Driving the automotive industry forward

Driving the automotive industry forward

The air cargo industry has experienced unprecedented change over the past few years due to a number of factors, including the Covid-19 pandemic, supply chain issues, Brexit, driver shortages and the war in Ukraine. These extraneous factors hit some sectors harder than others but one that took a significant knock was the automotive industry.

As a consequence, the air cargo sector has had to adapt to a new set of priorities at a time when the shift to electric vehicles (EVs) was already altering historically ingrained practices. Thankfully, air cargo already requires an agile approach and this has enabled companies, like time-critical logistics specialist Priority Freight, to adapt quickly to ensure the needs of the industry and the end user are satisfied, despite the challenges.

Challenges facing the industry  

The pandemic acted as a catalyst for some issues the industry was already facing, while also revealing some new ones. “We are currently contending with a challenge that is arguably overtaking the semiconductor shortages as the biggest supply chain issue for automotive – the shortage of wiring looms due to the Ukraine conflict,” Steve Downing, Head of Group Projects at Priority Freight, said.

With the ramp-up to an electric future in full swing, the air logistics industry is facing ongoing challenges such as the transportation of lithium-ion batteries, which are large, heavy and classed as dangerous goods. For safety reasons, they often cannot be stacked and this, along with their density, means few can be transported at any one time. The air cargo and automotive industries are working together to find ways to ensure a safe and cost-effective method of shipping these complex but vital components.

Priority Freight was recently commissioned to move 160 tonnes of lithium-ion electric vehicle batteries from China to Europe as a matter of urgency to prevent a halt in the production line. Interestingly, with the well-documented global shortage of semiconductors, we have seen a drop off in their movement by air. Whether this will continue to decline as manufacturers start to make their own semiconductors remains to be seen, but our feeling is that reliable internal production is still years away.

Read more: Air France KLM Martinair Cargo and Jan de Rijk Logistics introduce new LHV

Supply chain integrity 

For now, demand for air cargo remains buoyant and customers who choose a freight forwarder with an agile and flexible approach are ultimately the ones most likely to keep their production lines moving.

Recently, Priority Freight was tasked with transporting two tonnes of automotive parts from China to Spain in just 36 hours in order to prevent costly downtime. The cargo needed to be collected from two different Tianjin-based manufacturers which, at the time of the booking, were closed and had no idea the emergency transport was already being organised.

Their team prepared the relevant paperwork needed for customs and were ready with two vehicles to pick up the parts as soon as the Chinese manufacturers started work for the day, transferring to Shanghai airport (PVG) for the first suitable flight.

“To ensure the goods would arrive in Spain by the following evening, we knew the only solution would be air freight to Frankfurt (FRA) and then charter a flight to Madrid (MAD). Priority Freight having its own regional office at FRA airport played a big part in the success of the operation. We secured a direct flight to FRA for all two tons of cargo, where the team was able to expedite customs for a re-route to Stuttgart airport (STR). There, the chartered SAAB 340 aircraft was waiting to fly to MAD,” Downing explained.

“By the time our Spanish customer had woken up, all cargo had been loaded from both loading points and the vehicles were able to make the deadline to PVG. The cargo departed China and arrived in FRA less than 36 hours after the initial call came in. In Frankfurt, the cargo was divided in two – with the urgently required goods transferred to MAD via air charter from STR, and the less urgent components followed via road freight. This move, initiated by Priority Freight, saved €8,000 in freight costs for the client.”

Current state of play 

“We saw an initial increase in number of air charters being organised as a result of Brexit and the pandemic and, while we expected them to decrease again, the levels of air charter jobs have increased further. This is in part due to the ongoing supply chain challenges that have increased the reliance on air cargo for urgent shipments. Downtime in automotive manufacturing is costly and air cargo is often the only option for OEMs that utilise the just-in-time production model,” Downing stated.

Air cargo rates, although slightly lower than at their peak, remain high due to the ongoing lack of new aircraft – those that are in operation are over capacity, and there is also the rise in crude oil barrel pricing and the lack of truck drivers to move goods via road, especially within Europe. More recently, the inability to use Russia / Ukrainian airspace has meant that many flights are not able to take the most direct route to a destination, contributing to a weakened supply chain and higher rates to cover the necessary detours.

Some speculate that rising inflation may lead to a reduction in demand for air cargo as finance departments tighten their belts, but for the automotive sector at least, air cargo costs are always more cost-efficient than production line stoppages.

“We think that the demand for air cargo from the automotive industry will be very much driven by the consumer. While the demand is there, OEMs will scale up their logistical needs and Priority Freight will respond accordingly,” Downing said.

Read more: DB Schenker launches its first charter flights between Europe and South America

The air cargo outlook for the automotive industry  

The big question most manufacturers will be asking is, what is consumer confidence likely to be over the next 6-12 months, given recent developments in the global economy and geopolitical landscapes? “We think this will be a key driver on how the OEM’s will plan their logistical requirements,” Downing added.

Sustainability is high on the agenda for all manufacturers and they will, without doubt, be looking to lessen their carbon footprint by engaging with logistical providers that have smarter and cleaner methods of air logistics, for example, aircraft that use Sustainable Aviation Fuel (SAF). Environmentally it is more sustainable, but the economic case is less clear. Even with the current exceptionally high price of petroleum-based aviation fuel, SAF can still cost three to four times more.

“Our view at Priority Freight is that the demand for air charter will continue to increase – even once the semiconductor and wiring loom issues have been resolved – not least because of electric vehicle production ramping up. The type of goods we transport may change but the demand for air cargo is likely to remain high as we continue to meet the needs of a rapidly evolving and globally distributed automotive sector,” Downing concluded.

Picture of Edward Hardy

Edward Hardy

Having become a journalist after university, Edward Hardy has been a reporter and editor at some of the world's leading publications and news sites. In 2022, he became Air Cargo Week's Editor. Got news to share? Contact me on Edward.Hardy@AirCargoWeek.com

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