UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY

KEY FINDINGS

1. The United States automotive Logistics industry is growing at 5.3% CAGR from 2023 to 2030 in terms of value
2. The market was worth $XXB in 2022 and is expected to be $XXB in 2030
3. Global Automotive Logistics is roughly $35-40 Billion, which constitutes about only XX% of the overall logistics market. 
4. US automotive logistics account for about XX% of the overall automotive logistics market
5. Since automotive sales volume wise USA is a saturated market, there will not be a steep rise in sales in the period, resulting in minimal growth in the Logistics market
6. The vessels are typically built to carry up to 8,500 vehicles at once and are chartered by automakers to deliver their cars to ports, usually on the East and West Coasts.
7. Ocean mode is preferred for inter-continental exports as they can transfer large quantities of volume at once 
8. Rail constitutes more than half of the revenue generated in the sector
9. Finished Vehicles solely due to high individual cost occupy close to XX of the market
10. United States imported $157B of cars in 2022,  becoming the first largest car importer in the world. 
11. In 2022, the USA exported $60.4B in Cars, making it the 3rd largest exporter of Cars in the world. 
12. In the same year, Cars were the 3rd most exported product in the United States.
13. Car carriers in the US are facing significant pressure due to driver shortages. a lack of interest from the younger generation, an aging labor force, and stagnant wages are major contributors to this situation
14. XX Logistics is the market leader with ~16% market share in the US
15. The market is very fragmented as there are more than 30 logistic players maintaining auto haulers in the US

INTRODUCTION TO THE UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY

The United States is the world`s second-biggest auto market and the automotive industry plays a crucial role in US imports and exports. It is the third largest automaker in the world with 11.7% of total automobile production, it is also the second largest automobile importer in the world after the European Union.

Motor vehicles are the United States’ fourth most valuable export, trailing only aircraft, gasoline, and oil, On the import side, passenger vehicles are ranked No. 1 for five consecutive years. Logistics players provide a wide range of functions that can be classified in the following ways:

POSITION IN THE SUPPLY CHAIN

Upstream Supply Chain

1. Order Consolidation: consolidating orders from different vendors of an automaker
2. Bulk breaking: distributing orders from one vendor to multiple automakers
3. Vendor Managed Inventory/ Consignment inventory: fulfillment responsibility lies with the logistics players, for standardized products.
4. Clearing Agent: For imports of auto sub-components, documentation, and transportation activities are taken care of.

Downstream Supply Chain

1. Freight forwarding: Container stuffing at factory premises or loading of vehicles in Ro-Ro carrier from car terminal and export documentation.
2. Transport Arrangement: Transport arrangement through Land/ Sea/ Rail for completely built units
3. Pre-dispatch inspection: inspecting vehicles before transportation of vehicles.
4. Order Kitting: Cross-docking operation to ship spare parts from vendors to automobile service stations.

Services that they offer

1. Transportation
2. Fulfillment
3. Forwarding & Clearing

Market they serve

1. Domestic
2. International

UNITED STATES AUTOMOTIVE LOGISTICS MARKET SEGMENTATION

 The United States Automotive Logistics industry can be segmented into the following categories for further analysis.

United States Automotive Logistics Industry By Goods Type

• Finished Vehicle
• Supply Chain 

United States Automotive Logistics Industry By Mode of Transport

• Rail
• Road
• Ocean
• Air

United States Automotive Logistics Industry By Region

• Domestic
• International (Exports)

TRENDS IN THE UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY

BMW has begun using a digital cloud platform built on software supplied by Microsoft to increase manufacturing and support logistics productivity.

• The Open Manufacturing Platform (OMP) is designed to accelerate the use of internet-of-things (IoT) technology in the supply chain and factory and it would be shared among other OEMs.

Mexico ascended to the top spot in vehicle imports to the US for a brief period in 2020, beating Japan, the gap in imports of vehicles between Japan and Mexico to the US is close with 23% and 22% share respectively, this gap would narrow down with Biden administration in place. This would make Port Laredo take the top spot for passenger and commercial vehicles export and import from Port of Los Angeles.

COVID-19 has been a wake-call for supply chains, the automakers in the US would prefer Mexico and Canada for manufacturing their sub-assemblies, as these two nations are already building automobile component supply chains for U.S., Japanese, German, Korean, Swedish, and other manufacturers.

One major reason for the increase in automobile imports from Canada and Mexico is the new free trade agreement between the US, Canada, and Mexico (USMCA) which is highly likely to continue in the Biden Administration, the following are some key changes that were enacted:

• The revised automotive rules of origin require higher levels of North American content to incentivize production and sourcing in North America. Auto vendors have to submit rules of origin for their sub-assemblies and raw materials as well.
• 70% North American steel and aluminum requirements. This is likely to boost the surface transport.
• An increase in the CUSMA regional value content threshold for cars from 62.5% to 75%.
• Stronger regional value content requirements for core car parts, such as engines and transmissions.
• A new labor value content provision requires that 40% of the value of a passenger car (45% for a light truck) be made of materials, parts, and labor (including final assembly) produced or carried out by workers in a plant where the average hourly wage is at least US$16

One strong driver for the automotive industry would be Electric Vehicles, as most of the global battery production and Lithium, Nickle, cobalt, and graphite productions are concentrated in the following trends that can be observed in upcoming years:

• Demand for logistics players who can handle hazardous cargo, increase in sea trade to China from Chile & Argentina for Li, from Congo for Cobalt, and from Brazil for Graphite and Nickle.
• With the rise in tensions between Australia and China, the Lithium trade would likely see a small dip in demand and logistics players would see a rise in trade between the US and Australia for lithium trade.
• Battery supply chain players in China and the US would see an increase in demand, these players would be expected of special handling, packaging, transportation, and reverse logistics for recycling/ refurbishment.

UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY DYNAMICS

By 2025, CEVA Logistics will have converted to low-carbon electricity in all of its contract logistics and freight warehouses. The promise will rely on a combination of growing its electricity output via rooftop solar panels, which the business will triple by the end of 2025, and acquiring low-carbon electricity (renewable and nuclear) from regional utility suppliers.

Additionally, CEVA anticipates employing only LED lighting in all of its storage facilities by the end of 2023.

Two US tradeshows will feature UgoWork, a Canadian energy solutions provider with a focus on lithium-ion batteries and Energy as a Service (PaaS) solutions for the material handling sector. These two occasions serve as significant turning points for UgoWork as it works to increase its footprint in the automotive logistics and supply chain industry.

UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY’S RECENT ACQUISITION AND PARTNERSHIP

A significant provider of logistics and freight forwarding services to the automobile sector, the FX Coughlin Group (“Coughlin”), has been acquired by Exel, a global leader in supply chain management systems. Before goodwill amortization, it is anticipated that the acquisition will increase earnings.

It is also subject to various regulatory approvals. Coughlin offers comprehensive supply chain solutions, especially to the automotive industry, including domestic and international freight management, specialized contract logistics services, and custom packaging solutions.

Ford, Jaguar, Visteon, DaimlerChrysler, and General Motors are some of Coughlin’s clients. Coughlin has offices abroad in the UK, Mexico, Canada, Germany, the Netherlands, and Australia. Its headquarters are in Detroit, Michigan.

The incentive will be in the form of an initial cash payment and subsequent deferred payments based on three years of client retention. Additional payments can be made if the company’s performance greatly outperforms its existing profitability.

Any further payments will result in a decrease in the acquisition’s EV/EBIT multiple on realized earnings. After accounting for one-time expenses that are not anticipated to occur again, Coughlin generated underlying operating profits. The goodwill resulting from the transaction will be deductible for tax purposes.

The leader in autonomous mobile robots (AMR) for fulfillment warehouses, Locus Robotics, has announced the growth of their collaboration with DHL Supply Chain, the company that leads contract logistics for the Deutsche Post DHL Group.

To support the high volume order fulfillment for Carhartt, a major international clothing store, the extended cooperation involves the deployment of Locus autonomous mobile robots (AMRs) at DHL Supply Chain’s Canal Winchester and Lockbourne, Ohio fulfillment centers.

Through the use of autonomous mobile robots (AMR), CEVA Logistics and Geek+ are working together to more effectively connect customers with their preferred footwear and clothing.

The efforts to modernize CEVA’s Grobbendonk warehouse, which is situated in the Belgian province of Antwerp, amply highlight the advantages of AMRs by creating a more ergonomic working environment and boosting productivity while maintaining accuracy.

Five workstations and a fleet of 27 Geek+ P-series picking robots are now present in the warehouse. The picking robots can move at a maximum speed of 2 meters per second and can carry a payload of 1,000 kilograms. The goods-to-person solution developed by CEVA and Geek+ offers a high level of flexibility, prompt integration into the current processes, and the ability to handle daily quantities of more than 10,000 outgoing products.

TECHNOLOGY TREND IN UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY

Autonomous trucks would disrupt road transport. In the next two years, “platooning,” a technique to connect wirelessly a convoy of trucks to a lead truck, allowing them to operate safely much closer together and realize fuel efficiencies would feature. In about five years, the next wave, driverless platooning, will take hold. On interstate highways, these platoons will feature a driver in the lead truck and unmanned trucks following close behind. Upon leaving the highway, drivers will resume control of each vehicle.

Supply chain control towers would make their way to the top spot as a major digital disruptor, as the automotive supply chain industry is a global network this helps major automakers like BMW and Mercedes build their control towers integrating their logistics players. Logistics players who can leverage digital twins would likely gain a lot because this would help in capturing many automotive players.

COVID-19 PANDEMIC ON UNITED STATES AUTOMOTIVE LOGISTICS INDUSTRY RESPONSE

1. Wallenius Wilhelmsen Group announced it would temporarily lay off 2,500 production employees in the US and Mexico, as they expect a sharp drop in demand for US-Mexico tradeline.
2. The uncertainty facing SIEM and NYE comes as they are enlarging their fleet with the delivery of the first of two deep-sea car carriers fueled by liquefied natural gas (LNG). The vessels of SIEM will handle vehicle shipments exclusively for the Volkswagen Group.
3. Baltimore, Brunswick, Jacksonville, and New York/New Jersey have all seen a rise in export and import of vehicles though the overall vehicle imports remain 35% lower than last year and the overall exports are down by 32%. High-and-heavy ro-ro also saw a dramatic slide in the first half, down 64 %.
4. General Motors is forecasting 45,000 units through Baltimore from South Korea next year. Volkswagen also recently began a new service delivering vehicles through a Port of Baltimore partner facility called Tradepoint Atlantic, a 3,300-acre global logistics center. Volkswagen anticipates bringing in about 120,000 vehicles per year
5. The Port of New York and New Jersey is anticipating an extra 35,000 vehicles imported through the port as a result of Japanese manufacturer Nissan’s expansion of short-sea shipping services to New York and New Jersey from Mexico.
6. “K” Line said it is planning to cut its car carrier fleet to 71 ships this year, from 85 vessels at the end of March, through a mix of vessel sales, lay-ups, and returning vessels to charterers.