FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special...

12
Upheaval by 'service providers' "Freightratesmayhavekeptfalling for10years,butoperationcostshave neverstoppedincreasing.Inparticular, personnelexpenseshavemaintainedan increasingpaceofmorethan10%per year." Thedomestictransportationofauto partsinChinaissomewhatofanuisance tologisticserviceproviders.Dealingswith finishedvehiclemanufacturersarebased onthepremiseofcostreduction:so- called"Gentei"(costreduction)or"Kaizen" (improvement),referringtoareductionin thepricesforpartsandlogisticexpenses byafewpercentcomparedtotheprevious year.Whencompletedcarmanufacturers decreaselogisticscosts,autoparts manufacturerstendtokeepinpacewith KAIJI PRESS CO.,LTD. Copyright©2015KAIJIPRESS.Allrightsreserved. FEBRUARY 2015 No.007 China Automobile Logistics Special feature China Logistics Special Report Guangzhou, Changsha, Wuhan Automobile Logistics C hina, the largest automobile market in the world, is showing signs of change, such as a declining share of Japanese brands, continuous growth of small cars and SUVs, and an increase in the domestic procurement. But will these paradigm shifts lead to good opportunities for the logistics business? While the cargo flow is slowing down, local distributors determinedly insist that 'now is the time for automobiles in China'. In other words, the automobile logistics market has entered into a phase of fierce competition. This report will attempt to deliver insight into the current market. (By Masayuki Hasumi, Shanghai Bureau) The largest international cargo airport in Japan Narita International Airport 4 Comprehensive handling services at Narita and Centrair International Air Cargo Terminal 6 Japan's number one industrial agglomeration situating in the hinterland Chubu Centrair International Airport 8 CONTENTS

Transcript of FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special...

Page 1: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

�Upheaval by 'service providers'"Freight�rates�may�have�kept�falling�

for�10�years,�but�operation�costs�have�never�stopped�increasing.�In�particular,�personnel�expenses�have�maintained�an�increasing�pace�of�more�than�10%�per�

year."The�domestic�transportation�of�auto�

parts�in�China�is�somewhat�of�a�nuisance�to�logistic�service�providers.�Dealings�with�finished�vehicle�manufacturers�are�based�

on�the�premise�of�cost�reduction:�so-called�"Gentei"�(cost�reduction)�or�"Kaizen"�(improvement),�referring�to�a�reduction�in�the�prices�for�parts�and�logistic�expenses�by�a�few�percent�compared�to�the�previous�year.�When�completed�car�manufacturers�decrease�logistics�costs,�auto�parts�manufacturers�tend�to�keep�in�pace�with�

KAIJI PRESS CO.,LTD. Copyright�©�2015�KAIJI�PRESS.�All�rights�reserved.FEBRUARY 2015 No.007

ChinaAutomobile Logistics

Special feature─ China Logistics Special Report

Guangzhou, Changsha, Wuhan

Automobile LogisticsC hina, the largest automobile market in the world, is showing signs of change, such as a declining share of Japanese brands, continuous growth of small cars and SUVs, and an increase in the domestic procurement. But will these paradigm shifts lead to good opportunities for the logistics business? While the cargo flow is slowing down, local distributors determinedly insist that 'now is the time for automobiles in China'. In other words, the automobile logistics market has entered into a phase of fierce competition.

This report will attempt to deliver insight into the current market. (By Masayuki Hasumi, Shanghai Bureau)

The largest international cargo airport in Japan

Narita International Airport

4

Comprehensive handling services at Narita and Centrair

International Air Cargo Terminal

6

Japan's number one industrial agglomeration situating in the hinterland

Chubu Centrair International Airport

8

●CONTENTS ●

Page 2: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

UrumchiUrumchiUrumchiUrumchiUrumchiUrumchiUrumchiUrumchi

BeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijingBeijing

ChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchunChangchun

ShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyangShenyang

DalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianDalianTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjinTianjin

YantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantaiYantai青島青島青島青島QingdaoQingdao青島Qingdao青島青島Qingdao青島青島Qingdao青島青島Qingdao青島青島Qingdao青島青島Qingdao青島QingdaoQingdao

ShanghaiShanghaiShanghaiShanghaiShanghaiShanghaiShanghaiShanghaiShanghaiShanghaiShanghai

YanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYanchengYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchowYangchow

ZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhouZhengzhou

XiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyangXiangyang

ChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqingChongqing WuhanWuhanWuhanWuhanWuhanWuhanWuhanWuhanWuhanWuhanWuhanWuhan

ChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangshaChangsha

JiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiangJiujiang NingboNingboNingboNingboNingboNingboNingboNingboNingbo

FuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhouFuzhou

GuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouGuangzhouLiuzhouLiuzhouLiuzhouLiuzhouLiuzhouLiuzhouLiuzhouLiuzhou

ChengduChengduChengduChengduChengduChengduChengduChengduChengduChengdu

FoshanFoshanFoshanFoshanFoshanFoshanFoshan

NanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjingNanjing

■ Number of passenger car sales in China in 2013 by major foreign automobile manufacturersRank

(last year) Company Number of sales

Year-on-year growth

1 (2)VW (Germany) 3,200,000

cars 14%

2 (1)GM (USA)

3,160,000 11%

3 (3)Hyundai (Korea)

1,610,000 16%

4 (4)Nissan (Japan)

1,260,000 17%

5 (6)Ford (USA)

930,000 49%

6 (5)Toyota (Japan)

910,000 9%

7 (7)Honda (Japan)

750,000 26%

※ The data was collected from various statistics and articles in media and edited by Daily Cargo.

Sedan615.1

Sedan1200.9

SUV298.8

MPV130.5

Minivan162.5

SUV182.3

MPV88.2

Minivan77.6

Commercial car204.9

(3.1% down)

Commercial car405.5

(6.4% up)

China722.240.3%

German337.218.8%

German205.721.3%

Japanese147.215.3%

US122.112.7%

Korean86.39%

Japanese293.016.3%

US222.112.4%

Korean157.78.8%

French55.23.1%

Others5.2

0.3%

China363.037.7%

Others35.23.7

Others3.5

0.4%

Total1792.9

Total963.3

1168.3(8.3% up)

2198.4(13.8% up)

Passenger car963.3(11.1% up)

Passenger car1792.9(15.7% up)

2013 1st half of 20142013 1st half of 2014

Shift of the number of Automobile production and sales in China

Numbr of automobile sales in the world by country and regionUnit: 10 Thousand Cars

Number of automobile sales in ChinaUnit: 10 Thousand Cars

Unit: 10 Thousand Cars

Share of passenger car sales in China by country of manufacturer Unit: 10 Thousand Cars

Annual record of 2013

8548.8

China2,198.425.7%

Europe1,828.221.4%

USA1,588.318.6%

Japan 537.56.3%

Others1,478.1 17.3%

Malaysia 65.5 0.8%Mexico 110.0 1.3%

Indonesia 121.81.4%

Thailand 133.01.5%

India324.13.8%

Korea154.31.8%

Vietnam 9.6 0.1%

Germany 325.7Russia 295.0UK 259.5France 220.1Italy 142.00

500

1000

1500

2000

2500

934.5

1379.1

1826.41841.8

1927.1 2211.6

1178.3938.0

1364.4

1806.1

1850.51930.6

2198.4

1168.3934.5

1379.1

1826.41841.8

1927.1 2211.6

1178.3938.0

1364.4

1806.1

1850.51930.6

2198.4

1168.3

2008 2009 2010 2011 2012 2013 20141st half

Number of ProductionNumber of Sales

Source: all graphs from the statistics of China Association of Automobile Manufacturers

(Year)

Manufacturing bases of major foreign automobile manufacturers in China (including those under construction)

■ Outline of major JV Japanese automobile manufacturers in China (excluding consigned manufacturers)

Name of company Factory Production in 2014(Outlook as of summer 2014) Production capacity Major production models ( as of summer 2014)

Dongfeng Nissan

Guangzhou Huadu 1670,000 670,000 March, Sunny, Sylphy, Tiida, Livina, Qashqai (Dualis)

Guangzhou Huadu 2Xiangyang 130,000 250,000 Teana, MuranoZhengzhou 250,000 450,000 Venucia, X-TRAIL

Dalian Operation planned to start in October 2014 (150,000 units at the start) X-TRAIL, Qashqai (planned)

Zhengzhou Nissan Zhengzhou 200,000 (※) 350,000 (※) Paladin, NV200, Nissan Pickup trucks

Tianjin FAW Toyota Motor

Tianjin Xiqing

450,000420,000

Corolla, ViosTianjin TEDA 1

Corolla, Crown, RAV4, Reiz Tianjin TEDA 2

Sichuan FAW Toyota Motor

Changchun 110,000 Land Cruiser, Prius, RAV4Chengdu 30,000 Prado, Coaster

GAC Toyota MotorGuangzhou Nansha 1

400,000 400,000 Camry, Camry Hybrid, Highlander (Kluger), YarisGuangzhou Nansha 2Guangzhou Nansha 3 Operation planned to start in 2018 ―

Guangqi Honda

Guangzhou Huangpu550,000 Over 500,000

City, Fit, Cryder, Li NianGuangzhou Zengcheng 1 Accord, Crosstour, Odyssey

Guangzhou Zengcheng 2 Operation planned to start in the spring of 2015 (120,000 units at the start) Vezel (planned)

Dongfeng HondaWuhan 1

360,000240,000

CR-V, Civic, Spirior, Elysion, JadeWuhan 2 120,000Wuhan 3 Operation planned to start in 2016 ―

GAC Mitsubishi-Motors Changsha 70,000 130,000 ASX (RVR), Pajero SportChangan Mazda Nanjing 170,000 220,000 CX-5, Mazda 3 (Axela), Mazda 2 (Demio)

Changan SuzukiChongqing 1

― 350,000 SX4, Swift, Cultus, AltoChongqing 2

Changhe SuzukiJiujiang

―200,000 Liana (Aerio), Splash

Jingdezhen 100,000 Landy, Wagon R*“―” indicates no data available. ※Production and capacity of Zhengzhou Nissan includes those of commercial vehicle. The data was collected from interviews, press releases, various documents, articles in local media, etc. and edited by Daily Cargo.

2� Daily�-�CARGO�FEBRUARY�2015

them�by�calling�for�cost�reductions.�It�is�a�hierarchical�pyramid�structure�that�in�which�the�voice�of�authority�is�passed�down�to�lower�levels�from�the�very�top.�

In�such�a�world,�an�unprecedented�challenge�was�attempted�in�autumn�2013.�A�request�for�a�price�hike�from�a�logistics�company�was�made�to�a�completed�car�manufacturer.�In�other�words,�a�lowly�subcontractor�made�a�request�to�top�of�the�pyramid.�On�top�of�this,�the�request�was�made�not�at�the�time�of�contract�renewal�but�in�the�midst�of�a�contract�term.�"Despite�increasing�cargo�volumes�due�to�rising�production�levels,�the�current�price�level�no�longer�bears�any�profit.�We�realize�that�the�request�may�result�in�losing�our�contract,�but�it's�better�than�doing�nothing,"�said�a�concerned�party�during�the�attempt.��

"Our�contract�is�over,"�staff�of�the�manufacturer�yelled�at�him�at�first,�as�the�rebellious�request�of�the�agent�was�seen�as�a�disgraceful�act�to�their�counterpart,�which�is�taboo�in�terms�of�Chinese�business�customs.�However,�the�concerned�party�kept�insisting�on�the�necessity�of�improvement�as�a�last-ditch�effort�by�drawing�upon�the�relationships�he�had�built.�"We've�tried�our�best�for�a�long�time,�but�given�such�negative�earnings,�we�are�no�longer�capable�of�transporting�cargo."��

In�recent�years,�manufacturers�have�conducted�bids�once�every�two�or�three�years.�In�terms�of�procurement�distribution,�they�usually�select�one�agent�at�a�place�of�departure�in�each�area,�including�East�China,�South�China,�and�Central�China.�Foreign-invested�logistics�subsidiaries�of�Chinese�car�manufacturers,�however,�have�proven�to�be�obstacles�in�such�bids.�Chinese�car�manufacturers�often�send�relatives�of�executives�into�their�subsidiary�logistics�companies�in�order�to�tighten�their�grip�on�them.�As�for�distribution�of�cargo�for�such�manufacturers,�logistics�companies�affiliated�with�Chinese�car�manufacturers�have�won�deals�in�East�China�and�have�recently�been�expanding�into�South�China.�As�for�site�logistics,�which�are�referred�to�by�parties�involved�in�the�local�industry�as�'profitable�jobs',�Chinese�logistics�companies�effectively�'own'�all�the�factories.��

The�attempt,�which�seemed�unlikely�to�succeed�to�not�only�those�with�great�deals�but�also�to�those�that�requested�the�price�hike,�ultimately�resulted�in�a�success�as�result�of�persistent�negotiation�and�persuasion.�The�price�hike,�which�was�as�much�as�or�more�than�the�percentage�of�'Gentei',�was�accepted�as�a�part�of�consigned�operations�during�the�contract�term,�as�well�as�for�a�portion�of�operations�following�the�term.�The�staff�in�another�logistics�company�analyzed�the�situation,�stating�that,�"The�shipper�couldn't�have�maintained�its�distribution�network�(without�accepting�the�price�hike).�It�was�basically�taken�by�the�scruff�of�the�neck�and�given�no�choice�but�to�accept�the�hike."�The�tail�(read�'supplier')�that�wagged�the�dog�also�managed�to�place�successful�bids�for�transport�deals�around�the�new�factory.

Special feature─ China Logistics Special Report

Shipments being loaded at a warehouse in China

Page 3: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

Daily�-�CARGO�FEBRUARY�2015� 3

Reasons for "Gentei"Power�relationships�have�begun�to�

change.�With�the�annual�car�sales�1.4�times�more�than�United�States,�China�has�been�the�top-selling�country�in�the�world�for�five�successive�years.�The�number�of�sales�last�year�exceeded�20�million�units.�According�to�the�statistics�from�China�Association�of�Automobile�Manufactures�(CAAM),�Japanese�manufacturers�last�year�sold�about�2.93�million�passenger�cars�in�China.�This�record�surpasses�even�annual�combined�sales�of�Thailand�and�Indonesia,�both�of�which�are�rapidly�growing�nations.�

However,�the�share�of�Japanese�manufacturers�is�declining.�In�2010�and�2011,�their�total�combined�share�comprised�about�20%�of�the�total�passenger�car�sales,�but�that�figure�shrank�to�16%�the�following�year�due�to�factors�such�as�large�anti-Japan�demonstrations,�allowing�German�manufacturers�to�gain�a�lead.�In�2013,�the�gap�between�them�widened�instead�of�narrowing�in�the�first�half�of�2014�as�result�of�a�recovery�in�sales.�"We�have�ceased�trying�to�increase�our�share,"�said�a�local�board�member�of�a�Japanese�manufacturer.

One�of�the�reasons�is�the�intense�sales�competition.�The�price�of�Honda's�Accord,�for�example,�was�about�26,000�yuan�in�2003,�ten�years�ago.�The�current�price,�however,�is�about�180,000�yuan.�('Current�price'�refers�to�the�price�listed�on�the�website�as�of�the�end�of�September�2014.�The�same�definition�applies�hereinafter.)�Major�sales�trends�in�China�used�to�be�based�on�demand�for�new�cars�purchased�as�official�vehicles�by�government�institutions�or�state-owned�companies.�As�such,�sedan�types,�including�the�Accord,�occupied�a�major�part�of�sales.�Recent�trends,�however,�are�determined�by�public�

demand,�and�reflect�the�increase�in�income�as�well�as�the�national�favoring�of�luxury�goods.

The�major�trend�today�is�small�cars�in�low�price�ranges.�Nissan�announced�the�release�of�its�Venusia�at�minimum�price�of�400,000�yuan.�Toyota�sells�its�Yaris�with�a�price�tag�of�about�70,000�yuan,�while�Honda�offers�its�Fit�at�about�74,000�yuan.�Germany's�Volkswagen�has�introduced�its�Jetta,�and�Ford�from�the�U.S.�is�fighting�back�with�its�Fiesta.

