This year’s Automotive Logistics China went ahead without a hitch in Beijing at the beginning of the week despite the best efforts of Iceland’s Eyjafjaliajokull volcano, which grounded flights through the large part of Europe. And while there was discussion among the roughly 300 delegates who attended the conference concerning the backlog of car parts building up in Asia or Europe following the disruption, the circumstances only underlined what appears to be China’s unstoppable automotive growth and demand for a resilient and integrated logistics industry.
But as the vehicle market continues to expand there, carmakers at the conference said they wanted to see consolidated providers emerge that could offer both domestic and overseas, multimodal logistics services.
Yang Yulong, general manager of Dongfeng Nissan Automobile’s passenger vehicle supply chain management division, said logistics providers in China tend to concentrate on a single mode each, leaving the market fragmented. “Lots of companies just concentrate on road, or on railways,” says Yang. “Plus there are too many inexperienced players and newcomers in the industry.”
Jenny Jin, vice president of Geely Automobile’s international division, also called for an integrated system. “We now deal with many companies to pick up vehicles and get them to distribution centres, but we would like an integrated single system,” she said.
Global logistics providers able to offer this sort of system are not major players within China’s domestic automotive logistics scenario, and the conference revealed that Chinese OEMs often believe such providers do not have the cultural advantage and networks of the local LSPs. This perception is critical, as it is the Chinese OEMs who appear to have the most say in choosing domestic providers within joint ventures.
“The choice of the logistics provider is the choice of the Chinese joint venture partner as they know the type of market and behaviour and other habits of the local market,” said Nissan’s Yulong. The choice of technology and parts suppliers often fall with the foreign joint venture partner, according to Yang, but logistics is the local partner’s choice.
According to Chery’s Leo Yin, this decision depends on who is the majority controller of the venture. Yin said in countries where Chery has wholly-owned factories they chose the logistics providers, but where there is a local joint venture partner then they are responsible for the logistics.
This responsibility is subject to issues of regulation, which in China is a big driver of efficiency but can come from both central government as well as the market said Gerry Mattios, SCM Service line leader for Greater China at IBM.
One perennial issue at Automotive Logistics conferences that has shown no signs of abating is the overloading of trucks. Chen Gang, president of Beijing Changjiu Logistics, said that trailers made in China are made even longer as fines increase.
“Longer trailers bring more fines, but the higher the fines the more the industry tries to get away with things,” he said, adding that drivers actually have the fines ready in cash in their pockets.
Costs are also incurred by trailers now carrying loads well beyond the maximum capacity the vehicle and engines were made for, resulting in higher consumption of fuel and leading to yet higher costs.
Local logistics providers said that part of the problem is that they need more western-standard trailers for carrying vehicles. But at costs of more than $250,000 each compared to a locally made trailer at $70,000, it is not yet feasible. Carmakers could change the situation by implementing higher standards, but questions remain as to whether OEMS will agree to higher costs.
In terms of exports, Chery’s Leo Yin expressed concerns that ro-ro vessels do not really listen to the needs of low volume exporters. But WWL China’s Richard Ma said if the OEMs have fixed ports to deliver to, WWL is willing to ship as few as one vehicle. However, shipping lines often do not leave a port until their vessels are full, adding more time and cost onto an already long lead time, according to Chi Ruzhao of Jianghuai Automotive.
Other exporting issues relate to poor credit availability as well as high duties.
Overall the conference revealed that while the industry continues to depend on government control and stimulus to a large degree it is also waiting for OEMs to take a lead on quality and standards. “[It would be] very interesting to have standard KPIs–key performance indicators–across the industry,” said Ford’s DeMuro.
