Global shipping squeeze piles on costs for car makers

Then Covid hit in 2020, killing demand and prompting operators to scrap 30 ships in the third quarter that year, out of a global total of around 800. Then demand returned with a vengeance, and this year there has been even greater competition for the reduced shipping capacity. “The main reason behind that is EV growth out of China,” Nash said.

The Asia-Europe route is one of the most profitable for car carrier operators, and it’s getting more so as more car companies start to export out of China. These are both local, such as MG-owner SAIC and Geely’s Polestar, and non-local, including Tesla, BMW (with the BMW iX3) and Renault (with the Dacia Spring).

As a result, costs are spiralling. Nash said: “12-18 months ago, it would cost an OEM $500-$700 per car from Shanghai to Zeebrugge [Belgium]. Today it’s around $1500-$2000.” That $100,000 per day fee Nissan paid in August has probably already been broken, Nash believes, and he estimates spot rates could climb to $150,000 (£124,000) in 2023.

Such is the demand that Chinese electric vehicle specialist BYD has ordered two ships, with start-up Nio rumoured to also be also on the hunt. “Chinese OEMs are getting fed up with trying to find additional capacity from the market,” Nash said.

MG’s current push to boost market share in the UK has seen it bypassing the car carrier shortage by shipping its cars in containers instead. “That’s horrendously expensive, but it’s the only way we can maintain the volume we need to satisfy dealer and customer demands,” MG UK commercial director Guy Pigounakis said.

It's not such a foolish idea, reckons Nash from VesselsValue. “Container rates were outrageous but they’ve been correcting since September and there’s talk of hitting pre-pandemic levels,” he said.

That’s also good news for European car companies shipping parts from China. “The cost has come down tremendously,” Tesla CFO Zachary Kirkhorn said on the company’s third quarter earnings call. “The cost of a container on the spot market from Shanghai got as high as $20,000. Now it’s $3500-$3600.”

Containers are not a long-term solution for cars, though. Compared with the hassle of driving cars into individual containers, a roll-on, roll-off ferry is a lot more efficient.

However, it's not just shipping that’s experiencing problems. The ports themselves are struggling. Leading global car-carrier operation Wallenius Wilhelmsen has said it won’t handle any car exports out the German port of Bremerhaven for October and November, and possibly December too because of excess congestion. The port is suffering a lack of drivers to move cars and containers, affecting many car makers, including BMW, which is facing a three-month delay to move excess stock, CNBC reported.

The driver shortage is also preventing manufacturers from moving finished cars across Europe. The mismatch is hampering car makers as production increases following greater chip availability. For example, Stellantis's production numbers rose by 25% in the third quarter this year, but shipments went up by only 14%, hitting the bottom line.

“At the moment, we can’t build enough cars and the ones we are building in Europe we’re struggling to get to the point of sale,” Stellantis CFO Richard Palmer said on the company’s third quarter earnings call.

The shipping squeeze is likely to be easier for companies with close ties to shipping companies such as Hyundai Motor, which owns Glovis. However, even Glovis was forced to charter the Grimaldi ship Grande Abidjan last month, at a cost of $99,000 per day, according to VesselsValue data.