Hyundai Glovis Co., a supply chain management and logistics unit of South Korea’s Hyundai Motor Group, has clinched a long-term, exclusive delivery deal that could reach up to 518.2 billion won ($431.4 million) from Europe’s largest finished carmaker Volkswagen Group.
Hyundai Glovis said on Thursday that it signed a contract with Volkswagen Konzernlogistik GmbH & Co. OHG, an integrated logistics services provider under Germany’s Volkswagen Group, to ship finished vehicles of the group’s car brands by sea. Volkswagen Konzernlogistik – headquartered in Wolfsburg in Germany – is responsible for network planning, delivery, and distribution across Volkswagen’s 12 brands.
Shares of Hyundai Glovis finished 1.46 percent higher at 104,000 won on Thursday.
Under the contract, Hyundai Glovis will exclusively deliver vehicles of various brands under Volkswagen Group, including Volkswagen, Audi, Porsche, and Bentley, that will be produced in Europe to China. It will transport their finished cars 10 times every month from the port of Bremerhaven in Germany and port of Southampton in United Kingdom to major ports in China including those in Shanghai, Xinjiang, and Huangpu.
The contract will terminate in December 2024 that include minimum three years plus a two-year extension option. With the option, the deal value would reach up to 518.2 billion won. The two parties decided not to disclose details including their agreed delivery volume.
The Korean company said it is the largest-ever shipping deal clinched with a global finished carmaker other than its affiliates Hyundai Motor Co. and Kia Motors Corp. owned by Hyundai Motor Group.
Hyundai Glovis expected the latest deal to improve efficiency in cargo operation and loading rate because it will allow the company to operate ships on the all the major routes. It comes after it has been putting out efforts to secure cargo from Europe back to East Asia after shipping vehicles from Korea to Europe.
The latest long-term contract with Volkswagen also is expected to accelerate its effort to diversify its client base after years of focusing on its sibling companies in Hyundai Motor Group.
Revenue from non-Hyundai companies or non-auto cargo accounted for 40 percent of total sales in 2016, but jumped to 42 percent in 2017, 44 percent in 2018, and 53 percent in 2019.
Thanks to the efforts to diversify revenue source, Hyundai Glovis raised 2.05 trillion won in finished car sea transport business last year. Given that shipping revenue comes from transport fees, Hyundai Glovis is believed to have raised 1 trillion won in freight charge from non-affiliate companies last year including non-Hyundai finished vehicle manufacturers and heavy equipment manufacturers.
The global vehicle shipping industry is currently led by Japanese and European companies. They are closely trailed by Korean shipper Hyundai Glovis, which has signed a distribution contract with 17 global finished carmakers. The company is also a major player in transporting heavy equipment such as dump trucks and excavators and shipping used cars.