New Automaker Problem – Lack of Rail-cars

Automakers have been reporting large sales increases over the past few months, turning over inventory at a much faster rate than last year. This has created a new problem, a bottleneck of new cars waiting for specially built rail-cars to ship them to dealerships. This means you might just be waiting on a rail-car for your next pickup.

Automakers are dealing with a new problem, a lack of rail-cars used to ship vehicles to dealerships.

Rail-cars play a pivotal role in the distribution system that automakers use to get cars on the dealership lots. Essentially, new cars are loaded on bi-level and tri-level rail-cars and then shipped to rail heads. Then, semi-trucks pickup them up and drive them to a dealership.

According to a story by Autonews.com, daily inventories of cars awaiting rail-car pickup is 69,000 per day. As of May 18 that number was rose to 81,470 according to a report by TTX Co., a Chicago-based firm that helps the railroad industry coordinate shipments of vehicles. This increase in cars waiting to be picked up could cause serious transportation challenges for automakers.

As an example of what automakers face, Toyota says it has a daily inventory of 10,000 vehicles awaiting pick up from North American factories.

Mike Nelson, Toyota Motor Corporation’s national manager of rail strategy and operations recently spoke about the problem at a forum sponsored by the Automotive Industry Action Group in Troy, Mich.

“It’s a nightmare right now,” said  Nelson. “If it gets to 12,000 or 13,000 units, we’ll have trouble. We were there earlier this year. We watch this on a daily basis.”

One of the issues surrounding this problem is the rapid resurgence of auto sales that surprised industry forecasters. They didn’t think the auto industry would pick up so fast and didn’t plan to have enough rail-cars to fill the need.

Also compounding the problem is the special needs of automakers. They use special bi-level and tri-level rail-cars for transport. The real shortage is in tri-level rail-cars since they hold more compact cars which have been outselling trucks lately.

There is no real solution to the problem. Automakers could use more semi-trucks to carry the load, but this isn’t really a good solution since it is very cost-prohibitive to have them drive more than 75 miles from the rail head.

Automakers also don’t have a lot of “pull” within the railroad industry since they only account for 8 to 9 percent of the total freight used. Railroads simply make more money from other industry’s loads.

With no real solution in sight, Nelson said, “You can’t force anybody to do anything. I think we’ll have this problem over the next couple of years.”

Related Posts:

• May 2012 Toyota Tundra Sales up 88 percent!
• Toyota June 2012 Sales Boom – Continuing Trend
• Japan Earthquake Will Hurt Toyota Sales, Effect U.S. Automakers Too