Another�trend�is�SUVs.�The�number�of�SUV�sales�last�year�increased�by�50%�compared�to�the�previous�year,�as�opposed�to�sedan�sales,�which�exhibited�an�11%�increase�against�the�year�before.�Manufacturers�have�adjusted�their�production�to�follow�this�trend.�Mitsubishi,�for�example,�has�shifted�the�entire�production�capacity�of�its�Changsha�factory�into�SUVs,�and�is�introducing�a�string�of�several�smaller�SUV�models.

It�is�thought�that�"The�procurement�cost�occupies�70%�of�the�total�cost�of�car�production,"�according�to�a�staff�member�at�a�local�automobile�manufacturer�(the�same�hereinafter).�To�introduce�cars�at�low�price�range,�production�costs�must�not�increase�compared�to�the�previous�year,�which�is�why�"Gentei"�was�conducted�for�so�many�years.�The�reason�distribution�for�parts�procurement�by�manufacturers�became�so�ingrained�was�because�manufacturers�needed�to�"take�total�control�of�costs�by�demanding�that�the�purchase�of�parts�include�distribution�costs."

Each�manufacturer�has,�at�most,�only�a�few�agents�with�whom�it�places�direct�orders�pertaining�to�logistics�operations�closely�related�to�production�and�shipping.�Existing�contracts�with�agent�are�hard�to�replace�because�consigned�agents�have�

T he automobile market in China is growing. Looking back at his 20 years of experience alongside the country's growth, Atsushi Sakamoto, the president of Toyota Motor (China) Investment Guangzhou Branch, talked with us about the future of the market as well as Toyota's strategy.

�─�What is the business

structure of Toyota in China?Sakamoto:�We�have�joint�

factories�for�completed�cars,�namely�GAC�Toyota�Motor�Co.,�Ltd.�(GTMC)�in�Guangzhou�(Guangdong�province),�Tianjin�

FAW�Toyota�Motor�Co.,�Ltd.�(TFTM)�in�Tianjin,�and�Sichuan�FAW�Toyota�Motor�Co.,�Ltd.�(SFTM)�in�Chengdu�(Sichuan�province)�and�Changchun�(Jilin�province).�Also,�we�have�Toyota�Motor�(China)�Investment�Co.,�Ltd.�(TMCI)�as�our�general�agent�for�import�cars,�whereas�Toyota�Motor�Engineering�&�Manufacturing�(China)�Co.,�Ltd.�(TMEC)�in�Changshu�in�

Jiangsu�province�functions�as�our�technology�development�center.�Distribution�related�to�vehicles�is�controlled�by�Tong�Fang�Global�Logistics�Co.,�Ltd.�(TFGL)�in�Tianjin,�a�joint�company�

established�by�our�partners�First�Automobile�Works�Group�(FAW)�and�Guangzhou�Automobile�Group�Co.,�Ltd.�(GAC).�

�─�What specific tasks are conducted by TMCI?

Sakamoto:�TMCI�has�three�functions�for�-�it�is�the�original�dealer�of�imported�cars�such�as�Lexus,�it�functions�as�management�for�areas�such�as�finance�and�personnel�in�each�joint�company,�and�it�is�our�headquarters�for�preparing�middle�and�long�term�strategies�for�products�and�management.�We�import�cars�such�as�Lexus,�Alphard,�and�Prado�2.7L,�which�are�delivered�to�the�dealers�for�each�group,�including�600�locations�in�FAW,�400�locations�in�GAC,�and�130�locations�for�company�stores�of�Lexus.�About�80,000�units�by�Lexus�are�imported�mainly�from�the�Kyushu�factory.�Sales�in�the�South�China�region,�where�the�consumers�are�familiar�with�Japanese�cars,�make�up�46%.

�─�What are the specifications of your Guangzhou factory?

Sakamoto:�Annual�production�in�2013�was�about�300,000�units�total�for�our�first�and�second�factories.�We�estimate�400,000�units�for�production�in�2014.�The�models�we�manufacture�here�include�Camry,�our�leading�product,�and�Highlander�(Kluger�in�Japan)�in�terms�of�SUVs.�Also,�

in�addition�to�Camry�Hybrid�(HV)�and�Yaris�(Vitz�in�Japan),�we�have�started�the�production�of�Levin,�a�small�strategic�model�introduced�in�spring.

�─ How do you think the market in China will progress going forward?

Sakamoto:�A�rapid�increase�in�sales�is�unlikely,�but�the�number�of�sales�will�grow�to�at�least�30�million�units�per�year�in�2020,�when�the�population�is�said�to�start�decreasing.�The�foundation�of�sales�is�"new,�replacement,�and�addition."�That�is,�purchasing�a�new�car,�replacing�an�old�car,�or�adding�a�new�car.�While�replacements�are�the�major�factor�in�sales�in�Japan,�new�purchases�comprise�70%�of�total�sales�in�China.�Fuel�consumption�and�exhaust�regulations�are�coming�into�effect,�which�should�boost�sales�of�small�vehicles�going�forward.

�─�Sales by Japanese manufacturers recovered as the effects of deteriorated Japan-China relations diminished.

Sakamoto:�It�took�a�whole�year�to�recover.�Still,�I'm�unsure�how�the�share�of�Japanese�cars�will�change�compared�to�the�growth�of�the�market.�We�consider�it�more�important�to�manufacture�and�sell�the�cars�one�by�one�than�to�chase�after�increasing�our�share�in�China.�We�don't�expect�too�much�to�happen�on�the�

market,�but�we�also�don't�expect�much�depreciation,�either.�The�only�thing�we�can�do�is�to�move�forward�steadily�by�accumulating�sales�of�small�cars.��

�─�The introduction of HVs or EVs specialized for China has been hinted at.

Sakamoto:�In�terms�of�localized�HVs,�FAW�and�GAC�plan�to�start�selling�units�next�year,�and�they�are�now�working�on�the�selection�of�suppliers�as�well�as�improving�quality.�EVs�are�in�a�different�category,�in�that�they�have�a�fewer�number�of�parts�and�a�different�structure.

endured�price�decreases�for�so�long�and�have�become�used�to�accepting�prices�hike�in�the�middle�of�contract�terms.�Competing�with�Chinese�affiliate�agents�for�

replacement�contracts�is�almost�impossible.��For�many�of�logistic�companies,�the�

target�in�auto�parts�logistics�is�procurement�distribution�in�Tier�1�and�Tier�2.

Only 10% left for importsThe�pelting�of�rain�outside�is�less�noisy�

than�corridors�on�operation�sites,�which�are�busy�with�the�coming�and�going�of�rattling�carts�loaded�with�boxes�for�parts�and�headed�for�the�production�lines�of�completed�cars.�Amongst�the�noisy�machines�and�blaring�alarms,�young�workers�are�at�the�production�lines�assembling�parts�into�the�body�of�vehicle�on�the�conveyer.�Those�who�carry�carts,�wearing�caps�of�a�different�color�from�that�of�the�workers�on�the�production�lines,�are�staff�members�of�logistics�companies�conducting�on-site�logistics.�The�boxes�are�filled�with�auto�parts,�thousands�of�which�are�said�to�be�necessary�for�one�type�of�car.�"The�domestic�procurement�rate�of�manufacturers�is�more�than�90%,"�according�to�a�concerned�party�(the�same�hereinafter).�Of�the�two�warehouses�in�the�

factory,�one�was�previously�used�for�KD�parts�initially,�but�"There�are�now�very�few�stored�in�either�warehouse."

At�the�other�completed�car�factory,�parts�boxes�sorted�by�car�type�are�similarly�provided�to�production�lines�under�a�system�called�SPS�(Set�Parts�Supply).�Like�the�factory�mentioned�above,�this�factory�procures�parts�of�which�"almost�90%�are�made�in�China."�

Another�completed�car�factory�is�equipped�with�automated�production�lines�where�robots�operate�at�vigorous�speeds.�The�lines�for�parts�run�beside�them.�The�company,�which�started�full-swing�operations�in�the�past�few�years,�said�"The�domestic�procurement�rate�is�60-70%,�but�

Atsushi SakamotoPresident, Guangzhou BranchToyota Motor (China) Investment Co., Ltd.

