Containerized Vehicle Outlook 2023
Updated: Nov 23, 2023
As we enter 2023, we are leaving behind a period characterized by sever supply chain disruptions for the automotive OEMs; from chip shortages, Covid lockdowns, major fluctuations in global shipping, war in Europe, to finished vehicle transport capacity shortages, to name just a few. At the start of the year, we take a look at what to expect for cars in containers in the year to come.
The Covid years put a big dampener on global vehicle sales. 2022 saw sales down 15% compared to pre-covid times, however 2023 is poised for growth. S&P Global Mobility expects sales in 2023 to reach nearly 83.6 million units globally, an increase of 5.6% from 2022. Though there are still a range of issues bothering the automotive supply chain, and a full recovery on the manufacturing side compared to pre-covid is not expected until 2025 as structural semiconductor capacity will take years to solve, logistics is an issue, and access to labor is not as easy as it used to be. Still, light vehicle production is forecasted to increase 4% year on year. This increase in supply will lead to less pressure on the price for secondhand vehicles, and also a likely cooling of this market.
We are on the verge of an economic recession, inflation with high interest rates potentially reducing consumer confidence resulting in lowered demand. However, there is still pent-up demand left over from the covid years, and vehicle sales are expected to continue to climb. Though most likely more modestly than what the industry would hope for.
One thing that is for sure, 2023 will be electric. The previous year showed OEMs across the board doubling down on electric vehicles and sales of EVs grew 63% y/y in the first half of 2022. While manufacturers are determined to supply more EVs, Governments are set to ensure consumer demand will increase through initiatives like China's NEV policy, Europe's "Fit for 55", and the US Inflation Reduction Act which all aim to spur consumer demand for less polluting means of transport.
Global Vehicle Transportation
Falling container rates and lack of finished vehicle transport capacity were the headlines that occupied the last half of 2022. These trends are set to continue in 2023 as well. RoRo sailings are seemingly fully booked well into the year, and as lined out by Erik Solum from Walenius Wilhelmsen:
The global fleet consist of 600 larger roro vessels in total. Overall vessel capacity has been tight in 2022 and is expected to be tight going forward.
According to Solum there are only 11 vessels on orderbook with expected delivery in 2023. He also warned OEMs to have longer than usual horizons when planning their outbound logistics. With full sailings, increased vehicle output, and little new RoRo capacity to be added throughout the year, it is safe to say RoRo rates and service will be unfavorable for car shippers for the foreseeable future.
The container shipping market on the other hand is expected to continue to develop in favor of the shipper. Rates have been down significantly over the past 6 months and are expected to continue to drop until the middle of 2023. Spot rates are now much lower than contract rates agreed between shippers and lines earlier in the year. Maritime Strategies International forecast a 7% fleet growth year-on-year in both 2023 and 2024, combined with potential reduction in demand from industry and consumers around the globe due to recessionary fear, there will likely be an oversupply of containers and vessel slots in the coming years.
Some automotive trends are also posed to change the norms of global vehicle transportation going forward. OEMs are modernizing their distribution channels at a fast pace. Where you in the past had to enter a physical dealership to buy a car, most OEMs now offer online sales of cars. The digitalization of the sales process offers a much higher degree of customization for the buyer, which results in a higher volume of vehicles having a pre-assigned owner before even leaving the manufacturing plant. This puts pressure on traditional vehicle logistics methods, as speed to market and less supply chain risk-sharing among OEM and dealership occurs. Agile and flexible distribution methods will be needed.
The above-mentioned boom in the EV sector will present its range of challenges for global vehicle transport. Several vessel fires over the past years have highlighted the need for increased safety when shipping electric vehicles. From specialized fire preventive and suppression systems, to separate loading and handling zones for EVs, a range of safety features must be considered for the outbound supply chain.
At Kar-Tainer we are quite optimistic for what 2023 will bring in terms of vehicle containerization. Under the current market conditions, shipping cars in containers offers a cost efficient and flexible solution compared to the conventional methods. There is and will be an even more distinct need to get cars to market damage free, and at speed. With the container and RoRo industries on current trajectories, shipping cars in containers will be a boon for an automotive industry making its way out of a slump. It will offer new sources of income for shipping lines and logistics service providers experiencing downturns to their revenue streams in 2023 when compared to previous years. It can offer unique solutions to deliver electric vehicles in a safe manner, and it should be a means to ensure customers who have been in a 2-year queue to receive their new vehicles finally receive their long-awaited purchase.
In summary, we see some specific trends which will permeate the containerized vehicle industry in the year to come:
Increased emphasis from OEMs to add cars in containers as a tool in their utility belt
A switch where RoRo focus on larger markets, leaving room for containerized distribution to niche markets
A general growth of cars shipped in containers around the world
A reduction of secondhand cars shipped in containers, versus an increase of new cars
An increase in EVs shipped in containers, with increased focus on safety features like shipping cars without batteries, or adding additional safety features inside the container
We specialize in the solutions needed to safely and efficiently load and ship big quanta of vehicles in containers. If you want to learn more or keep the discussion going on what 2023 will bring for cars in containers, get in touch with your closest Kar-Tainer representative or reach out to us through the website contact forms.