Europe: Eyes on Car Trade Revival

By Malcolm Ramsay

In a feature from Issue 4 of Breakbulk Magazine, we look at how the recovery in vehicle trade lacks specialist logistics support and why supply chains need to be rebuilt after being decimated by the pandemic. 

In the turbulent world of breakbulk shipping, few sectors have witnessed more dramatic shifts and challenges than the automotive industry over the past few years. Global supply chain disruptions, a stark slowdown in new car registrations, and a debilitating microchip crisis have all battered the sector even as the industry grapples with the transition from internal combustion engine, or ICE, vehicles to electric vehicles, or EVs.

Since the start of 2023, however, the tide has been turning and according to data from the European Automobile Manufacturers Association, passenger car registrations in the EU market saw a significant increase, marking a 17.2 percent growth in April 2023 from the previous year. While this is positive news for the sector, deep issues remain and many operators have been forced to reevaluate their strategies, even as new uncertainties appear on the horizon.

As Ann De Smet of Port of Antwerp-Bruges aptly describes:

“The automotive industry had been suffering from a variety of disruptions: consumers doubting to buy an EV or still an ICE car, the pandemic, the shortage of semi-conductors, so it was in urgent need of a boost… It was to be expected that if production increased again, the gap between seller and buyer would fill up, leading to an increase in sales. The question remains, what the situation will be after the gap has been filled. Will the demand remain high, stabilize or drop?”


Rising From the Lows

The rapid onset of the pandemic not only shut down transport networks but caused many long-standing supply chains to break down. A marked slowdown in new car registrations and widespread supply chain issues significantly disrupted global trade.

Paul Kyprianou, external relations manager at Grimaldi Group, added: “The lack of microchips and spare parts triggered a domino effect, exacerbating the lack of visibility and the ability to plan properly. Events in recent years exposed weaknesses in supply chains, and outbound logistics is an integral part of this phenomenon... Logistics operators have paid a huge bill in terms of poor utilization of their assets, often finding themselves unable to carry out the necessary investments, especially in light of the expected market recovery.”

Despite overwhelmingly positive momentum in the first quarter, the European vehicle trade is still down by 22.8 percent compared with the same period in 2019, indicating there’s still much ground to cover.

“The trend has mostly confirmed our expectations,” Kyprianou said, adding that “the marked slowdown in registrations over the past few years has created enormous potential for the market.” Having overcome the latest uncertainties related to phenomena such as inflation and rising interest rates, as well as a more robust supply of environmentally friendly cars and infrastructure, the expectation is for a huge demand for transport capacity, which unfortunately will have to confront an already very unbalanced scenario.

According to UECC Director Sales & Marketing Bjorn Svenningsen, adaptation has been key during this period: “We have had to adjust some of our networks and the dialogue with our partners is more fluid and at the same time we have asked for volume commitments.”


Shifting Gears

While an uptick in demand might be expected to be a positive sign, it currently presents serious challenges in a fragmented sector like automotive logistics. This is particularly true in the wake of the pandemic and the microchip crisis, which had significant impacts on the relationships between original equipment manufacturers, or OEMs, and their logistic service providers, or LSPs.

“Today, shipyards and factories are full of orders for new ships and trucks, but re-establishing the right capacity in the market will take a long time,” Kyprianou said. “This critical climate has necessarily led to a strengthening of partnerships in order to have a common front to challenges affecting the entire automotive industry.”

In the heat of the crisis, LSPs were often left in the lurch with little to no notice that contracted volumes would be significantly reduced or even eliminated, and this lack of warning resulted in precarious cash flow situations, forcing many logistics providers to lay off staff or pivot their focus to more profitable trades.

“Every disruption brings its own supply chain challenge: either unsold volumes on the terminals, closure of plants during the pandemic (so no supply); or shortage of semiconductors (hiccup in production, late deliveries),” De Smet said, highlighting that there can be both winners and losers as “during these disrupting times we saw a drop in volume but at the same time an increase in market share.”

As demand now recovers, OEMs for the most part are grappling with the reality that their previous supply chains have been fundamentally altered. Many are finding that the reliable, efficient systems they relied on pre-pandemic have been replaced with a disjointed network, a consequence of logistics providers having to adjust their operations in response to the unexpected disruptions.

This breakdown in trust will take time to repair, according to Hervé Moulin, telematics project leader at Renault Group. He said: “The capacity crisis will continue even as volumes return as there are numerous factors that impact the sector now, for instance driver shortages or missing components.” The solution “is not easy, we need to restore confidence in our relations with our LSPs we have to prove ourselves.”


Navigating the Bottlenecks

The seismic shift in the global automotive supply chain landscape isn’t just transforming the operations of manufacturers and end consumers; it also poses substantial challenges for breakbulk carriers. While ports and seaborne capacity have largely recovered, the onward delivery of vehicles has emerged as a significant bottleneck.

While increased demand for breakbulk shipping is generally positive, carriers are hindered by a lack of road capacity. Many operators let staff go during the pandemic and are now struggling to reinstate them, leading to a significant shortage of truck drivers across Europe. Consequently, the race is on to get the vehicles from the port to their final destination in a timely manner, creating an operational pressure cooker.

Port of Antwerp-Bruges’ De Smet explained: “The biggest challenge the EU market as a whole is facing is the shortage in trucking capacity (both driver and equipment) combined with high charter rates for pure car and truck carriers, pulling them away from the short sea market into the more lucrative ex-Asia market. The stockbuilding of new OEMs combined with a shortage in last mile capacity is leading to pressure on compound surface and operational efficiency.”

