BYD Takes to the Seas: Chinese Company Ventures into Shipping Business to Meet Rising Demand for its Electric Cars

Sunday - February 4 2024, 22:08 UTC - 9 months ago

BYD, China's largest electric vehicle maker, is expanding into the shipping business to meet the rising demand for its cars overseas. This move was a result of a shortage of roll-on/roll-off ships, with BYD being unable to access them at reasonable prices. The company's shift into shipping was first reported in late 2022 and has since acquired its first ship, the BYD Explorer No.1, to support its role in the global car trade.

Earlier this month, a massive ship picked up over 5,000 electric cars from two ports in northern and southern China. Five days later, it passed through Singapore, and it is now headed for India. However, its final destination is in Europe, where most of the cars will be sold. The ship’s name is BYD Explorer No.1. As the first of a massive fleet that BYD is building, it reflects the Chinese company’s ambition to establish a seafaring business that supports its new role in the global car trade.

BYD, founded by a Chinese metallurgy researcher named Wang Chuanfu in 1995, started out making small batteries for mobile devices. It later expanded its business to automobiles and eventually combined the two to make electric vehicles. In two decades, it became China’s largest EV maker. By the fourth quarter of 2023, it was the world’s.

BYD offers a lot of options, ranging from affordable sedans to luxury SUVs, and there's rising appetite for its cars overseas. In 2023, BYD exported over 240,000 vehicles, up from 55,000 in 2022. But it’s run into a snag: to get the most financial benefit from its exploding popularity abroad, it’s having to expand beyond the car trade into the shipping business.To understand why BYD has made this move, you need to learn a little about how cars are transported across the sea. Usually, the cargo industry uses roll-on/roll-off (RORO) ships. Unlike ships that use a crane to lift up cargo and place it aboard, RORO ships have ramps that allow vehicles to be driven directly on, making the whole process much easier.

But these ships have been in short supply for the past few years. While old vessels have been entering retirement, new ship orders were down because of the 2008 financial crisis and the industry-wide upgrade to more environmentally friendly fuels, leaving a shortfall.Also, most car companies have longstanding relationships with shipping firms or own their own fleets of boats. For example, Japanese car makers like Nissan and Toyota each have fleets of RORO ships that can carry tens of thousands of cars. But China’s domestic car-carrier vessels represent only 2.8% of global shipping capacity, leaving the Chinese brands few options for getting their cars across the seas.

As a result, their access to RORO ships has become prohibitively expensive. According to Clarksons Research, the intelligence arm of the world’s largest shipping services provider, the price to rent (or charter, as the industry says) a car-carrier ship for a day skyrocketed to $115,000 in 2023, a historical high and close to seven times the average pre-pandemic price, which was around $17,000 in 2019.

The shortage of shipping capacity is what’s standing in its way.

Venturing out by themselves .

News that BYD was looking to buy or charter ships was first reported by the shipping outlet Lloyd’s List in late 2022. In December that year, the company changed its corporate registration to include the business of international cargo shipping and ship management. MIT Technology Review contacted BYD for comment, but it did not respond in time for publication.

BYD Explorer No.1 was delivered at the beginning of this year.