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Steering growth

Despite its ups and downs, transporting components for the automotive industry remains a lucrative business segment and operators see cause for optimism in 2017, as Helen Massy-Beresford discovers

Operators that generate a large proportion of their revenues from transporting components for the automotive industry are used to a degree of volatility. New model launches, safety recalls, investments in new production plants, currency fluctuations affecting exports and unforeseen events – such as the 2015 west coast port strike – all swell or diminish their volumes on major routes across the globe.


Despite the unpredictability of the sector, and following on from what many found to be a challenging 2016, they are looking forward to a positive year in 2017.


Consultancy Seabury, which carried out a detailed analysis of the air cargo sector for Airline Cargo Management's December issue, has also looked specifically at automotive performance. In terms of air trade weight, the sector fell 4% on average in the first 10 months of 2016.


Seabury says that growth has been rather volatile over the past two years. In fact, the sector did show signs of recovery in the second half, with double-digit growth. However, that did not offset significant declines recorded early 2016 when compared to the prior year, affected by the positive impact of the west coast port strike together with the huge recall of cars fitted with Takata airbags to Japan in 2015.


China was once again an important factor in air freight demand from the automotive industry. In 2016, China was the largest contributor to automotive air cargo growth, both for import and export, according to Seabury. China alone has added approximately 20,000 tonnes of automotive volumes in 2016, split roughly equally between export and import. With its China Shipper Database, Seabury is able to pinpoint how shippers are performing individually, within the automotive sector. In fact, most top automotive players located in China have recorded positive growth in 2016 – in particular Ford, Bosch and Daimler AG (see graph).


Germany is Europe’s largest automotive producer and also its biggest car market, and Lufthansa Cargo estimates around 15-18% of its air freight volumes are accounted for by the automotive sector, with most of that being the transportation of components. 


With China playing such an important role in automotive demand within the air freight industry, it is no surprise that Lufthansa Cargo’s top automotive destinations include three Chinese cities – Beijing, Shanghai and Shenyang – as well as Chicago, Detroit, Los Angeles and Atlanta in the United States, São Paulo in Brazil and Mexico. Operators everywhere are more and more aware of the potential of the automotive industry. 


“It is increasingly becoming a product in its own right,” says Senior Vice President of Cargo at Virgin Atlantic, John Lloyd. “The automotive industry relies on fast and highly efficient supply chains that demand predictability. That means manufacturers and their logistics providers recognise the value of air cargo in terms of supporting low inventory levels and maintaining the best customer service.”


Virgin Atlantic Cargo transported over 4 million kilograms of automotive goods in 2016, accounting for 2% of overall volumes – 90% of that volume was parts. The majority of that automotive traffic heads for North America, with New York JFK, Atlanta and Los Angeles accounting for half of automotive traffic. “We’ve seen a growth rate of about 10% per annum over the last few years to these destinations,” says Lloyd. “Given that the US is such a big automotive market, our 30% share of capacity on transatlantic routes, and the frequency of services we offer to and from major US gateways makes Virgin Atlantic an attractive proposition for customers moving goods for the motor industry.”


He adds: “We are definitely seeing an increase in demand. This is predominantly coming from motor manufacturers whose parts originate in the UK and which are seeing very strong growth in their North American sales. One UK manufacturer recently reported the sales of over 105,000 cars in the US in 2016, a 24% rise year-on-year, and we are supporting their success through the speed and reliability of the services we offer. The demand for parts is increasing as the number of vehicles on North American roads increases. Additionally, we are seeing growth in the movement of luxury vehicles as well as new supply chains emerging to support growing trends such as hybrid production.”  


Roel de Weyert, Senior Manager at Vantec World Transport, part of The Hitachi-Vantec Groups – which ships car components both by sea and by air – says changes in the way auto manufacturers operate are favouring the shorter lead times air freight can offer. “We ship all over the world and by air, the optimum lead time is about seven days. Compared to sea freight it is quite striking that it coincides with what companies want – stock-level tuning and a predictable goods flow. It’s better to have a very small stock of items which are frequently used like oil filters and the not-so-common kind of goods, we ship them by air.” Increased personalisation of cars is also driving demand for air freight, he adds. 


About 40% of Vantec’s business comes from the automotive sector, with Audi, Nissan and Mercedes among Vantec’s customers, but the bulk of the parts it ships travel from Japan to Europe or from Europe to South America, Africa and the Middle East. Air exports have been increasing and while shipments have become more frequent they have also become larger in volume, he says. 


Shipping completed cars – for example, to events such as international motor shows – has seen a huge jump, almost doubling from last year’s 35, de Weyert says. 

Automotive industry players are increasingly seeing the advantage of transport by air, Virgin Atlantic Cargo’s Lloyd agrees. “Speed is obviously the big plus but there are also cost benefits too when they look at their total supply chain and production costs. The reliability of air cargo means, for example, that companies don’t have to tie up money in holding vast inventories of parts all over the world. They know they can move products quickly and they will arrive to the expected delivery schedule.” >>

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