Special feature─ China Logistics Special Report

Auto parts placed beside the production line at a completed car factory

Interview

[Biography] Atsushi Sakamoto joined Toyota Motor in 1982. After working in the domestic and international advertisement section, he took as head of operations in China in 1994. After joining the Beijing office for PR and marketing in 1998, he held posts as manager of vehicle division at FAW Toyota Motor Sales Co., Ltd. (2001), vice manager of maintenance division at FAW Toyota Motor Co., Ltd. (2007), and president of the Shanghai Branch at Toyota Motor (China) Investment Co., Ltd. (2010). He took current post in January 2014.

continued to Page10

Page 4: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

4� Daily�-�CARGO�FEBRUARY�2015

The largest international cargo airport in Japan

Narita�International�Airport�has�2�runways�(4,000�meters�&�2,500�meters).�The�number�of�destination�in�the�international�flight�network�has�reached�34�countries/101�cities�(as�of�November�2014).�The�balanced�international�network�is�spread�across�major�regions�around�the�world.�The�flight�capacity�is�270,000�flights�per�year�at�present,�and�will�be�increased�to�300,000�flights�by�the�end�of�March�2015.�This�will�provide�more�convenience�as�the�flight�frequency�per�hour�gets�increased.

Also,�the�air�network�of�Narita�Airport�is�getting�wider�as�the�new�airlines�including�LCC�(low�cost�carrier)�start�service�and�the�existing�airlines�launch�new�flights�more�actively.�This�is�because�of�the�measures�

put�in�effect�such�as�(1)�introduction�of�the�Open�Skies�Policy�(starting�from�the�summer�schedule�in�2013),�(2)�introduction�of�discount�for�landing�charges,�noise�index�incentive,�and�reduction�of�extra�landing�charge�of�international�flights�(effective�in�April�2013),�and�so�on.�

The�infrastructures�including�runways�and�other�facilities�contribute�to�enhance�the�performance�of�the�airport;�they�are�able�to�respond�to�the�takeoffs�and�landings�of�super�jumbo�aircrafts�such�as�Boeing�747-8�and�Airbus�A380.

The�base�idea�of�the�landing�charge�reduction�for�international�flight�is�to�reduce�the�landing�charge�of�each�rank�of�noise�index�(6�ranks�from�A�to�F)�by�Y100�per�ton,�while�maintaining�the�scheme�of�the�index�itself.�This�is�to�bring�the�reduction�of�5.5%�in�average�compared�to�the�prices�before�implementation�of�the�measure.�

Also,�NAA�introduced�the�volume�incentive�applying�to�the�landing�charge�

for�international�flight,�as�a�part�of�incentive�schemes�for�new�airlines�and�additional�flights�of�existing�airlines.�This�incentive�scheme�is�to�provide�50%�reduction�to�the�charge�for�the�increased�amount�of�accumulative�landing�weight�in�relevant�period,�either�the�first�half�(April�to�September)�or�the�second�half�(October�to�March)�of�the�year,�in�comparison�to�the�same�period�last�year.

Measures for landing charge reduction toput in effect

The�number�of�international�flight�(takeoffs�and�landings)�operated�in�2014�(January�to�December)�showed�the�record�178,304�flights�with�the�steady�increase�by�1.4%�compared�to�last�year;�152,787�flights�for�passenger�increased�by�0.8%,�23,406�flights�for�cargo�increased�by�5.6%,�and�2,111�flights�for�others�decreased�by�3.4%.�The�number�of�cargo�flight�achieved�the�sound�growth�as�well.���

As�for�the�volume�of�cargo,�the�year�2014�was�a�breakthrough�recording�2�million�ton�for�the�first�time�in�4�years�since�2010;�938,770�ton�of�loaded�cargo�increased�by�

8.9%�(595,920�ton�of�export�cargo�increased�by�6.0%,�342,850�ton�of�transit�cargo�increased�by�14.5%),�and�1,104,602�ton�of�unloaded�cargo�increased�by�2.4%�(763,324�ton�of�import�cargo�decreased�by�2.7%�/�341,278�ton�of�transit�cargo�increased�by�16.1%).�The�volume�of�transit�cargo�handled�at�the�airport�showed�the�highest�figure�in�the�history.�

�In�the�international�cargo�market,�the�flow�between�is�active.�The�figure�above�reflects�the�fact�that�Narita�Airport�takes�in�this�flow�of�international�cargo�as�a�connection�point�between�Asia�and�Europe/America.�

Transit cargo increased

Narita�Airport�has�the�cargo�terminal�facilities�within�its�site�to�handle�2.35�million�ton�per�year�without�disruption,�which�realizes�the�flexible�response�to�the�various�needs�by�shippers�and�logistic�providers�from�dry�cargo�to�perishable�and�low-temperature�cargo.

In�addition,�the�advantage�of�Narita�Airport�lies�in�the�fact�that�there�are�42�

logistics�centers�by�38�international�air�cargo�forwarders�and�logistics�providers�located�around�it.�As�the�construction�of�Metropolitan�Inter-City�Expressway�and�other�roads�is�steadily�in�progress,�the�access�to�the�roads�from�the�airport�to�all�over�Japan�will�become�even�better�and�give�more�merits�to�the�logistic�activity�there.�

Tokyo�International�Airport�(Haneda)�has�

Most cargo to/from Haneda gathered in Narita

The�Japanese�government�is�currently�studying�to�enhance�their�functions�of�the�metropolitan�airports.�Aiming�at�2020,�the�year�Tokyo�hosts�the�Olympic�&�Paralympic�Games,�the�government�will�first�promote�expansion�of�capacities�of�both�Narita�and�Haneda�airports.

The�approaches�by�technical�enhancement,�such�as�the�innovation�of�air�traffic�control�and�the�installation�of�high-speed�exit�taxiway,�are�discussed�for�the�expansion�of�Narita�Airport.�These�will�allow�the�increase�of�the�number�of�aircraft�

departing/landing�in�an�hour�and�become�the�solution�for�the�demand�of�international�flight�that�is�inclined�to�concentrate�in�the�peak�hours.�They�could�give�the�users�more�convenience.

Also,�the�technical�approaches�including�adding�another�runway�have�been�reviewed�as�for�the�capacity�expansion�plan�after�2020.

Extending functions for the Olympic Games in Tokyo

The�appointment�to�the�area�for�"National�Strategic�Special�Zone"�by�the�government�is�going�to�have�affect�on�the�cargo�operation�at�Narita�Airport.�The�most�site�of�the�airport�belongs�to�Narita�City.�The�city�has�been�appointed�to�the�National�Strategic�Special�Zone�by�the�government�of�Japan,�and�the�various�discussions�

have�been�made�to�establish�one-stop�export�procedure;�the�acceleration�of�export�process�by�using�public�wholesale�markets�is�one�of�them.�This�could�allow�the�airport�to�function�as�the�exporting�base�of�the�agricultural�products�as�well�as�the�food�products�that�are�expected�to�grow�from�now�on.

