1. Overview and Impact of Tariff Negotiations
In 2025, tariff negotiations among the United States, Japan, South Korea, and the European Union (EU) concluded, leading to significant changes in automobile tariffs.
| Country/Region | Tariff Before Negotiation | Tariff After Negotiation | Change |
|---|---|---|---|
| South Korea | Effectively 0% (FTA) | 15% | +15% |
| Japan | 2.5% | 15% | +12.5% |
| EU | 2.5% | 15% | +12.5% |
South Korea previously benefited from zero tariffs under the US-Korea Free Trade Agreement (FTA), but the revised terms are expected to impact Korean automakers most severely. Japanese and EU manufacturers will also be subject to higher tariffs, prompting them to accelerate their local production strategies within the United States.
2. Decline in Transport Demand Due to Local Production
New car export volumes to the United States from 2023 to 2024:
- South Korea: Approximately 47% of total vehicle exports were destined for the US
- Japan: Approximately 25–32% of total vehicle exports were US-bound
Roughly 2.7 million vehicles were exported from East Asia (Japan and South Korea) to the US, alongside 1.12 million units from the EU. These combined 4 million vehicles represent approximately 18% of global car carrier transport volume.
Although a rapid shift to local production is unlikely, a gradual decline in export volumes appears inevitable.
3. Future Outlook for Car Carrier Transport
If transport demand decreases by 15% or more, the following operational impacts are anticipated:
- Large car carriers (capacity: 6,000–8,000 vehicles) will need to increase the number of port calls, significantly reducing operational efficiency
- Transitioning to medium-sized vessels (capacity: fewer than 4,000 vehicles) is a viable alternative, but with only around 160 such vessels in existence, widespread adoption remains challenging
Age distribution of existing medium-sized vessels:
- Less than 10 years old: 75 vessels
- 11 to 20 years old: 60 vessels
- Over 20 years old: 25 vessels
Meanwhile, more than 150 newly built large car carriers are scheduled to enter service between 2025 and 2026. This supply imbalance may force operators to run large vessels at a loss. Simultaneously, they may be compelled to scrap already depreciated and cost-efficient medium-sized vessels to reduce fleet size and alleviate market oversupply.
4. The Car Transport Industry at a Crossroads: End of Prosperity, Start of Restructuring?
Following the COVID-19 pandemic, surging global consumption and restrictions on the Panama and Suez Canals extended shipping distances, triggering a shortage of car carriers and an unprecedented boom in the industry. However, as local automobile production advances, shipping demand is expected to decline steadily year by year. This trend may accelerate if consumer demand slows and canal restrictions are lifted.
Historically, excess shipping capacity has been managed by scrapping older vessels. Today, such measures are financially and politically difficult, as most large ships currently in operation are relatively new. While operators without large vessels may enjoy a competitive edge, existing mid-sized fleets are aging. As the industry enters a period of contraction, the decision to invest in new vessels will become a critical strategic consideration.
5. Future-Proof Automotive Shipping Strategy
In many countries, automobile demand remains insufficient to justify local production, meaning international shipping between producing and consuming nations will continue. However, due to the limited number of vehicles exported per voyage, car carriers must expand their port calls to maintain profitability.
From an economic perspective, it is inefficient for large car carriers to operate across multiple discharge ports. Therefore, two operational models are considered viable:
- Transport from the producing country to a hub port using large vessels, followed by feeder transport via medium-sized or smaller ships
- Direct transport using medium-sized vessels with limited discharge ports
In this context, securing the right markets is essential to gaining a competitive advantage.
Long-distance transport to remote consumer markets requires large-scale systems built on long-term strategies, including vessel selection, hub port development, and feeder ship coordination—all of which demand substantial investment and time.
Conversely, short-distance transport enables direct delivery using medium- or small-sized vessels with minimal preparation. Shuttle operations using the same vessels allow services to be maintained with fewer ships, eliminating the need for large-scale capital investment.
Additionally, shorter routes allow for increased operational efficiency by maximizing the number of active days (days when cargo is loaded). Although short-distance freight rates are generally lower than long-distance rates, higher vessel utilization can result in greater total annual freight revenue.
Therefore, the most strategic routes to secure ahead of competitors are those involving short-distance transport, which require neither extensive preparation nor large-scale infrastructure investment.
Login to comment