This pressure is also changing onward supply, with increasing incentives for customers to travel themselves to collect vehicles. “Cars are produced, they are sold, but they cannot be delivered. This crisis probably makes less noise than the microchip crisis, but unfortunately it has the same ultimate effect,” Grimaldi’s Kyprianou said. “Many manufacturers have had to start rethinking their logistics schemes. The lack of trucks and trains has also led to saturation of land space in compounds and ports. The lack of car carrier ships, deployed on new world trades and no longer easily employed for capillary regional deliveries, is leading to the use of roll-on, roll-off ships on new intra-European routes.”

For example, some manufacturers are now offering incentives for customers to collect directly from port hinterlands, instead of adding the cost for onward delivery. This might lead a German customer to drive to Belgium or the Netherlands to collect a car to save both time and money.

From the perspective of breakbulk carriers like UECC, cautious optimism is the order of the day. In May, the firm launched a new service for automotive and breakbulk cargoes between the Port of Pasajes in Spain and the Port of Cuxhaven in Germany. UECC’s Svenningsen noted: “We are positive, but cautious. Interest rates are climbing, and we are somewhat concerned that the new order intake for cars will not be so strong in the coming months.”

Renault Group’s Moulin meanwhile emphasized the need for a collaborative, multi-pronged approach. “There is no single action that can be taken to alleviate this crisis or miracle cure but instead we need lots of different solutions, working together,” he says. “The first step is to restore confidence in new investment, but this will not be an easy path as we have already been through a long string of crises and maybe these are not over yet.”

In this complex environment, adaptation and flexibility will be key to navigating the unfolding landscape effectively, as carriers grapple with new realities and bottlenecks.


BEV Growth

As European car manufacturers grapple with the complexities of restarting their traditional supply chains, the industry is simultaneously facing a paradigm shift brought on by the surge of battery electric vehicles, or BEVs, into the market.

For many years, BEVs were something of a niche, with Tesla largely synonymous with the sector. Now, the landscape has dramatically changed, and the mounting competition is most apparent in the surge of imports from China. The Asian superpower has rapidly developed some of the most advanced BEV manufacturing and supply chains in the world, and this year has reaped the benefits as Chinese exports have surged. For Q1, electric car exports from China to Europe more than doubled, compared with the same period in 2022, and these volumes are carried exclusively by sea.

In contrast, incumbent European OEMs typically have distributed manufacturing facilities across the continent, which necessitate intricate logistics for market delivery. For example, BEVs typically weigh more than internal combustion engine (ICE) vehicles, and this can make car carriers too heavy for some European roads.

This rising tide of seaborne imports presents both challenges and opportunities for logistics, however, as De Smet noted: “Most of the terminal capacity in European ports is fully utilized, so Chinese brands are looking for alternative solutions: sending vehicles in racks on container vessels or stuffing vehicles in containers. The thing to watch will be if there is a match between the sales targets of the Chinese OEMs and their production/ import stock capacity. If a mismatch would come into play, this could place additional pressure on the supply chains and terminal operations.”

Grimaldi’s Kyprianou added: “The increase in Chinese imports is an important part of the criticality. Car carrier ships used under charter contracts in Europe have mostly been returned and dedicated to trades where demand is higher. Trades that have longer deployment times and therefore result in a reduction in the supply of space on a global scale.”

Finally, while the trend towards electrification is undeniable, there are also concerns about its pace and cost, particularly in Europe. Luca de Meo, ACEA president and CEO of Renault Group, argued: “We want to accelerate electrification, but if we keep piling up regulations, it will cost too much. The Chinese started building their entire electric vehicle value chain a generation ago...They sell 6 million electric cars in China compared to barely a million in Europe. It’s a very good springboard for exporting and since they can’t go to the U.S., the next battle is Europe.”


Investing in the Future

As this landscape continues to evolve, it’s clear that both breakbulk sea carriers and European manufacturers will need to adapt quickly to these shifting currents and make new investments to improve efficiencies. Scandinavian shipping line Wallenius Wilhelmsen is one firm taking strides in this direction, recently completing the purchase of Syngin Technology from Haute Tour Holdings.

Offering a range of digital supply chain tools, Syngin offers the potential to manage operations more effectively and overcome bottlenecks. Hailing this as a “tremendous asset,” Michael Hynekamp, chief operating officer at Wallenius Wilhelmsen, explained the significance of these digital tools, saying it allows the firm to “take the next step in offering dedicated services for the fleet management industry.”

Grimaldi Group is also making notable advancements. Kyprianou highlighted that the company “has been pursuing major investments for years now, currently boasting a portfolio of 27 new ships (one of which has already been delivered a few weeks ago).” Seventeen are pure car and truck carriers, and therefore dedicated to automotive trades. “The group continues to carry out important investments in terms of space in its main port terminals as well as maritime and land personnel. We are always trying to guarantee our partners resources and solutions in line with their future projects.”

Looking ahead, UECC’s Svenningsen holds an optimistic view about the rising tide of battery electric vehicle registrations, seeing this trend as a gateway to future business opportunities and noting there is “more to come” in terms of investment from the firm.

As the landscape continues to transform, adaptability and agility remain central, and despite mounting cost pressures it seems clear that strategic investment and technological innovation are the order of the day for players to navigate this evolving terrain.


TOP PHOTO: Grimaldi's Grande Mirafiori entering Piraeus. CREDIT: Grimaldi