Appointed to the area for National Strategic Special Zone

As�for�the�establishment�of�one-stop�export�procedure,�Narita�City�on�October�30,�2014�established�"the�study�group�to�promote�Narita�Market�as�the�base�of�export"�consisting�of�the�relevant�administrative�bodies,�NAA,�agricultural�producers,�wholesalers,�logistic�providers,�and�so�on.�The�group�is�under�the�research�of�various�topics:�the�analysis�on�the�trend�of�export�such�as�destination�and�type�of�shipment,�streamlining�and�establishing�one-stop�export�procedure�for�agricultural�products,�reduction�of�logistic�

cost,�establishing�the�center�of�export�business,�maintaining�the�stable�supply�of�agricultural�products�by�building�up�the�network�with�the�agricultural�centers�mainly�in�East�Japan,�branding�Narita�Wholesale�Market,�and�so�on.�

The�team�also�studies�for�the�promotion�by�the�local�governments�around�the�airport�to�export�local�products�including�the�perishables.�The�ongoing�challenge�to�construct�the�smooth�distribution�in�collaboration�with�the�local�communities�could�also�give�advantage�to�the�airport.�

Establishing as the base airport to export agricultural/marine products

increased�the�number�of�international�flights�in�October�2010�and�in�the�summer�schedule�of�2014.�However,�the�shipments�loaded/unloaded�at�Haneda�still�have�been�gathered�at�or�around�Narita�Airport.�This�substantiates�the�existence�of�Narita�Airport�as�the�international�cargo�hub�airport�of�Japan�and�its�metropolitan�area.�

Narita International Airport

N arita International Airport functions as a hub airport in Japan as well as in the metropolitan area for international air cargo transportation. The cargo volume is regaining as the cargo demand has been recovered globally; in 2014, the volume of international cargo exceeded 2 million-ton level for the first time in 4 years. Narita International Airport Corporation (NAA), the operator of the airport, has introduced various promotional measures such as the strategic landing charge incentives, in addition to those for the expansion of flight capacity. Narita is the airport with a hub function connecting Asia and Europe/America, evolving to be more valuable in the dynamic network of international cargo transportation.

Setting the capacity at 300,000 or more flights

NARITA� Daily�-�CARGO�FEBRUARY�2015NARITA� Daily�-�CARGO�FEBRUARY�2015NARITAThe largest international cargo airport in Japan

Outline of Narita International Airport in 2014Opening date May 20, 1978

RunwayA=4000mB=2500m

Number of takeoff and landing

229,581 (103.6%) International 178,304 (101.4%) Passenger 152,787 (100.8%) Cargo 23,406 (105.6%) Others 2,111 (96.6%) Domestic 51,277 (111.9%) Passenger 49,346 (111.1%) Cargo 879 (125.6%) Others 1,052 (148.2%)

Volume of cargo<unit=ton>

2,043,372(105.3%) Loaded 938,770(108.9%) Export 595,920(106.0%) Transit 342,850(114.5%) Unloaded 1,104,602(102.4%) Import 763,324(97.3%) Transit 341,278(116.1%)

Number of passenger

35,594,965 (100.6%) International 29,651,395 (97.0%) Japanese 14,182,233(88.1%) Foreigner 10,141,312(115.4%) Transit 5,327,850(94.0%) Domestic 5,943,570(123.2%)

* ( ) shows the growth rate compared to 2013

Narita International Airport

Page 5: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

Special�Issue��Daily�CARGO�English�Edition�2015� 2

Page 6: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

Common Import Warehouse (IACT A Building, Narita International Airport)

6� Daily�-�CARGO�FEBRUARY�2015

Comprehensive handling services at Narita and CentrairHandling services

I nternational Air Cargo Terminal Co., Ltd. (IACT) represents Japan as the independent airport warehouse operator as well as the ground handling service provider. In addition to the main business of import warehouse operation at Narita International Airport (NRT) and Haneda Airport (HND) for nearly 50 years, the company has entered into new business of export warehouse operation, airport ramp handling, and passenger handling since 2010. The facility specialized for temperature-controlled container was established in 2012 while the main deck loader for ULD with maximum weight of 35t was introduced by IACT for the first time in Japan in 2013. The new warehouse system called New JTO (developed by IBS software) started in operation from March 2014. With the history for nearly a half century, IACT has contributed to the development of air cargo industry in Japan and will be moving on, responding to the trend of air cargo industry around the world.

IACT�has�proceeded�with�diversification�of�business�in�the�shift�of�business�environment.

In�September�2010,�the�company�acquired�Skyport�Service�Corporation�(SPS),�a�company�providing�warehouse�operation�and�ground�handling�at�Chubu�Centrair�International�Airport�(NGO),�by�purchasing�majority�stakes�previously�owned�by�Mitsubishi�Corporation.�By�this�acquisition,�

IACT�started�operation�at�NGO�and�entered�into�ramp�handling�business.

Business�domain�of�IACT�is�not�limited�inside�of�airports.�"IACT�Narita�Logistics�Center,"�which�is�located�within�a�few�minutes�from�NRT�by�car,�started�7�years�ago.�The�

Logistics center in vicinity of NRT

■ IACT USER AIRLINES (As of Jan. 1., 2015)

AIRLINE IMPORT EXPORT GROUND HANDLING PASSENGER BY TRK

AF Air France ●

AZ Alitalia-Compagnia Aerea S.p.A ●

BA British Airways ● ●

CX Cathay Pacifi c Cargo ● ●

C8 Cargolux Italia S.p.A. ● ●

DL Delta Air Lines ●

DM Asian Air ● ● ●

FX Federal Express ● ●

GA Garuda Indonesla ● ● ●

HB Air Asia Atlantic ●

HY Uzbekistan Airways ●

HZ Aurora Airlines ● ● ●

IJ Spring Japan ● ●

KL KLM Royal Dutch Airlines ●

LD AHK Air Hong Kong Limited ●

LH Lufthansa Cargo AG ● ●

LX Swiss International Air Lines ● ●

NX Air Macau ● ●

OZ Asiana Airlines ●

PO Polar Air Cargo ● ● ●

QR Qatar Airways ● ●

OS Austrian Airlines ● ●

SB Air Caledonie International ●

SK Scandinavian Airlines System ●

TK Turkish Airlines Inc. ● ● ●

TN Air Tahiti Nui ● ●

UL Srilankan Airlines Ltd. ● ● ● ●

Y8 Yanqtze River Express ● ●

IACT�has�started�ground-handling�for�Spring�Airlines�Japan�and�Aurora�Airlines�on�July�and�August,�2014�respectively,�and�added�up�the�number�of�customer�carriers�to�28�that�IACT�conducts�the�service�operations�for.�Of�the�two�new�carriers,�Spring�Airlines�Japan,�a�low�cost�carrier�(LCC)�becoming�popular�in�Japan,�signed�an�agreement�with�IACT�to�receive�a�wide�range�of�services�including;�crew�transport,�loading/unloading�cargo,�taxiing�support,�lavatory�service,�water�service,�luggage�handling,�air�passenger�services�(accompanied�luggage,�check-in�counter,�information/guide�services,�air-ticket�booking/issuing).�IACT�shows�its�ability�to�the�fullest�as�a�comprehensive�ground-handling�service�provider.�

IACT� Daily�-�CARGO�FEBRUARY�2015IACT� Daily�-�CARGO�FEBRUARY�2015IACTIACT

Page 7: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

Common Import Warehouse (IACT A Building, Narita International Airport)

Daily�-�CARGO�FEBRUARY�2015� 7

Comprehensive handling services at Narita and Centrair

nternational Air Cargo Terminal Co., Ltd. (IACT) represents Japan as the independent airport warehouse operator as well as the ground handling service provider. In addition to the main business of import warehouse operation at Narita International Airport (NRT) and Haneda Airport (HND) for nearly 50 years, the company has entered into new business of export warehouse operation, airport ramp handling, and passenger handling since 2010. The facility specialized for temperature-controlled container was established in 2012 while the main deck loader for ULD with maximum weight of 35t was introduced by IACT for the first time in Japan in 2013. The new warehouse system called New JTO (developed by IBS software) started in operation from March 2014. With the history for nearly a half century, IACT has contributed to the development of air cargo industry in Japan and will be moving on, responding to the trend of air cargo industry around the world.

IACT�makes�efforts�to�gain�recognition�in�abroad.

For�example,�the�company�became�a�member�of�IGHC�(IATA�Ground�handling�Council)�and�also�takes�part�in�World�Cargo�Symposium�(WCS)�which�is�held�every�spring�around�in�the�world.�It�expands�the�area�of�business�outside�of�Japan�by�visiting�the�headquarters�of�customer�airlines.

�Also�in�January�2015,�IACT�joined�the�International�Forklift�and�Pallet�Building�Competition�hosted�by�Hong�Kong�Air�

Cargo�Terminals�Limited�(HACTL)�at�Hong�Kong�International�Airport�and�won�the�best�prize�in�“Overall”�&�"Pallet-Building"�sector.

World champion of grand handling

■ SPS�USER�AIRLINES (As of Jan. 1., 2015)

AIRLINE IMPORT EXPORT GROUND HANDLING PASSENGER BY TRK

CX Cathay Pacifi c Cargo ● ●

C8 Cargolux Italia S.p.A ● ● ●

JQ Jetstar Airways ● ●

KZ Nippon Cargo Airlines ● ● ●

LD AHK Air Hong Kong Limited ● ● ●

PO Polar Air Cargo ● ● ●

RU AirBridgeCargo Airines LLC ● ● ● ●

Y8 Yanqtze River Express ● ● ●

5J Cebu Pacifi c Air ● ●

5X United Percel Service Company ● ●

7C Jeju Air ● ●

S kyport�Service�Corporation�(SPS,�led�by�president�Shingo�Konagaya),�a�subsidiary�wholly�owned�by�IACT�and�situated�at�the�No.�3�International�Cargo�Warehouse�within�the�Centrair�premise,�provides�services�including;�cargo�handling�in�the�warehouse,�ramp-handling�such�as�loading/unloading�cargo�and�accompanied�baggage�on�passenger/cargo�flights,�check-in�counter�service�for�air�travelers,�flight�maintenance�and�flight�support�services.

SPS�has�been�providing�ramp�handling�services�for�15�flights/week�of�Polar�Air�Cargo�(PAC)�and�five�flights/week�of�Air�Hong�Kong�(AEK)�on�a�regular�basis�as�well�as�warehouse�

cargo-handling�services�for�eight�airlines�(including�suspended�flights),�including�cargo�transferred�(drayaged)�by�truck�from�other�airports.�It�also�handles�cargo�charter�flight�service�as�needed.

�As�to�operations�of�warehouses,�SPS�is�shoring�up�its�cold�storage�service.�It�

conventionally�utilizes�20-ft�containers�capable�of�setting�temperature�

at�5�degrees-C�(Celsius)�and�storage�spaces�maintaining�at�15-25�degrees-C�as�temperature-controlled�storage.�On�top�of�these,�SPS�has�prepared�trucks�capable�of�setting�temperature�at�5�degrees-C�to�meet�the�increasing�handling�volume�for�live�flowers�and�fresh/perishable�foods.�

Total ground-handling services at Centrair

Skyport Service Corporation (SPS)Focus

site�area�of�facility�is�12,000�sqm.�The�total�floor�area�in�the�2-story�building�is�10,700�sqm,�half�of�which�is�air�conditioned�for�the�storage�of�temperature�sensitive�cargo.�The�same�building�is�used�for�warehouse�as�well�as�office�rooms.

International Air Cargo TerminalInternational Air Cargo Terminal

35 t class MDL

Page 8: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

8� Daily�-�CARGO�FEBRUARY�2015

Japan's number one industrial agglomeration situating

in the hinterland

Value�of�the�product�shipments�from�Aichi�prefecture,�home�of�Centrair,�posted�Y40,033.2�billion�in�2012,�up�8.1%�in�comparison�to�that�of�2011.�It�was�13.9%�of�the�nationwide�products�that�year,�increased�0.9%�year-on-year.�In�fact,�Aichi�took�the�number�one�position�in�the�product�share�for�36�consecutive�years�after�1977.�Needless�to�say,�automobile-related�industry�including�Toyota�Motor�Corp.�concentrates�in�this�area,�and�in�late�years,�the�aircraft�industry�is�growing�up�as�well�centering�production�of�Boeing�787.

Five�prefectures�in�the�Chubu�area,�

namely�Aichi,�Gifu,�Shizuoka,�Mie�and�Nagano,�produce�about�50%�of�aircraft�and�its�parts�in�terms�of�value,�as�well�as�more�than�70%�of�aircraft�parts�production�in�Japan.�The�government�has�designated�the�"Special�Zone�to�Create�Asia's�No.1�Aerospace�Industrial�Cluster"�promoted�by�the�Chubu�region�as�the�"Comprehensive�Special�Zone�for�International�Competitiveness"�in�December�2011.�In�the�midst�of�globally�expanding�needs�for�aircrafts,�Chubu�area�is�expected�to�grow�further�as�the�center�of�supply-chain�in�Asia�for�aircraft�manufacturers.�

Growth led by automobile and aircraft industry

T he volume of international cargo at Chubu Centrair International Airport (NGO/Centrair) shows steep increase. The Chubu area, where Centrair is located, is not only geographically being known as the center of Japan but also known as Japan's core area for Monozukuri ("manufacturing" in Japanese) of such products as automobile and aircraft. In 2013 air freight services kicked off one after another, which brought chances to regain those air cargoes that flowed out to the other airports. In February 2015, Centrair will mark the 10th anniversary of its operation.

Centrair�opened�on�February�17,�2005�and�will�mark�the�10th�anniversary�of�establishment�next�February.�The�airport�has�a�single�runway�of�3,500�meters�in�length�and�60�meters�in�width,�and�under�an�advantage�of�its�location�at�off�the�coast,�it�is�capable�of�operating�24�hours�a�day.�As�it�is�located�in�the�center�of�Honshu,�accesses�both�to�the�Tokyo�metropolitan�to�the�east�and�the�Kansai�urban�area�to�the�west�are�good,�that�is�convenient�and�optimum�for�land�transport�within�Japan.�According�to�international�flight�service�schedule�as�of�July�2014,�297�flights�for�passenger�planes�per�week�and�connecting�27�cities.�

International�flight�service�schedule�for�air�cargo�is�28�flights�per�week,�comprising�

five�flights�by�Air�Hong�Kong�(Hong�Kong�route),�two�flights�by�Asiana�Airlines�(Seoul/Incheon�route),�15�flights�by�Polar�Air�Cargo�(Cincinnati,�Shanghai�and�Seoul/Incheon-Taipei/Taoyuan�routes),�and�six�flights�by�All�Nippon�Airways.�

Polar�Air�Cargo�(PAC)�inaugurated�its�operation�at�Centrair�on�April�22,�2013,�as�a�part�of�the�program�that�DHL,�one�of�investors�to�PAC,�to�expand�its�intra-Asia�network.�PAC�provides�services�which�connect�Centrair�with�Cincinnati�(a/c=Boeing�747F)�and�Shanghai�(747F),�and�also�connect�Seoul/Incheon�with�Taipei/Taoyuan�(Boeing�767F).�For�Centrair�the�Cincinnati�route�is�its�first�North�America�air�cargo�service�to�offer�in�three�and�half�years.

Centrair marks 10th anniversary

On�August�28,�2013,�ANA�started�an�air�cargo�service�with�Boeing�767�Freighter�for�Narita-Centrair-Naha�(ANA's�Okinawa�Cargo�Hub)�route�six�flights�per�week.�ANA�resumed�freighter�operation�at�Centrair�after�a�hiatus�since�2008.�Centrair�functions�as�a�hub�for�the�flights�connecting�to�such�cities�as�Shanghai/

Pudong,�Hong�Kong,�Qingdao,�Taipei/Taoyuan,�Seoul/Incheon,�Bangkok,�and�Singapore.�High�speed�overnight�transportation�is�a�strong�point�to�attract�transport�demand�of�Asia-bound�cargo.�

Handling�volume�for�the�international�cargo�at�Centrair�in�the�fiscal�2013�(April�2013-March�2014)�surged�36%�from�the�

Directly connecting to ANA's Okinawa Cargo Hub

previous�year�to�146,923�ton�on�account�of�economic�recovery.�Of�the�total,�loading�cargo�at�the�airport�was�67,131�ton,�41%�increase�year-on-year�while�the�unloading�cargo�was�79,792�ton,�up�36%�y-o-y.�

Export�air�cargo�from�the�largest�industrial�center�in�Japan�has�become�able�to�be�directly�shipped�out�to�overseas,�proving�its�potentiality�in�responding�demands�for�international�cargo.

