Heavy investment in automotive logistics

LinkedIn +

The car industry may have been the driving force in logistics innovation in the past but a new report by Transport Intelligence indicates that the European automotive logistics market faces tougher times ahead. However this is unlikely to stop logistics companies from investing heavily in the sector.

A market worth Euro 17Bn will stay firmly in the control of the vehicle manufacturers, and will grow by as little as 1 or 2% a year. The conclusion of Transport Intelligence’s Automotive Logistics Report Europe 2004 is that there is unlikely to be much more out-sourcing of higher margin logistics activities over the coming years and there is little evidence to suggest that many vehicle manufacturers are interested in fashionable ideas such as ‘fourth-party logistics providers’ (4PL) – where management and planning are outsourced, despite some projects in this area by Ford and GM.

Some of the largest logistics operations are still owned by the vehicle manufacturers and their purchasing policies are designed to avoid consolidation amongst suppliers.

The inbound logistics market is likely to be hit by flat production levels in western Europe, although there is slightly better news for finished vehicle logistics companies as prospects for sales (including imports from outside the EU) are more positive. However, the finished vehicle logistics companies’ hopes of dealership deregulation leading to a logistics bonanza show no signs of happening.

Even component suppliers are cautious about logistics outsourcing, looking to base their logistics systems on the Toyota Production System.

The report identifies that the greatest opportunities for logistics companies lie in central Europe but this market accounts for only a small proportion of production compared with the region as a whole. Car carrying shipping companies are also set to benefit from the growing trickle of Chinese imports.

The difficult market conditions have not discouraged logistics companies from investing in the sector. New entrants include those with backing from massive new global logistics companies flush with cash from the boom in China and from sectors such as express parcels. They now want to prove themselves in the leading market for industrial logistics – the automotive sector. So expect a lot more take-overs and bankruptcies. Profits will remain grim.

Share this story: