The explosion damage and subsequent clean-up operations at Tianjin port are likely to impact vehicle imports and shipments to other Chinese cities.
IHS Automotive perspective | |
Significance | Hyundai, Renault, and Volkswagen (VW) are among the automakers most affected by the twin explosions in China's port of Tianjin. Meanwhile, Japanese automakers did not report big impacts on their operations. |
Implications | While media reports have tried to gauge the damage of the explosions in monetary terms, it is too early for automakers to comment conclusively. |
Outlook | The tragic incident, which has claimed at least 50 lives, is expected to cause short-term issues for vehicle shipments to other parts of the country, as well as for imports and exports. |
The twin blasts in the northern Chinese port city of Tianjin has caused maximum damage to Hyundai, Renault, and Volkswagen (VW), while Toyota – which has a production base in the city – said its operations were unaffected. The incident, triggered at a dangerous and toxic chemicals warehouse, claimed 50 lives, including at least 12 firefighters, according to state media at the time of writing.
The exact cause of the explosions is not known currently, although reports have indicated that use of water to extinguish initial flames could have caused the blasts. According to China's Xinhua news agency, several containers in the warehouse had caught fire before the blasts. A Reuters report quoted Lei Jinde, department head of China's fire department, as admitting that the first group of firefighters on the scene had used water. "We knew there was calcium carbide inside but we didn't know whether it had already exploded," he said. Police said the warehouse stored ammonium nitrate, potassium nitrate, and calcium carbide at the time of the blasts. The usage of water to douse the fire could have led to a reaction with calcium carbide, resulting in highly explosive acetylene gas.
Hyundai
Reports indicated nearly 4,000 imported Hyundai and Kia vehicles were damaged at a warehouse near the port. The vehicles included Genesis and Equus luxury sedans. While a Hyundai spokesperson said the damage had not been assessed so far, a Yonhap news agency report said the damage could be around 160 billion Korean won (USD135.9 million). "It will take quite a long time to find out the detailed damages [incurred from the explosion]," said a Hyundai Motor official, adding that the damage would be covered by insurance.
Renault
The damage for the French automaker is around CNY210 million (USD32.7 million) based on the price of the least expensive vehicle sold by Renault in China. This is based on the fact that nearly 1,500 cars parked at a stockyard were damaged.
Volkswagen
The German automaker has acknowledged damage to vehicles in one of its warehouses at the port, which was located close to the site of the explosions. Included among the damaged vehicles are 2,748 units of the Beetle, T5, Touareg, Golf, Tiguan, and Magotan. A Bloomberg report cited Larissa Braun, a Beijing-based spokesperson for the company, as saying that VW would make alternative arrangements to make shipments to its dealers through the ports of Shanghai and Guangzhou.
Toyota and others
Toyota said the explosions caused some damage to its car assembly, logistics, and research-and-development facilities, which it operates in the city through a joint venture with FAW Group. No one at its facilities was hurt as operations had been closed for a week-long summer holiday. Without sharing a figure, the automaker said some of its vehicles were affected by the blasts. "In our current view, the damage isn't that severe," a Beijing-based Toyota spokesperson said.
Fuji Heavy Industries, the manufacturer of Subaru branded vehicles, said around 100 imported vehicles stored in a local warehouse had broken windows. The imported vehicles were waiting customs clearance. In addition, Mazda acknowledged damage of peeling paint and scratches to an unknown number of imported vehicles.
Outlook and implications
Tianjin is one of the biggest automobile shipping ports in China and is widely used to ship vehicles within the country, especially northern parts, as well as for exports and imports. The city's port accounts for about 40% of China's imported cars, the largest share of any port in the country. Apart from automobiles, the port accounted for nearly 17% of the nation's ethylene imports, 15% of its wheat deliveries, and 30% of steel exports in the first half of 2015, according to government data. Following the deadly incident, chemical, oil, and LPG terminals at the port have been closed, although bulk shipping operations related to cargo such as coal and iron ore are continuing normally. The blasts have also impacted the corporate office area at the docks, further complicating the task of measuring the impact and assessing which other hazardous goods are stored at the warehouses.
Since damaged goods are usually covered by insurance in such cases, the impact is more in terms of delivery delays and shortages. Since Tianjin port is used as a gateway to the northern parts of the country, the incident is likely to pose some logistics challenges. This impact is also short term in nature as automakers, suppliers, and distributors tend to divert shipments following such incidents. Some automakers have already indicated they will schedule alternative shipping of vehicles to other parts of the country through other ports. Toyota is one automaker which has a production base in Tianjin, but the OEM has reported it has remained unaffected by the explosions, except some broken windows.