Finished Vehicle Logistics Magazine China - Developing with Demand
CHINA IN FOCUS
China’s increasing export
volume, particularly to lowcost markets, has resulted in a
challenging, fragmented logistics
sector. Anthony Coia reports
IN THIS STORY...
hina’s phenomenal rise to becoming the world’s
largest vehicle sales and production market was
largely a domestic affair. As sales for commercial
and passenger vehicles roared ahead in the heady
days of 2009 and 2010, exports – including semiand complete-knockdown kits (SKD and CKD) – fell from a
high of 681,000 units in 2008 to just 370,000 in 2009, and did
not surpass the previous high again for several years.
However, since 2011 exports have rocketed, rising 50% in
that year and another 30% last year to surpass the million
mark for the first time. The leading brands were Chery,
which shipped around 200,000 units of finished vehicle and
ollowed by Geely and
Great Wall, which
each exported around
Who we spoke to:
100,000 units. With
or of ind
Mark Morley, direct uring, GXS
growth in China’s
rketing for manufact
Jenny Jin, vice-p
ck Guo, manager, Eur
especially for many
of China’s domestic
Bob Tang, head of com rs
Tang Zhe, marketing t Ro-Ro Terminal
manager, Tianjin Por
Paulus Lee, marketing ve Terminal
as a proportion of
eral manager, China,
Thomas Leiber, gen istics
BLG Automobile Log
p45 China’s export destinations
p46 Geely’s expanding needs
Great Wall’s ambitions
p47 Ro-ro shipping services
p48 Terminals and 3PLs
p50 Cars in containers
With this rise in exports
has come an increase in
the demand for logistics
services, including inland
transport, port handling
operations, shipping and
even rail towards Russia and Central Asia. Carmakers are
starting to see more options for ports of exit, as well as the
entry of specialist logistics providers, such as Germany’s
BLG Automobile Logistics, which offers services like vehicle
tracking and adding accessories.
However, there are important differences in the nature of
the current growth and logistics operations for China when
compared to other nations that have recently experienced a
strong rise in vehicle exports, including Mexico and the UK,
let alone compared to the export stalwarts like Germany, Japan
and South Korea.
The most obvious difference is the mix of market
destinations and the product mix. China exports fewer
passenger cars, at 45%, than it does commercial vehicles.
The great majority of these vehicles are destined to low-cost
and developing markets such as Iraq, Algeria, Chile and the
Ukraine, although Chinese brands have started to gain a
stronger footing in major markets like Russia and Brazil, as
well as Iran. Furthermore, according to Mark Morley, director
of industry marketing for manufacturing at supply chain
consulting firm GXS, some observers expect that Chinese
companies will increase exports significantly in the coming
years to markets such as India, Thailand and Vietnam.
o, senior director
Rinaldy Sudyatmik Europe, APL Logistics
omotive, Asia and
CHINA IN FOCUS
While all of these developing markets have wildly different
characteristics, they share some common difficulties. Smaller
markets often lack frequent and regular ro-ro services, as
well as adequate terminal and inland infrastructure to handle
vehicles, which can make shipping cars in containers a more
practical option. Likewise, whether in larger markets like
Brazil or Russia, or smaller ones in Latin America, many
emerging markets – like China itself – have industrial policies
and import duties that encourage, if not mandate, setting
up knockdown kit assembly plants or working with local
Jin predicts that the composition of Geely’s exports will
shift further in 2013 as it targets a 60% rise in exports, to more
than 160,000 units. She expects the proportion of CKD to rise
to 40-45% as new assembly locations open in Egypt, Belarus
and Uruguay, where Geely plans to ship 3,000 units each.
“In actuality, some of our markets may change from CBU
[completely built units] to KD [knockdown] and vice-versa.
For example, Ukraine was an SKD market a few years ago. It
depends on the import duties,” says Jin.
According to Jin, Geely’s current export logistics demands
are significant for both finished vehicles and for kit handling.
In actuality, some of our markets may change from CBU to KD
an vice-versa. For example, Ukraine was an SKD market a few
years ago. It depends on the import duties – Jenny Jin, Geely
The result is that logistics services for Chinese exports are
in some ways more fragmented than those of other markets.
