HONG KONG — UTi Worldwide Inc. has created a strategic partnership with the largest auto logistics provider in China in a move that will position both companies for an expected increase in the exporting of finished vehicles to overseas markets.
The UTi partnership with Beijing Changjiu Logistics will initially provide the supply chain requirements of global automotive OEMs and suppliers in the booming automotive market in China, but will also unlock global business as parts follow vehicle exports.
“This will allow us to tap into the next big wave as Chinese original equipment manufacturers (OEMs) and suppliers begin to export finished vehicles and service parts abroad,” Bo Shijiu, board chairman of Changjiu Logistics, said in a statement.
Changjiu Logistics is a privately held company and the largest independent automotive logistics operator in China with $500 million in annual revenue.
Ditlev Blicher, UTi president, Asia Pacific, said UTi and Changjiu will offer end-to-end service for automotive clients integrating freight forwarding, inland transportation, production logistics, order management, and customs brokerage.
“Changjiu Logistics is a pioneer in finished vehicle transportation and warehousing in China and their agile, entrepreneurial culture is what attracted us to partner with this company to best serve the needs of automotive clients in global markets,” he said.
The partnership gives each company the ability to cross-sell each other’s core capabilities to automotive companies around the world and creates a lead service provider in Asia-Pacific, according to Blicher.
Both companies will benefit from the deal. The partnership will help UTi grow its footprint in the China market, leveraging Changjiu’s client base, cultural awareness and governmental relationships, while Changjiu clients will gain faster entry into global markets through UTi’s international network of supply chain and transportation services.
“We believe that by combining UTi’s industry leading automotive solutions with Changjiu’s more than 23 years of operating experience and our proven capability in automotive logistics transportation, we will release value for global companies importing into China,” Bo said.
Obtaining value for the logistics companies may not be easy. Profit margins for logistics providers in China were around 4 percent last year, well below the average at other industries. Steadily rising costs in the country make such profit levels unsustainable, but logistics companies complain that OEMs ignore rising labour and transport costs in China and demand constant price reductions.
Yet even as these OEMs drive a hard bargain, they are rapidly increasing the size of the market and creating new opportunities for auto logistics providers. Production facilities are being expanded in the manufacturing hubs along the coastal regions of the east.
For instance, BMW Brilliance Automotive Ltd., a joint venture between BMW and Brilliance Auto, has experienced strong growth over the last 12 months, requiring a further 132,000 square feet of new space to be added to the initial 355,000 square feet it signed for in October last year. The facility will replace BMW Brilliance Automotive’s three existing and separate distribution centers in Beijing and become the regional auto parts distribution centre for Northern China.
“The demand for high-quality warehousing space continues to surge in Northern China, and is driving the expansion of our footprint in this region,” said Philip Pearce, managing director greater China for Goodman.
Tier one supplier Delphi has also seen strong growth in China, and to meet demand the company is doubling capacity at its factories in the tier two cities of Chongqing and Chengdu.
Contact Greg Knowler at email@example.com and follow him on Twitter: @greg_knowler.