logistics services for overseas car companies, as they are more experienced in providing localized workers.
Changjiu Logistics(CJL) responds to this change in demand and closely follows the footsteps of automobile enterprises in their layout. CJL currently operates in Poland, Germany, and Central Asia. In the future, it will expand in Southeast Asia and South America to serve Chinese car brands globally. The company will offer various services for vehicle commodities, including packaging and warehousing for the automotive industry, for complete vehicles and KD.
Chinese double-deck car carrier wagon railway train
CJL’s strategy for expanding its presence in the global market revolves around the crucial idea of swiftly adapting to dynamic market demands. Not only does CJL prioritize this, but it also goes the extra mile by offering additional services tailored to the specific needs of its valued clients. Its business layout is the result of full communication with customers or forward-looking judgement of industry trends. CJL will focus on developing additional services, like used car transport and trade, cross-border highways, offshore ports and terminals, and logistics services between overseas countries.
“At this stage, we are deeply involved in cross-border whole vehicle and KD packaging and transport. Our System’s 1,200-member KD packaging team is copying existing packaging functions to provide services for domestic automobile brands, improving support for cost, timeliness, and quality.” Meng Qingwen said.
Part 2 Logistics Industry Under Pressure and Positive Response
China’s vehicles export market lacks sufficient ro-ro capacity to meet the growing demand, causing capacity constraints. Vehicle manufactures and shipowners have been boosting their investment in ro-ro capacity. However, there exists a time lag between this investment and the actual demand. It is projected that the new capacity will be available by the second half of 2024 or early 2025. Meanwhile, certain car brands are imposing strict requirements on their suppliers, regarding recyclable energy and environmental protection, in line with considerations such as ship age, driving regulations, international and domestic carbon emissions, and environmental registration requirements. Consequently, these requirements will inevitably lead to the “natural elimination” of older capacities and impose certain limitations on overall capacity. Based on this, it is not difficult to find that the tight capacity derived from the mismatch between supply and demand will continue for some time, and the resulting high freight rates will not be solved in a short period of time.
Meng Qingwen’s analysis, it is crucial for cross-border logistics providers to effectively optimize costs for customers, considering that customers have always been sensitive to prices. However, the price is determined by market trends, which are influenced by the limited resources available for ro-ro transport backhaul. Factors such as efficient loading times can directly affect the overall return time.
Therefore, at this phase, we hope that other types of transportation will help reduce the demand for ro-ro transport. When demand decreases, prices will stabilize. With the introduction of new ro-ro capacity, prices will gradually return to normal. As for the large gap in the ro-ro capacity market, CJL has actually made a prediction. In addition to operating its own ro-ro vessels on international routes, our company also collaborates with various partners to enhance its space resources.
Changjiu Fortune Ro-Ro Ship
Furthermore, CJL continuously strive to expand our multimodal transport capabilities to meet and exceed the needs of our valued customers. Mr.Meng stated:”Our utmost priority is to ensure that our routes, service quality, and sailing schedules align with the highest expectations. In addition, the company has been actively exploring structural resources, such as making full use of double deck car carrier wagon resources in railways and expanding overseas wagon to connect with various modes of transport in China, and the results are beginning to show. In terms of the China Railway Express(CR Express), apart from relying on the liner resources of the company’s joint-venture company, Harbin Europe International Co.(HAO), in Heilongjiang province, the company has also been actively cooperating in-depth with many domestic platforms for CR Express, so as to maintain stable growth in its operations.”
