Aviation
AUTOMOTIVE SECTOR POWERS GROWTH IN TRAFFIC
January 4, 2017

In early December, Honda’s joint venture company in China, Dongfeng Honda, broke ground on its third production plant in the country, a US$435-million facility which is slated to come on stream in the first half of 2019 and will be capable of producing 120,000 units a year. This will boost the Japanese car maker’s overall capacity in China to 1.25 million units a year.

 

Japanese car makers have also expanded on the other side of the Pacific. “We have a lot of business from Japanese auto manufacturers. We moved 77 vehicles in November. Every (trans-Pacific) flight has some automotive cargo on it,” said Shawn McWhorter, president for the Americas at Nippon Cargo Airlines.

 

“All plants in Mexico are running at capacity, and all are expanding,” he added.

 

NCA’s expertise in moving automotive traffic has garnered some business for the carrier on trans-Atlantic flights (which are routed from the US East Coast to Europe and on to Japan) for German manufacturers. This clientele is showing a strong demand for lift. In November, Air Atlanta Icelandic started a weekly Boeing 747 freighter run on behalf of German forwarder Senator International to move cargo for BMW between Germany and Spartanburg in South Carolina.

 

Self Photos / Files - 100084_First_Honda_Clarity_Fuel_Cell_Arrives_in_Europe

 

GEFCO, a forwarder owned by PSA Peugeot Citroën and Russian Railways, celebrated a 27% rise in EBITDA in the first half of this year, which management attributed in part to the recovery of the European car market. Automotive traffic is the logistics firm’s largest source of revenues.

 

Rich Zablocki, vice president for global product development, North America, at CEVA Logistics, reported that automotive traffic has gone strong over the past two years – for different reasons. In 2015, new production plants were set up by a number of its clients, which led to a surge in project cargo business for CEVA; the past year’s strength has been due to solid, steady output, he said.

 

For CEVA, the automotive sector has been a strong source of business. A number of its employees are embedded with automotive manufacturers. Typically, the manufacturers look for end-to-end solutions, as they do not want to get involved in logistics themselves, Zablocki said.

 

Zablocki is upbeat on the coming year, noting that production has kept going strong into the autumn. Moreover, several US car makers are putting a strong focus on Asia, he added.

 

The abundance of vessels in the trans-Pacific lanes means that getting capacity has not been an issue and is not likely to become one in the foreseeable future, forwarders reckon. Nor has air freight lift been hard to find, Zablocki said, except for occasional blips caused by ad hoc cancellations of freighters, with which some airlines have tried to bolster their load factors.

 

Over the years, auto manufacturers like Volkswagen have stated that they do not use air freight strategically and do not budget for it. However, all remain regular users of air freight, driven by the need for speed when problems occur.

“They may not budget for it, but they use it. When there is a problem, it’s a lot cheaper to send some parts by air than risking a disruption at a production line,” Zablocki said. He added that the use of on-board courier services for clients from the automotive industry has been up at CEVA.

 

When it comes to high-end cars, the options for airborne transportation broadened in November when Emirates launched SkyWheels, a special offering targeting this particular segment. The customizable premium service for classic, luxury and sports cars covers door-to-door transportation for select origins and destinations, including customs clearance processes at both ends of the journey.

 

According to Alex Moazed, founder and CEO of Applico, a US-based platform innovation company, the automotive supply chain of the future will be shaped by the proliferation of self-driving cars. This will turn passenger vehicles into “new-age entertainment hubs, with captive consumers surrounded by their technology for an average of at least five hours a week.” As a result of this, a network of software engineers will replace the current network of various tiers of suppliers to OEMs, which in turn will force those car makers to reconfigure their supply chains to a “platform business model.”

 

Of more immediate concern to logistics providers dealing with automotive clients’ moves to and from the US is the stance of the incoming administration on globalization and international flows. The new president, who made protectionism a key plank in his election campaign, has waged a war of words with Ford over vehicle production outside the US.

 

Zablocki has not heard any comments from CEVA’s automotive clients on this issue. “I think it’s too early to take a serious read on this,” he said.

 

 

By Ian Putzger

Correspondent | Toronto