The never-ending impact on the automotive supply chain continues. We’ve written extensively about the shortage of chips and other parts, and the multiple causes of these shortages. Automakers are currently feeling the disruption from the crisis in Ukraine and the sanctions against Russia in their supply chains. This post addresses another challenge – the shortage of shipping containers and cargo ships.
The global backlog of shipping is well documented. An industry article from last year, “Where Are All the Containers?” closed the domino effect of a lack of container manufacturing before the pandemic worsened with the delays caused by the pandemic. Containers got stuck in inland ports, storage locations or were gobbled up by the highest bidder.
In November, the Washington Post reported that major retailers like Ikea were reprioritizing the products they ship in containers to focus on “lightweight” and “flexible” products so more can fit in each container. This prioritization doesn’t bode well for vehicles, which take up much more space than other consumer products. The Post report also found that about 3 million containers were stuck in various locations due to a lack of manpower to transport them. Vox followed shortly thereafter, claiming containers were “destroying” the supply chain.
The situation has not improved. The New York Times analyzed the global shipping industry and concluded that shipping restrictions are unlikely to improve in 2022. Just this week, a huge cargo ship carrying up to 4,000 vehicles (and 1,500 rare cars) caught fire and sank, reportedly destroying up to 1,000 people in vehicles worth $400 million. Luckily, the crew was safely rescued, but manufacturers and car buyers, long awaiting tight space on a container ship, saw their new vehicles — rare Bentleys, Porsches and Lamborghinis — burst into flames. VW was apparently hit particularly hard, as a large proportion of the vehicles on board were intended for new VW car owners.
What will happen next? At least one container company cited trends toward increased shipping container manufacturing and regionalization of manufacturing and sourcing as potential remedies. As more supply chain partners seek to reduce the distances parts and accessories travel and labor markets begin to normalize, the industry is hoping competition for shipping containers will ease.
© 2022 Foley & Lardner LLPNational Law Review, Volume XII, Number 67