A�typical�character�of�Centrair�is�its�capability�to�handle�large�and�irregular�cargo�by�utilizing�the�underpass�named�"787�aircraft�body�parts�passage�way"�situated�in�southern�tip�of�the�airport.�Major�suppliers�such�as�Mitsubishi�Heavy�Industries,�Kawasaki�Heavy�Industries�and�Fuji�Heavy�Industries�are�concentrated�in�the�Chubu�area.�Large-size�structural�parts�produced�at�each�factory�are�hauled�via�marine�transport�to�the�Centrair�pier,�then�they�are�

loaded�in�a�specialized�freighter�airplane�"Dreamlifter".�Dreamlifter�is�capable�of�transporting�cargoes�by�a�short�transit�time�(T/T)�to�the�destinations�in�North�America�where�Boeing's�finishing�factories�are�located.

Dreamlifter flies in Centrair

Production�rate�for�787�is�currently�10�units�per�month.�The�rate�will�be�increased�to�12�units/month�in�2016�and�further�to�14�units/month�in�2019.�Streamlined�and�efficient�supply�chain�was�essential�to�be�set�up.�Eventually�in�March�2014,�a�storage�facility�for�the�aircraft's�parts�"Dreamlifter�Operations�Center"�(DOC)�started�full�scale�operation.�Freight�flight�frequency�of�Dreamlifter�will�be�increased�from�the�current�16-18�flights�per�month�to�more�than�20�along�with�the�increasing�frequency�of�production�rate,�making�the�

cargo�volume�to�increase�by�2,500-4,000�tons�on�a�yearly�base.�Schedule�of�Dreamlifter's�flights�is�secured�regardless�of�the�weather�condition,�for�example,�if�the�cargo�of�parts�are�brought�in�to�DOC�the�previous�day,�the�system�is�enabling�to�keep�the�delivery�date�with�its�flexibility�of�supply�chain.�Hiroshi�Kawakami,�president�of�Chubu�Centrair�International�Airport�said,�"I�am�confident�that�the�full�scale�operation�of�DOC�will�be�a�propulsive�force�to�promote�the�Chubu�area."�

Full scale operation of Boeing's DOC

Since�its�start,�the�promotional�strategy�"Fly�Centrair�Cargo"�for�the�usage�of�cargo�transport�has�been�pushed�by�Centrair,�which�is�situated�in�the�center�of�Japan's�leading�manufacturing�industry,�with�a�

support�from�the�local�members.�One�of�the�plans�is�for�encouraging�shippers�to�switch�the�loading�airport�to�Centrair.�Total�number�of�partners�with�the�"Fly�Centrair�Cargo"�operation�is�295.

Switching to Centrair

Chubu Centrair International AirportCENTRAIR� Daily�-�CARGO�FEBRUARY�2015CENTRAIR� Daily�-�CARGO�FEBRUARY�2015CENTRAIRCENTRAIR

Chubu Centrair International Airport

Dreamlifter

Page 9: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual
Page 10: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

10� Daily�-�CARGO�FEBRUARY�2015

we�have�no�intention�of�shifting�the�rest�of�parts�to�domestic�products."��

Of�the�annual�3�million�TEUs�carried�on�the�Japan-China�route,�the�base�cargo�is�CKD�for�vehicles.�However,�it�is�estimated�that�the�cargo�flow�has�recently�fallen�below�that�mark.�Most�of�Japanese�companies�in�Tier�1�and�Tier�2�have�advanced�in�China�under�the�intention�of�completed�car�manufacturers,�and�as�

such,�the�number�of�Japanese�companies�producing�auto�parts�in�East�China�is�estimated�to�have�already�reached�600-700.�The�shift�toward�the�domestic�production�of�parts�has�reached�its�peak,�and�imports�are�limited�to�high-precision�engine-related�parts,�such�as�transmissions�or�the�engine�itself.�While�milk�run�operations�involving�hundreds�of�trucks�are�carried�out�at�each�factory�everyday�all�over�the�country,�marine�container�transport�continues�to�decline.�

Essential field in logistics�Automobile�demand,�however,�is�more�

stable�in�the�forwarding�business�compared�to�that�of�electric�machinery,�which�is�on�the�decline.�Major�logistic�companies�have�uniformly�created�"Automobile�Specialization�Teams"�in�their�subsidiaries�in�China,�and�have�enthusiastically�stated,�"Our�focus�is�now�

on�automobiles."�Still,�there�are�varied�reasons�hidden�behind�such�attitudes.

Let's�take�a�look�at�the�lists�of�tariffs�by�several�Chinese�trucking�companies.�The�minimum�unit�rates�per�m3�between�Shanghai�and�Guangzhou,�about�1,600�km,�are�as�follows:�180�yuan�for�company�A,�130�yuan�for�company�B,�100�yuan�for�

company�C,�and�so�on.�It�is�clear�that�no�one�can�squarely�compete�with�local�companies�that�are�not�afraid�of�overloading�or�co-loading�cargo�even�in�chartered�trucks.�"Without�securing�the�base�cargo,�we�cannot�offer�competitive�rates�for�truck�transport",�according�to�one�local�logistics�official�(the�same�hereinafter).�

On�the�other�hand,�the�rate�for�storage�is�normally�1�yuan/m2.�"We�cannot�subsist�on�storage�fees�alone.�We�need�the�cargo�that�comes�and�goes�immediately,�much�like�a�'touch�and�go�landing'."

In�today's�China,�domestic�distribution�is�essential,�and�the�construction�and�expansion�of�the�networks�with�"points�and�lines,"�namely�warehouses�and�truck�transportation,�has�been�a�necessary�stepping�stone.�In�such�an�environment,�auto�parts�are�the�essential�cargo,�transported�by�JIT�transport�under�a�so-called�"shotgun�system"�with�scheduled�trucks.

New�supply�chains�are�also�being�constructed.�While�Japanese�manufacturers�lose�their�share,�Germans�and�Koreans�are�enjoying�booming�business.�There�is�a�scheme�called�the�"24-month�rule"�in�the�production�of�new�car.�This�is�the�rule�used�to�set�the�development�timeline,�giving�two�years�between�the�selection�of�supplier�and�'line�off'�(completion�of�the�first�completed�car),�including�sample�production�and�inspection.�The�parts�manufacturers�affiliated�with�automobile�manufacturers�are�prohibited�from�selling�their�products�to�third�parties,�but�"Many�Japanese�parts�manufacturers�are�said�to�be�looking�for�a�new�non-Japanese�car�models�planned�for�the�development�between�2016�and�2017",�according�to�a�party�related�to�a�local�parts�manufacturer.�

The�quantity�of�CKDs�exported�from�China�to�developing�countries�is�also�increasing.�Automobile�manufacturers�provide�parts�made�in�China�to�countries�

Special feature─ China Logistics Special Report

Warehouse where auto parts are stored Semi-trailer for completed cars waiting in the parking lot

continued from Page 3

Page 11: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

Daily�-�CARGO�FEBRUARY�2015� 11

F utian�Nikkon�Logistics�(Guangzhou)�Co.,�Ltd.,�a�joint�logistics�company�by�Nippon�Konpo�Unyu�Soko�Co.,�Ltd.�(Nikkon)�and�Honda�Motor�Co.,�Ltd.�Group,�provides�logistics�services�for�Guangqi�Honda�Automobile�Co.,�Ltd.�(Guangqi�Honda),�a�joint�manufacturing�base�for�Honda's�completed�cars.�Specifically,�it�is�consigned�total�distribution�operations,�from�procurement,�site�logistics,�and�completed�car�transport�to�the�packing�of�after-market�parts�(parts�provided�to�customers�after�sales�for�purposes�such�as�replacements)�at�completed�car�factories�in�Huangpu�in�Guangzhou�city�and�Zengcheng�in�Zengcheng�city,�both�in�Guangdong�province.�The�company�runs�trucks�about�1,000�times�per�day�for�the�two�factories;�120�trucks,�including�40�of�its�own,�are�normally�operated�for�milk�runs�in�south�China.�It�offers�JIT�distribution�16�times�each�day�under�a�motto�of�"Synchronized�

Logistics,"�which�is�adjusted�for�the�production�plans�of�its�customers.�It�operates�warehouses�with�about�260,000�m2�of�floor�space�in�Guangdong�province,�including�

a�motorcycle�factory�of�the�Honda�Group.

