All electric in the Middle Kingdom?

According to China’s Passenger Cars Association, China ranked second – just behind Germany – in terms of exported cars last year. Experts estimate that by 2025 the current leader, Europe, will import more cars than it will export. In fact, two of China’s biggest automakers are so determined to ensure their cars make it from factories to global customers that they’ve bought their own ships to be ready for export. BYD, which makes only electric and hybrid cars, is going the extra length to avoid any supply chain troubles, ordering at least six ships in October 2022, each capable of carrying 7,700 cars. The state-owned SAIC Motor Corporation already operates the world’s fifth-largest shipping fleet for cars through its own transport subsidiary.

While Chinese manufacturers are selling more and more electric vehicles in Europe, both European and American manufacturers are increasingly shifting their electric vehicle production to China to gain better access to key components in final production.

The Chinese car industry is picking up speed

Nowadays, Chinese car brands are already leaders in several markets in the Middle East and Latin America. In Europe, sales are dominated by Tesla and Chinese-owned former European brands such as Polestar (Volvo) and MG, as well as European car models such as the Dacia Spring or the BMW iX3, which is produced exclusively in China. Chinese car brands such as BYD, NIO, AIWAYS, LYNK, just to name a few, are further venturing into the European and US markets with remarkably high ambitions. Chinese carmakers aim to compete with established carmakers in Europe and the US, but Chinese brands are still relatively unknown in Europe and have a lot of work to do to build a strong brand reputation. Earlier efforts by Chinese brands to enter the European market have largely failed, but this time China’s expertise in fully electric vehicles could be a decisive competitive advantage.

Different strategic approach to electric vehicles

In the United States and Europe, many producers focus on premium electric models and segments where there is little sensitivity to high prices. In the past, neither US nor European producers have succeeded in adjusting electric car prices to lower- and middle-income consumers. Despite the fact that Chinese carmakers are not particularly well regarded in Europe and the US, these circumstances now give China the opportunity to capture a significant market share in this segment. Studies show that in recent years, Chinese car manufacturers have managed to significantly reduce the prices of electric vehicles. In the US and Europe, on the other hand, they have risen. While in China, the costs of an electric car averaged around 32,000 EUR in the first half of 2022, the price in Europe is around 56,000 EUR – a significant cost advantage that is likely to put Western manufacturers under pressure.

Big opportunity for air freight

High-value and sensitive parts, such as batteries, computer chips, sensors or other electronic components that are vitally needed in the automotive industry, are often shipped by air freight. Batteries are central to the design of electric vehicles and even though they are only shipped by airfreight when really necessary, their rising importance could increase the demand for urgent battery shipments by air.

Batteries are considered dangerous transport goods due to the highly flammable chemicals they contain. While all fires are dangerous, fires involving lithium-ion batteries can be particularly severe. This is because they release a toxic, flammable vapor that can keep the fire going while also harming bystanders. Add this risk to an air freight shipment and you can understand why battery transports have not been particularly popular with cargo airlines in the past.

A special certificate for batteries

But those concerns seemed to change recently with IATA’s Center of Excellence for Independent Validators (CEIV) Lithium Battery certification. This is IATA’s most recent CEIV certification and is in line with similar certifications for handling pharmaceuticals, perishables, and live animals. Like the other certificates, it aims to improve safety in the handling and transportation of special goods throughout the supply chain.

Lithium battery shipments – either on their own or in finished products – must meet established global safety standards for manufacturing process, testing, packaging, marking, labeling and documentation. These requirements are key to the IATA Lithium Battery Shipping Regulations (LBSR) and the IATA Dangerous Goods Regulations (DGR), which combine regulatory and operational aspects based on recommendations from industry experts and government regulators.

As of February 2023, only two airlines have received the respective certification, with LATAM Cargo being the world’s first and Qatar Airways the second. In addition, Qatar Aviation Services is the first ground handling company to be certified globally.

The cargo division of Qatar Airways has already announced the complete exchange of its more than 10,000 ULD containers with a newly developed model from Safran Cabins. They are designed to withstand a lithium-based fire for up to six hours.

Emergency transports are crucial for the automotive industry

In general, air freight solutions are especially important for the automotive industry when companies launch new vehicles. Technical changes are often made to vehicles after market launch to address quality issues that might arise in the beginning. In this case, air freight can be a crucial and decisive factor in providing spare parts in a timely manner during potential recall campaigns. And besides, a stopping conveyor belt in a factory is far more costly to the company than an urgent emergency transport – even if the transported goods are only a few cases of very special screws…

With China boosting its role on the global automotive market and aiming for a “top spot”, this could lead to new developments for automotive supply chains. The country has already become the second largest exporter of vehicle parts, and most Chinese cars are produced directly in the country. For air freight, this means great potential for transports between manufacturers, suppliers and spare parts providers for the production of (electric) vehicles to and from China.