China's automakers are taking a shortcut to European markets

Time of India

a day ago

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BEIJING: Chinese automakers are shipping cars to Europe through the Red Sea and Suez Canal , nearly two years after the Iran-backed Houthi militia in Yemen started attacking vessels in the critical Middle East transit route.Other automakers are still shipping cars from Asia by way of a much longer, and expensive, trip around Africa.Last month, at least 14 car-carrier ships traveled from Chinese ports to Europe through the Red Sea and Suez Canal, according to a new analysis by Lloyd's List Intelligence , a British maritime information service. About the same number made the voyage in June.The trips have continued even after the Houthis used drones, grenades and gunfire to sink two other cargo ships early last month. The militia group says the attacks are in solidarity with Palestinians living through Israel's war against Hamas in the Gaza Strip.Most shipping analysts assume that the Chinese government has reached an understanding with Iran or the Houthis not to harm car-carrier ships from China . It seems that "China has found a way to deal with the Iran-backed Houthi rebels, and they have been told that their ships will not be targeted," said Daniel Nash, associate director of valuation and analytics at Veson Nautical, another maritime data firm.Traveling through the Red Sea and Suez Canal saves 14 to 18 days on each round trip between Asia and Europe, compared with going around Africa. This reduces costs for fuel, crews and the ships themselves by a couple hundred dollars per car.Going around Africa "adds considerable costs to a shipowner's fuel bill, increases pollution from the vessel and ultimately adds costs for buyers of new cars," said Rob Willmington, a senior analyst at Lloyd's List who led the review of voyages by car-carrier ships.The savings help Chinese automakers compete in Europe with Japanese, Korean and European automakers, which rely on European and Japanese shipping lines that are not using Red Sea routes.Chinese automakers face other costs -- thousands of dollars for each car -- from tariffs the European Union imposed on electric vehicles from China last year.BYD and other Chinese automakers have partly bypassed those tariffs by sending hybrid cars that mainly use battery-powered electric motors with small gasoline engines as backups.Most other commercial vessels, including big container ships belonging to the state-owned China Ocean Shipping Co., known as Cosco, have been avoiding the Red Sea and Suez Canal since the Houthi militia began sinking or hijacking ships near Yemen in November 2023. Shipowners in Europe and Asia mostly refuse to allow companies to charter their vessels for such trips. Commercial insurers in London have become wary of insuring such voyages, charging higher rates when they do.Chinese automakers, notably BYD and SAIC Motor, have taken delivery in recent months from Chinese shipyards of some of the world's largest ships designed specially to carry cars. The automakers are sending these newly built vessels through the Red Sea anyway. Built in shipyards on or near the Yangtze River, these ships have a dozen decks and can carry as many as 5,000 cars, worth a total of $100 million or more, on each voyage.The state-owned SAIC Motor, previously known as the Shanghai Automotive Industry Corp., and BYD did not respond to requests for comment. In addition to Chinese-owned ships, several car-carrier ships owned by a South Korean company or by a joint venture of businesses in Abu Dhabi, United Arab Emirates, and Turkey also sailed through the Red Sea and Suez Canal in June and July after stopping at car-loading ports in China, Willmington said.In a written reply to questions, China's Ministry of Foreign Affairs did not mention car-carrier ships but said that "China has been playing an active role in easing tensions since the situation in the Red Sea escalated, and will continue to contribute to the early restoration of peace and tranquility in the Red Sea."China buys almost all of Iran's crude oil exports, which represent 6% of Iran's economy and are equal to half of the Iranian government's annual budget. Chinese officials contend that boycotts of Iran's oil exports were organised by the West but never approved by the United Nations, and so are not binding on Chinese oil companies.The Houthis announced July 28 that they would continue their campaign of attacks on ships that they believe have any connection to Israel or Israeli ports. The campaign began soon after Hamas militants from Gaza attacked southern Israel on Oct. 7, 2023.One of the first Houthi targets, and the best-known incident, involved the hijacking in November 2023 of the Galaxy Leader, a car-carrier ship that was traveling back empty from Europe to Asia. The ship's 25-member crew was held hostage for 14 months in Yemen and finally released in January, but the Houthis kept the ship at a Yemeni port.The Israeli air force bombed the vessel a month ago after reports that the Houthis were using a sophisticated radar system on the ship to track potential targets in the Red Sea for attacks.