OEMs require a mix of ro-ro shipping, containers and CKD
operations, often split between many trade routes. And with
some carmakers expecting to increase the proportion of CKD
manufacturing in their international networks, demand looks
likely to remain splintered.
Geely’s export mix
An important example of how logistics services for exports
are developing in China can be found at Geely, which was
China’s second largest exporter last year with 100,279 units.
The carmaker’s top five markets in 2012 were Russia, Iraq,
Saudi Arabia, Ukraine, and Iran. Geely’s exports were 68%
finished vehicles, 29% CKDs and 3% SKDs, according to Jenny
Jin, vice-president of Geely’s international division. Markets
to which Geely sends finished vehicles currently include
Iraq, Australia and the Ukraine, while knockdown kits go to
markets like Brazil, India, Iran, Mexico, Russia, and Malaysia.
She says that the carmaker is seeking more options for loading
ports in China based on the location of its plants and points
to further need for logistics service providers and ro-ro
service. “When choosing ocean carriers, for example, we need
ones that are reliable and offer competitive lead-times and
guaranteed space,” she says.
But Geely also needs freight forwarders to provide
competitive destination services for its CKD shipments. Jin
says the company is aiming for more door-to-door services for
CKD shipments, over which it wants to gain greater control.
Great Wall wants more ro-ro frequency
China’s other major exporters have a similar export mix to
Geely, with CKD representing around 30-40% of vehicles
exported. Although Chery was not available for interview in
this article, last year it told Finished Vehicle Logistics that CKD
made up around 40% of its exports in 2011.
Great Wall Motor Company exported 96,500 vehicles last
year. According to Chuck Guo, manager of the Europe region,
CHINESE CAR EXPORTS (VEHICLES AND CKD)
Source: China Association of Automobile Manufacturers
CHINA IN FOCUS
The Tianjin Port Ro-Ro Terminal is aiming to develop an integrated logistics
service platform to boost its export offering
the company shipped about 72% of the vehicles as finished
vehicles and 28% as kits. At present, Great Wall Motors exports
mainly to Russia, Iraq, Australia, Algeria, and South Africa,
which account for nearly 70% of its total export volume. In
its export-concentrated markets, such as the Middle East
and South America, Guo says Great Wall plans to establish
vehicle distribution centres. Like Geely, it has set extremely
high growth targets for its exports this year and beyond. Guo
says the company expects to export 140,000 vehicles in 2013
and 300,000 vehicles by 2015. By that time it expects to be
producing vehicles at a factory in Bulgaria that would serve
the wider European market. Last year, it also entered the UK
market with a pickup truck.
Whether or not Great Wall meets these ambitious export
targets, the need for more logistics services will be essential.
According to Guo, the OEM’s finished vehicle flows currently
split across three transport modes with 55% moving by ro-ro
vessels, 20% in container ships, and 25% by railway containers,
the latter of which move mainly to Russia and Central Asia.
For ocean shipping, Guo says that ro-ro vessels have the
advantages of scale and efficient handling but the company
suffers from a lack of shipping frequency, something it is
hoping to address through carrier contracts. In the meantime
however, container shipping allows for more frequency.
“Compared to ro-ro vessels, ocean container shipping
provides a considerably stable sailing schedule of almost
once weekly, less sensitivity to climate changes, and short
demurrage time,” he says. “It works as the supplement when
ro-ro shipping is insufficient.”
Expanding ro-ro services
Although China’s exports move through a variety of transport
modes to a fragmented list of markets, the country’s exportrelated logistics services are undoubtedly growing. And while
ro-ro services have been among the areas that manufacturers
say are in need of further development, shipping lines have
been adding new routes and ports of call.
One of the leading ro-ro carriers serving China is
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CHINA IN FOCUS
Höegh Autoliners. Bob Tang, the line’s head of commercial,
says that its primary export ports in the country are Shanghai
and Tianjin (near Beijing). However Xiamen, located on the
southeast coast, about 700km northeast of Guangzhou, is the
fastest growing export hub for Höegh.
The shipping line’s trade lanes from China include routes
to Europe, Africa and South America. Somewhat surprisingly,
given the current climate, Tang says that the fastest growing
route is to Europe, where Chinese-made vehicles move or
tranship to the Mediterranean region, Eastern Europe, Russia
and North Africa in some cases.
