GAC Forwarding & Shipping: The Chinese automobile industry must be more specialized

Gasgoo.com interviewed Xu Xinlong, president of GAC Forwarding & Shipping (Shanghai) Co, Ltd.

The rapid growth of automobile industry has given Chinese logistics companies much more room to expand. Meanwhile, more and more automobile companies look to these companies to supply logistics services, including vehicle transport, entrance and aftermarket auto part logistics. As new models continue to debut in the market and as the time manufacturers have to devote to R&D shortens, auto part logistics have becomes more and more in demand. This huge market has attracted the attention of countless logistics companies. To top it all off, international giants are looking to displace domestic businesses. With its decade-long history, GAC Forwarding & Shipping is one of them. On June 24, 2011, Gasgoo.com interviewed Xu Xinlong, president of GAC Forwarding & Shipping (Shanghai) Co, Ltd., regarding the state of the Chinese logistics industry and his company's operation mode.

Gasgoo.com: Since its establishment in 2002, GAC Forwarding & Shipping (Shanghai) Co, Ltd. has been providing Chinese logistics services. When did your company begin working specifically in the automobile industry? Can you explain in details about what sort of company GAC Forwarding & Shipping is?

Xu Xinlong: Actually, GAC Forwarding & Shipping is the Chinese subsidiary of Swedish company GAC. GAC's Chinese headquarter is located in Shanghai. Furthermore, GAC has branches in Amoy, Beijing, Tianjin and Tsingtao, and has opened operating bodies in other areas.

Gasgoo.com: How much does automobile logistics distribution account for the whole logistics business? Which enterprises does GAC cooperate with?

Xu Xinlong: When speaking of imports, automobile logistics constitutes 50 percent of GAC's business. As for exports, it takes 15 percent. The enterprises currently cooperating with us include Linamar, AutoKabel, Koyo, Faurecia, Sabo Kaco, BOA and TRW. In addition, our company also provides export services for automobile manufacturers. Compared with 2010, our company's business increased 20 percent during the first half of this year.

Gasgoo.com: Following the rapid development of the Chinese automobile market, some well-known international logistics companies have started pouring into China. Comparing with your rival, what advantages does GAC have in the fields it works in?

Xu Xinlong: First of all, GAC has formed a professional team to handle automobile logistics services. We have established the GAL professional automobile logistics department. Meanwhile our company has worked non-stop to improve our quality service in order to create a recognizable industry brand. Furthermore, from the very beginning GAC has used customers' viewpoints to make unique case solutions to tackle logistics problems. This includes, but is not limited to, aftermarket service, finished products logistics and comprehensive supply chain management. GAC's goal is to help global automobile and auto parts enterprises increase the effectiveness of their supply chains.

Gasgoo.com: What method does your company take to help increase supply chain efficiency?

Xu Xinlong: Firstly, GAC creates a complete service solution in accordance to customer requirements. At the same time, our company makes use of intensive management. The key point to remember about auto parts is that they are relatively sparse, with the amount needed by each customer usually relatively small. GAC intensively manages auto parts for customers all across the globe. Every week we fill one to two filing cabinets worth of case solutions to be sent alongside the orders. This intensive method can cut down the carmakers’ transportation cost, speed up the delivery, as well as enhance the security of goods.

As for the CKD business, our company is working with Englon, we transport 40 cars to them every week. All these cars are completely knocked down with thousands of auto parts, and we are responsible for sorting, packaging, transportation, distribution and after sales service.

Gasgoo.com: What is your opinion in regards to the current state of the automobile logistics industry in China? How will it affect the development of your company's business?

Xu Xinlong: China currently has one big problem, which is that import-export trade volume is not stable. There are many factors behind this, including appreciation of the Chinese RMB , the rising cost of fuel and the decrease in other countries' purchasing power. Unstable export volumes directly lead to constant change in shipping rates and delivery prices. This in turn causes companies' logistics costs to be very unstable. Furthermore, export volume has significantly decreased, and the volume of exports by air is very small. Meanwhile imports have been increasing constantly. The unbalance between imports and exports will greatly impact the logistics industry.

Gasgoo.com: How does your company plan to tackle these negative factors?

Xu Xinlong: First, our company will properly allocate order times to prevent imports and exports from stacking up unevenly. Secondly, we will cooperate with several aviation companies. As the automobile industry places heavy emphasis on the timeliness and security of product delivery, GAC will do its best to make sure these two points are satisfactorily completed. GAC will spare nothing in order to find the best solutions to optimize logistics costs.

Gasgoo.com: What do you think of development trends in the Chinese automobile logistics industry for the future?

Xu Xinlong: I am fully confident in the future of the Chinese logistics industry. On one hand, sales in the Chinese automobile industry are continuing to increase, which helps speed up the development for the logistics industry. This sort of positive growth looks to be sustained for a long period of time. Secondly, the Western automobile industry, which includes automobile logistics, is already over-saturated. This forces international enterprises to have no choice but to look for and to transfer their services to immature markets and developing areas. I have no doubt that China and India are currently the best choices. The process of transferring services gives local markets technological and infrastructure support, which provides China with a great opportunity to develop.

Gasgoo.com: When faced with intense competition, some enterprises form partnerships in order to increase their strength. Does your company have any similar plans?

Xu Xinlong: We will and have always been cooperating with other companies; however we will not form a union. Not all of our services are done solely by us. GAC has a realistic, practical and flexible strategy, in which a portion of our logistics services are handled by our partners.

Gasgoo.com: In terms of the whole logistics industry, where does China come up lacking when compared with mature markets such as Europe and the US?

Xu Xinlong: Currently, the Chinese logistics industry is not developing healthily at all.

First is talent. There is almost no barrier to enter the logistics industry. Meanwhile the logistics majors offered at the university level are for all intents and purposes vapid and lacking any real substance. This all leads to a severe lack of talent in the industry.

Second is the imbalance between imports and exports. Unstable trade development is a large blow to the logistics industry.

Third is the continued existence of unhealthy competition within the industry, which still requires the government's guidance.

Fourth is poor management and high traffic expenses, both of which cause logistics costs to be unnecessarily high.

Of course, every new industry needs to go through a maturing process. European and US companies have also been through this process. Therefore, I still retain full confidence in the Chinese automobile logistics industry.

Gasgoo.com: How do you think the development of GAC in the past 20 years?

Xu Xinlong: GAC has truly developed in the past ten years, with its services growing 10 to 20 percent annually. However, GAC's sales volume still has room to grow, while its services should continue to expand in the future.

Gasgoo.com: What plans do you have for the next three to five years?

Xu Xinlong: Our automobile logistics services will grow 50 percent, while our customers will increase to over 30. GAC's automobile logistics business will be a specialized and independent part of GAC China.