News / Production decline leaves European automotive LSPs with eroding margins

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European automotive logistics services providers will take some comfort in forecasts of a moderate rebound in the market in 2025, largely due to growth in battery electric vehicles.

But the cold reality is, there are far fewer vehicles being produced across the continent than in the previous decade.

Speaking at the Association of European Vehicle Logistics (ECG) 2025 General Assembly and Spring Congress, Justin Cox, director of global production, GlobalData, estimated that Europe was producing five million fewer units than during the peak period of 2017/2018.

He argued that such volume contraction could not be viewed as cyclical but something more structural, which LSPs must factor-in when it comes to planning strategy.

Asked how European automotive LSPs might adapt to an industry beset by shrinking output, and caught up in a trade war which has led to a decline in exports, and whose knock-on effect on LSPs has been margin erosion, ING’s senior sector economist, Rico Luman, told The Loadstar: “The loss of unit volume and the persistently lower sales level of just 80% of 2019 levels (in the EU/UK/EFTA) seems to be the new normal for now.

“There’s a chance that unit sales will gain traction when electric cars eventually become cheaper and more attainable to middle-income buyers, but we’re not there yet, either this year or the next. There’s no easy substitution for the ‘lost’ business, frankly.”

He pointed to the used car market getting bigger with growth in cross-border flows, but this was likely to have only very limited compensatory effects.

A downturn in automotive logistics activity can be gauged by the excess capacity in mega road trailers (to transport vehicles) and where residual values had dropped, said Mr Luman.

“In response, some LSPs will probably look to diversify into other markets. I’ve heard of OEMs like Volkswagen and Daimler eyeing the production of more military vehicles – this to a backdrop of an increase in public spending in Europe on defence – which would obviously require logistics provision.”

One strategic shift on the part of OEMs could be to increase volumes in Europe, because of the headwinds in export markets such as US and China, he noted.

“If they prioritised volume, reduced prices and turned out more affordable cars it could drive up sales again. However, this of course will also hurt margins, so I don’t see it happening just yet.”

The after-sales automobile market being strong could also provide LSPs with opportunities.

“Commercial fleets are still on the rise across Europe and with this comes the need for more maintenance, spare parts and accessories. This is a segment (of the market) which requires specific logistics handling expertise and use of different transportation equipment,” Mr Luman added.