Futian�Nikkon�was�established�in�1997.�The�investment�ratio�at�present�is�40%�by�Guangqi�Trade�Co.,�Ltd.,�a�logistics�company�of�Guangqi�Group,�10%�by�Guangzhou�City�Futian�Industrial�Development,�30%�by�Nikkon,�and�10%�each�by�Honda�Motor�and�Honda�Logistics�Inc.�The�company�consists�of�2,850�staff�members�including�1,100�personnel�dispatched�to�Guangqi�Honda’s�two�factories.�

Guangqi�Honda�last�year�produced�440,000�units�per�year�at�its�factories�in�Huangpu�and�Zengcheng.�This�year,�its�annual�production�is�estimated�to�reach�about�550,000�units.�City,�Fit,�Crider�(a�car�brand�specialized�for�China),�and�Everus�(Li�Nian)�are�manufactured�at�Huangpu,�whereas�Accord,�Odyssey,�and�Crosstour�are�manufactured�at�Zengcheng.�In�May�last�year,�we�started�construction�of�a�third�factory�and�an�engine�

factory�at�our�Zengcheng�factory�location.�They�should�be�ready�to�commence�operations�by�the�next�spring,�and�we�plan�on�introducing�small�cars.�The�annual�production�rate�will�increase�to�600,000�units�per�year�once�operations�at�the�third�factory�begin.

Guangqi�Honda�has�205�suppliers�all�over�China.�More�than�half�of�them,�or�112�companies,�are�located�in�South�China,�followed�by�71�in�

East�China,�14�in�the�northeast,�and�eight�in�the�Midwest.�The�domestic�procurement�rate�of�parts�is�over�90%.�A�limited�number�of�parts�near�the�engine,�which�require�high�accuracy�during�production,�are�imported�as�CKDs.�Futian�Nikkon�consigns�milk�run�operations�to�four�companies�in�all�areas�except�for�South�China,�which�it�covers�with�its�own�truck�operations.�For�long-haul�trunk�line�transport,�the�company�has�deals�with�six�companies�in�each�area.�

"The�quantity�of�stock�in�our�factory�is�enough�for�one�day,�for�the�most�part.�Each�day's�operations�are�divided�into�16�time�periods,�and�we�deliver�our�products�once�per�hour�via�JIT�distribution�to�delivery�centers,"�explained�Mr.�Kazuo�Tashiro,�general�manager�of�Nikkon�Logistics�China�Co.,�Ltd.�who�has�formerly�held�posts�as�the�manager�of�production�and�maintenance�at�Guangqi�Honda�as�well�as�the�president�of�Futian�Nikkon.��

In�terms�of�on-site�logistics,�the�company�contracts�the�operation�of�delivery�centers�(DC)�in�two�factories�as�well�as�the�delivery�of�parts�to�the�production�line.�In�Huangpu,�there�are�two�DCs�-�one�with�8,000�m2�and�another�with�12,000�m2�of�floor�space.�The�parts�are�first�taken�out�of�reusable�shipping�cartons�and�undergo�inspection.�Midsize�and�small�parts�are�repacked�in�parts�boxes�in�consideration�of�the�order�of�

flow�of�the�production�lines�for�the�production�of�multiple�automobile�models.�There�are�several�warehouses�by�the�company,�including�its�DC�in�Zengcheng�factory�with�a�floor�space�of�30,000�m2�and�its�warehouse�at�Futian�Nikkon�headquarters�with�15,000�m2�of�floor�space,�in�addition�to�the�DC�mentioned�above.�In�addition,�there�are�multiple�parts�centers�near�the�factories�and�the�warehouse�that�are�specialized�for�aftermarket�parts�to�be�distributed�all�over�China,�and�have�a�total�of�40,000�m2�of�floor�space.��

The�number�of�dealers�for�Guangqi�Honda�total�462�locations�all�over�China.�Futian�Nikkon�provides�land�transport�with�75�trailer�trucks�of�its�own,�as�well�as�another�75�trailers�from�five�agents.�Depots�for�completed�cars�are�located�in�cities�such�as�Guangzhou,�Shanghai,�Beijing,�and�Chengdu�(Sichuan�province).�The�company�provides�rail�transportation�via�service�rail�lines�that�lead�into�its�factory�in�Huangpu.�It�also�makes�partial�use�of�coastal�vessels.��

in�Southeast�Asia,�as�well�as�Mexico�and�Russia,�for�the�introduction�of�new�models,�shifting�the�trade�agent�from�a�third�party�to�their�own.�In�2014,�All�Nippon�Airways�(ANA)�launched�a�new�cargo�flight�by�freighter�in�Guangzhou,�the�'automobile�city',�Guangdong�province.�In�terms�of�rail�transport�between�Europe�and�China,�automobile-related�cargo,�in�addition�to�personal�computer�cargo,�is�garnering�attention�on�routes�to/from�Shenyang�(Liaoning�province),�Wuhan,�and�Chongqing�(Hubei

province).�Japanese�auto�parts�manufacturers�have�also�begun�considering�the�use�of�such�routes.�

Automobile�distribution�has�been�an�area�

of�focus�perhaps�because�it�is�the�greatest�common�divisor�in�China,�a�nation�that�has�reached�a�turning�point.�However,�the�fact�is�that�operation�sites�are�a�battlefield�where�the�only�way�to�turn�a�profit�is�to�repeat�the�old�adage,�"many�a�little�makes�a�mickle."�One�agent�states,�"We�make�efforts�by�providing�additional�services�on�top�of�storage,�such�as�quality�inspections�or�product�examinations,"�while�another�agent�says,�"We�have�been�trying�to�enhance�the�efficiency�of�truck�operations�by�constantly�reducing�our�number�of�cooperative�companies."�Another�agent�has�taken�a�more�extreme�approach,�and�states,�"We�have�conducted�reviews�of�our�warehouse�cleaning�methods�by�offering�

rewards�and�collecting�ideas�to�improve�our�processes."�

In�addition�to�"Gentei",�another�obstacle�exists�in�the�form�of�the�production�plan�for�completed�cars�that�is�prepared�at�the�beginning�of�the�year.�While�production�adjustments�are�executed�weekly�based�on�the�state�of�car�sales,�"The�planned�amount�of�cargo�rarely�moves�due�to�the�fact�that�the�plan�is�prepared�based�on�'the�number�of�sales�they�hope�to�achieve'.�As�such,�various�approaches�to�cost�reduction�are�required."�

The�rising�rate�of�domestic�procurement�of�parts�also�means�that�the�advancement�of�Japanese�companies�into�Tier�1�and�2�has�come�to�an�end.�As�the�battle�

continues�for�this�limited�territory,�it�appears�that�the�exchange�of�blows�in�terms�of�freight�rates�is�becoming�more�and�more�severe.�

One�executive�staff�member�of�a�logistics�company�that�successfully�"wagged�the�dog"�has�stated,�"You�carry�cargo�piece�by�piece�to�eventually�become�a�core�pillar�for�shippers.�You�also�have�to�try�and�reduce�costs�through�various�ideas�and�approaches.�Then,�while�you�may�not�find�great�success,�you�will�be�able�to�accumulate�more�wins�than�losses.�Automobiles�test�and�reveal�the�true�abilities�in�terms�of�one's�logistics�fortitude.�It�will�be�the�most�important�category�for�the�logistic�companies�in�China�from�now�on."

1,000 runs a day for Guangqi

Honda's two factories

Futian Nikkon Logistics (Guangzhou) Co., Ltd.

Special feature─ China Logistics Special Report

Kazuo Tashiro, general manager of Nikkon Logistics China Co., Ltd. (center), Hisashi Iwashita, general manager of Futian Nikkon (left), Toshihiko Ikeya, deputy general manager of Futian Nikkon

Pick Up!

Page 12: FEBRUARY 2015 No.007 KAIJI PRESS CO.,LTD. Special …Special feature ─China Logistics Special Report Guangzhou, Changsha, Wuhan C hina, the largest automobile market in ... Annual

12� Daily�-�CARGO�FEBRUARY�2015