The biggest difficulties for Höegh include the volatility
also been expanding. The Tianjin Port Ro-Ro Terminal, for
example, consists of two terminals with an annual handling
capacity of 600,000 imports and exports. In 2012, the terminal
handled about 120,000 exports from mainly Great Wall,
Foton, FAW, and Hafei, according to Tang Zhe, the terminal’s
marketing department deputy manager.
Destinations for vehicle exports include Australia, Chile,
Peru, Ecuador, Algeria, Nigeria, Jordan, Iraq, and Saudi Arabia.
For 2013, Tang says that the terminal expects an increase of
nearly 8%. “Great Wall opened a plant in Tianjin in 2011. We
have seen few exports thus far, but it will increase,” he says.
Tang adds that the terminal is aiming to develop an
In recent years, we have set up a new logistics department in orde to
provide one-stop service, including inspection and distribution
– Tang Zhe, Tianjin Port Ro-Ro Terminal
of these volumes, as well as port congestion, particularly in
markets with inadequate infrastructure. “Our main challenges
involve port congestion and infrastructure deficiencies,” says
Tang. “On the destination side, this is something that we
experience quite often in North Africa, such as at the port of
Djen Djen, Algeria.”
However, with the current growth, Tang reveals the company
is expanding its fleet and service, and predicts improved port
connections. “We want to further develop regular trade lanes
out of China and increase our vessel sizes. With the increase in
export volumes, we will also see positive developments in port
infrastructure, which will enable quicker turnarounds for the
vessels,” he says.
integrated logistics service platform. “We have constructed
a carport in the terminal, a one-floor covered building that
should be open in April,” he says. “We are also building a new
yard, which should be ready in May or June. Tianjin is also
developing a multi-level car park, which will take about two
years to complete.”
Other terminals are developing besides Shanghai, Tianjin
and Xiamen. Important nodes that Geely uses, for example,
include the ports of Ningbo, 225km south of Shanghai, and
Yantai, which is 600km southeast of Tianjin. In southern
China, Guangzhou Port Nansha Automotive Terminal expects
to begin operations in the second quarter of this year. Paulus
Lee, marketing manager, expects to export 15,000 vehicles
from Guangzhou to Pakistan in 2013.
More export terminal options develop
China’s terminals for handling vehicles have also been
developing with the growth in exports. While the Shanghai
Haitong International Terminal has been the country’s
dominant port for vehicles, a number of other terminals have
According to BLG, Chinese OEMs are often more reluctant to pay higher prices
for value-added services, whereas as many foreign carmakers will pay for such
services as a matter of course
3PLs get in the mix
As exports and port terminals develop, third party logistics
providers have been expanding export services. An example is
a joint venture between BLG Automobile Logistics and China’s
Cinko SCM, which opened its first terminal in Tianjin last year
and now operates in Beijing and Shanghai.
Last year BLG handled about 60,000 exports at the terminal
in Tianjin. Around 40% of the vehicles were shipped to the
Mediterranean Sea region and 35% to the South America
west coast, while smaller volumes were sent to the Persian
Gulf (10%), Sub-Saharan Africa (10%), Southeast Asia and
Australia (5%). South America and Southeast Asia were the
fastest growing markets.
According to Thomas Leiber, general manager for China,
BLG’s export services range from repairs and accessories to
building entire special edition cars; it also includes software
flashing, as well as tracking and tracing vehicles. The fastest
growing export service for the company is labelling vehicles
with barcodes and entering them into a BLG system called
‘C@rin’. “This system provides tracking throughout the
entire journey from our compound to final destination at the
dealership,” says Leiber.
Leiber says that although almost all of its exports are
CHINA IN FOCUS
finished vehicles, he is expecting growth in the number of
CKD and SKD shipments as BLG prepares to offer services
that supply its clients’ domestic and foreign assembly lines.
Cars in containers
Another area of potential growth is the containerised
movement of vehicles from China using specially fitted racks,
particularly for China’s less developed export destinations.
“We ship to countries that ro-ro vessels do not serve, including
destinations in Asia, South America, the Middle East and
Africa,” says APL Logistics’ Rinaldy Sudyatmiko, senior
director, automotive, Asia and Europe.