Meng Qingwen told reporters: CJL remains committed to continuous investment, even in the midst of industry development and evolving customer demands. Rather than simply being a standard freight forwarder, and we seek to establish itself as a dedicated and expert service team. An advanced IT system has been implemented in international business this year. This entity allows for better control of information and data across all business segments. It helps businesses make adjustments and accurate decisions. On the basis of main transport route , CJL has actively improved operational capabilities at both ends, including port collection and station collection in the domestic segment and short barging circuits in small regions; it has also been actively expanding its overseas business, such as warehousing and buffer services, end-to-end distribution services, customs clearance, and other related value-added services, etc. It has also been pushing forward the feasibility analysis of establishing controllable overseas warehouses , to strengthen the operational efficiency of the entire supply chain and ensure that customers’ demands are satisfied. ”
Part 3 Situation eased up Rise to the Challenge
Based on Meng Qingwen’s perspective, he believes that the current tight situation regarding ro-ro capacity will gradually improve in the coming years. Firstly, this is due to the fact that ro-ro shipping is the dominant mode for automobile exports. Although other modes such as containers, pulp ships, anti-frame boxes, and bulk shipments can be used as supplementary capacity, the ro-ro ship remains the most crucial. Additionally, there has been an increase in the number of post-quarantine railway China-European liners and highway ports that cater to automobile exports. These regular routes provide significant support to markets in Central Asia, East Asia, eastern EU countries, and more. As a result, the positive impact of this expansion is evident. In the long run, in addition to some shipowners, car companies will have a huge number of new ships in 2025 around the batch launch, car export growth rate in the next 3 to 5 years or can reach a certain balance, which will reduce the pressure on the ro-ro market. “At that time, domestic car companies will increase their efforts to build factories and invest in the destination countries or demand places for exports, rather than relying only on exporting complete cars to meet market demand. In the future, there will be changes in the structure of exported complete vehicles and KDs, and the localised development of car enterprises will continue to deepen, and the scale and capacity of overseas plant construction will continue to expand. Based on this, the ro-ro market will also see corresponding changes.” Meng Qingwen said.
So, will the market be saturated with ro-ro capacity? Meng Qingwen believes that: professional people do professional things, and professional ro-ro capacity will usher in a balance between natural growth and elimination. For example, bulk and miscellaneous ships, pulp ships, container ships can do ro-ro capacity supplement, but the operation is more complex and prone to cargo damage, the applicability of automotive commodities, the operation of professionalism is to be explored and considered. Taking new energy vehicles as an example, no matter whether ro-ro or rail transport is used, the most efficient way is to use specialised transport equipment and professional operation. CJL for new energy vehicles driving, loading, safety, technology, performance and other aspects of the requirements, issued relevant training and operation manuals, each link to do a good job of effective control and management, to avoid vehicles or batteries in the logistics chain of safety issues and power attenuation; in the investment of hardware, input and application of GPS, temperature controllers, car loading required brackets, trays and so on. It can be believed that the market will play the role of the best transfer, the new ro-ro capacity supplemented in, not only will be used for the export of new cars, but also for domestic machinery and equipment, used cars and other commodities export transport.
Electric car sales between 2010 and 2023
In response to China’s automobile exports for a long time to maintain a high growth trend, China’s cross-border logistics providers in the end how to follow the trend? Meng Qingwen proposed that the need to pay attention to the following three aspects: first, the industry is still in a blossoming stage of development, all walks of life on the automobile exports, including used car exports want to vigorously participate in, but the professionalism is not enough, and some enterprises are more “follow the trend”, and did not continue to invest in the above situation is in urgent need of improvement; second, in the normative and industrial standards, the technical threshold should be raised, and the industry standards should be improved. Secondly, in the normative and industry standards, should improve the technical threshold, such as individual enterprises bidding in the “lowest price winning method” and other phenomena, the cost can only be used as one of the reference value of the bid or not, can not represent the whole of the level of professional services; Thirdly, logistics enterprises to strengthen with the foreign such as railways, shipping, customs and other departments to work closely together, to increase regular learning, Once again, logistics enterprises should strengthen close cooperation with overseas departments such as railway, shipping and customs to increase regular learning and exchange opportunities, and industry authorities and representative enterprises also need to participate in the process to accelerate the professional and extensive development of automotive logistics, especially international logistics services, and to promote the industry’s standardisation and progress, and health and upward movement.
(The Chinese version of this article will be published in the China Journal of Logistics and Purchasing, Issue 17, 2023.)