Ship shortage holds up Chinese EV sales in Europe
Auto industry ‘battling’ for car carriers faces record freight rates after dozens of vessels were scrapped in 2020
Khodrocar - A shortage of car-moving ships has pushed up shipping prices to record levels and limited the flow of electric vehicle exports from China to Europe.
Shipping companies scrapped older vessels during 2020, when car factories worldwide were idled owing to the pandemic, while many replacement vehicle carriers are not expected to be ready for another three years.
Yet the faster than expected return of worldwide auto demand, coupled with a sharp Chinese export push, has left the industry facing shortages of key vessels.
"Global automotive shipping is running pretty hot,” said one executive from a big global car distributor, adding that the number of ships in use was still about 10 per cent lower than pre-Covid-19 levels.
"Now carmakers are back to production, coupled with China exports, shipping is becoming more of a battle.”
The number of cars shipped across the oceans is expected to have risen 17 per cent in 2023 to a record high of 23.4mn, beating the previous record set in 2018, according to shipping agent Clarksons.
European car imports saw the largest increase of any region, rising by 40 per cent during 2023. China is projected to have shipped 4.3mn vehicles during the year, compared with less than 1mn in 2020. Japan and Korea are the other largest exporters.
The shipping shortages have also seen daily charter prices rise to $115,000, which is 10 per cent higher than in 2022 and seven times higher than prices in 2019.
The industry is now "playing catch-up,” according to Stephen Gordon, research director at Clarksons.
"The market’s very tight,” he said. "Partly, lots of cars are being moved around . . . and there haven’t been many new buildings [of ships] coming into the market”. There were 80 new ship orders placed in 2023, but these take about three years to complete, he added.
More "pure car and truck carriers”, a type of car-carrying ship, were scrapped during 2020 than in any other year since 2016, according to data from shipbroking group Braemar.
While many carmakers ship vehicles across the world, the latest shortage is particularly affecting Chinese brands that sell EVs in Europe, according to analysts. Chinese companies have increased exports because of overcapacity in their domestic factories, and have no alternatives to using sea freight.
Chinese automakers that produce domestically and sell to Europe "are entirely exposed to sea freight with no European production plants in place”, said Matthias Schmidt, an analyst who specialises in tracking European EV sales.
Chinese carmakers have been steadily expanding market share in Europe as they increase sales in the region. But the continent’s share of Chinese-branded vehicles barely rose between September and October, something that was largely due to shipping problems, he added.
While many Chinese companies plan to build local European factories, these will not begin producing vehicles until later this decade.
About one in four EVs sold in Europe comes from mainland China, partly because of shipments from Tesla, BYD and Polestar. Renault, BMW and Volvo Cars also manufacture some models in China for sale in Europe.
Schmidt said: "The perfect Covid storm saw many older vessels, dedicated to shipping vehicles, scrapped when vehicle demand sunk to recent historic depths, and shipping companies saw their opportunity to limit supply and keep prices as high as possible.
"It has now caused a major headache for auto companies that rely on these ships. Despite record orders for new vessels, these aren’t likely to come online for at least another two years as vehicle demand returns faster than anticipated.”
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