APL Logistics ships volumes of up to 10,000 units on
average, says Sudyatmiko, with a service that leaves from
Yantai – APL’s main port – as well as Tianjin and Shanghai.
The service is ‘door-to-door’, according to Sudyatmiko.
In November, APL began exporting General Motors’
Chevrolet Sail model from China to Laos. The process begins
with General Motors in Yantai delivering to APL’s local yard.
The cars are loaded at the yard using Trans-Rak International’s
‘R-Rak’ solution, which is removable equipment that allows the
ensure they have the appropriate logistics infrastructure in
place to support exports, particularly as higher wages on
the east coast, together with government policy, have led
companies to build plants further inland. “The problem is that
the road and rail infrastructure that is used to support the
transportation of vehicles to the east coast for export is only
just starting to become established,” says Morley.
BLG, for example, moves vehicles to Tianjin port solely by
truck. According to Leiber, the average distance from vehicle
plants to Tianjin port in the northeast is around 400km.
Another characteristic of the Chinese export market has
been the slow uptake of value-added services. Leiber says
that whereas foreign OEMs view BLG’s quality and technical
services as a matter of course, Chinese carmakers often do
not want to pay higher prices for such service. “Even damage
rate competitiveness ranks second after service costs [for
Chinese OEMs]. The consequences of costs and savings are
not evaluated sufficiently,” says Leiber.
Tang adds that one of Tianjin Port Ro-Ro Terminal’s main
difficulties is that the Chinese authorities have not entirely
supported the expansion of its terminal logistics services
beyond cargo handling. “In recent years, we have set up a new
logistics department for customers in order to provide onestop service, such as inspection and distribution,” he says.
“This logistics department receives limited policy assistance
as the authorities believe that we should only handle ro-ro
vessel loading and unloading, not logistics. This is unlike the
Shanghai Haitong Ro-Ro Terminal, which is a five-storey
facility that offers a variety of storage vehicle and services.”
Chinese OEMs must get sophisticated
APL’s ‘door-to-door’ containerised shipping service for GM begins with the
loading of four vehicles using Trans-Rak International’s ‘R-Rak’ equipment
secure loading and bracing of four vehicles in one container.
Once the containers are loaded, ocean carrier APL ships them
from Yantai to Dalian by barge, and from Dalian to Bangkok
by ocean. At Bangkok, the containers move by truck a distance
of 640km to Vientiane, the capital and largest city in Laos.
The entire process, from vehicle receipt in Yantai to delivery
at Vientiane dealerships, takes 30 days – within GM’s lead time
expectations, says Sudyatmiko. In Bangkok, APL Logistics
collects the R-Raks and returns them to Yantai by loading 55
units in one container.
Lack of rail and added value
While the Chinese export and logistics service market is
growing across numerous modes, it is still suffering from
deficiencies in infrastructure and, arguably, in quality control.
There is a general lack of rail links between plants and the
major exit ports, which slows down lead times and increases
cost. According to GXS’s Morley, Chinese OEMs need to
With generally low-cost vehicles and a popularity in
developing markets, China’s OEMs depend on a logistics
system that has global reach but can keep costs down. In many
ways, this system is remarkable for its extensive range despite
relatively small volumes on many trade lanes.
For example, although rail is lacking for domestic
movements, it has begun to develop across the ‘Eurasian land
bridge’, with manufacturers making use of Russia’s TransSiberian railway to connect China with the West. GXS’s Morley
points out that a number of European OEMs have used this
route to transport knockdown car kits to plants in China.
Likewise, some Chinese carmakers, such as Great Wall and
Chery, are using the rail network to export kits to Russia.
But as exports grow, the need for more frequent and
reliable services is evident. Chinese OEMs are currently at a
disadvantage to competitors as they face long shipping times
to market. Also, given the fractured nature of their export
flows, these OEMs cannot make full use of economies of scale
for shipping when it comes to cost and service frequency.
Furthermore, if Chinese OEMs aspire to break into
more established markets, such as Europe or the US, the
competition will be fierce, especially at the low end of the
market where the likes of Renault’s Dacia brand or Volkswagen
will be hard to match, says Morley. In such areas, speed to
market, the need for more sophisticated services and a focus
on quality, including damage prevention, will be essential for
any Chinese export. q