Weekly Business Insights from Top Ten Business Magazines | Week 334
Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 334 | Feb 2-8, 2024
Shaping Section | 2
Why the world’s biggest EV maker is getting into shipping
By Zeyi Yanga | MIT Technology Review | January 30, 2024
Extractive Summary of the Article | Listen
Earlier this month, a massive ship picked up over 5,000 electric cars from two ports in northern and southern China and its final destination is in Europe, where most of the cars will be sold. The ship’s name is BYD Explorer No.1. As the first of a massive fleet that BYD is building, it reflects the Chinese company’s ambition to establish a seafaring business that supports its new role in the global car trade.
In 2023, BYD exported over 240,000 vehicles, up from 55,000 in 2022. But it’s run into a snag: to get the most financial benefit from its exploding popularity abroad, it’s having to expand beyond the car trade into the shipping business.
BYD Explorer No.1 was delivered at the beginning of this year. The RORO vessel, which can carry 7,000 cars at the same time, is officially registered under Zodiac Maritime, a UK company controlled by the Israeli shipping tycoon Eyal Ofer, but BYD has leased it for an undisclosed period of time. In a press release, BYD says it plans to add seven more vessels to the fleet in the next two years. It also plans to let other companies export their vehicles using BYD’s ships, it says.
Most car companies have longstanding relationships with shipping firms or own their own fleets of boats. For example, Japanese car makers like Nissan and Toyota each have fleets of RORO ships that can carry tens of thousands of cars. But China’s domestic car-carrier vessels represent only 2.8% of global shipping capacity, leaving the Chinese brands few options for getting their cars across the seas. As a result, their access to RORO ships has become prohibitively expensive. According to Clarksons Research, the intelligence arm of the world’s largest shipping services provider, the price to rent (or charter, as the industry says) a car-carrier ship for a day skyrocketed to $115,000 in 2023, a historical high and close to seven times the average pre-pandemic price, which was around $17,000 in 2019.
New demand to ship cars predominantly comes from China right now. The country is on the verge of becoming the world’s largest car exporter. It exports a mix of traditional gas cars, electric cars made by Chinese companies, and Tesla cars manufactured in the Giga Shanghai plant. The shortage of shipping capacity is what’s standing in its way.
And just as the auto industry in Japan and South Korea has pushed these two countries to become global leaders in shipping, EVs could make China a major player in the ocean too.
3 key takeaways from the article
- Earlier this month, a massive ship picked up over 5,000 electric cars from two ports in northern and southern China and its final destination is in Europe, where most of the cars will be sold. The ship’s name is BYD Explorer No.1. As the first of a massive fleet that BYD is building, it reflects the Chinese company’s ambition to establish a seafaring business that supports its new role in the global car trade.
- Most car companies have longstanding relationships with shipping firms or own their own fleets of boats. For example, Japanese car makers like Nissan and Toyota each have fleets of RORO ships that can carry tens of thousands of cars. But China’s domestic car-carrier vessels represent only 2.8% of global shipping capacity, leaving the Chinese brands few options for getting their cars across the seas.
- And just as the auto industry in Japan and South Korea has pushed these two countries to become global leaders in shipping, EVs could make China a major player in the ocean too.
(Copyright lies with the publisher)
Topics: Electric Cars, Shipping, Transportation
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