Chinese automakers and shippers are capitalizing on the booming electric vehicle (EV) export market by ordering a record number of car-carrying vessels. This trend positions China to have the world’s fourth-largest fleet of car-carrying ships by 2028. Currently, China ranks eighth in terms of fleet size, with 33 car-carrying ships, while Japan boasts the largest fleet with 283 ships, followed by Norway, South Korea, and Isle of Man. However, Chinese companies are aggressively placing orders, accounting for a quarter of all global orders. Prominent buyers include SAIC Motor, Chery Automobile, BYD (a major EV giant), and shippers such as COSCO and China Merchants.
According to Veson Nautical, a shipping consultancy, this surge in orders will dramatically increase China’s controlled car carrier fleet from its current 2.4% to 8.7% once the new vessels are delivered. Analyst Andrea de Luca predicts that new trade routes will be established primarily for Chinese original equipment manufacturers (OEMs) in the automotive industry. This expansion has predominantly benefited Chinese shipyards, which have received 82% of global orders.
The impetus behind this growth is multi-faceted. Automakers are facing intense competition, pricing pressures, cost-conscious consumers, and a sluggish domestic economy. Therefore, they are aggressively expanding into international markets where their vehicles can command higher prices. In fact, China surpassed Japan as the largest auto exporter last year. Notably, BYD alone exported over 240,000 cars in 2023, accounting for approximately 8% of its global sales, and plans to export up to 400,000 vehicles this year.
Foreign peers like Tesla and Volkswagen have also recognized the value of China’s cost-effective supply chain and have expanded their production capabilities within the country for export purposes. Furthermore, rising shipping costs and government support at the local level have convinced automakers to purchase their own ships. Data from shipping consultancy Clarkson reveals that the daily rate to charter a 6,500-vehicle carrier reached $115,000 by the end of 2023, more than seven times the average rate in 2019.
Despite the positive outlook for Chinese automakers and shippers, there have been concerns about excess capacity and accusations of unfair trade practices. The U.S. and EU have accused China of flooding their markets with low-priced products as a means to manage excess industrial capacity. However, the Chinese government argues that this focus on capacity underestimates innovation and overrates the role of state support in driving growth. It is worth noting that excess capacity concerns also apply to shipbuilding, with China often being targeted. Senior economist Xu Tianchen from the Economist Intelligence Unit acknowledges the risk of excess capacity but suggests that some niches, such as car cargo ships, may not be saturated yet.
The issue of excess capacity and fair trade practices is gaining attention at the international level. During her recent trip to China, U.S. Treasury Secretary Janet Yellen raised concerns about overcapacity. In parallel, China’s Minister of Commerce Wang Wentao is currently visiting Europe, and discussions are anticipated regarding a European Commission probe into whether Chinese-made EVs unfairly benefit from subsidies.
In conclusion, the surge in orders for car-carrying vessels by Chinese automakers and shippers indicates a significant expansion in China’s EV export market. This growth is fueled by various factors, including intense competition, pricing pressures, cost-conscious consumers, and a sluggish domestic economy. Chinese companies are taking advantage of the country’s cost-effective supply chain and government support at the local level. While concerns about excess capacity and fair trade practices persist, Chinese automakers and shippers continue to make strides in global markets. The landscape is dynamic, with discussions underway at both regional and international levels to address these concerns and maintain a fair and balanced trade environment.