Structural Headwinds and Margin Pressures Plague Car Shippers: A Bearish Outlook for 2025

The vessel chartering sector for car shippers is grappling with a confluence of structural headwinds and margin pressures in 2025, driven by geopolitical tensions, regulatory shifts, and oversupply dynamics. Companies like Höegh Autoliners and Wallenius Wilhelmsen are navigating a landscape where demand volatility and cost inflation are eroding profitability, even as strategic fleet modernization and operational adjustments offer limited respite.

Structural Headwinds: Tariffs, Geopolitics, and Oversupply

The most immediate threat to car shippers stems from the European Union's imposition of tariffs on Chinese-made electric vehicles (EVs), which reached as high as 45.3% in 2025, according to a MarineLink report. These tariffs have disrupted global trade flows, particularly for operators reliant on trans-Pacific routes. For instance, Wallenius Wilhelmsen's stock price plummeted nearly 20% in late October 2024 following weaker global car sales forecasts, underscoring market pessimism noted by MarineLink. While the company anticipates adjusted EBITDA growth of 7–12% YoY in 2025, the broader sector remains vulnerable to oversupply conditions. A 39% orderbook-to-live fleet ratio is set to inject an 11% net supply increase in 2025, with an additional 6% potential surge if the Red Sea crisis resolves earlier than expected, MarineLink also reported.

Geopolitical disruptions further exacerbate these challenges. Höegh Autoliners reported a 14% decline in adjusted EBITDA in Q1 2025, partly due to Red Sea reroutings and U.S. port fees, which management estimates could cost $60–70 million annually, according to Höegh Q1 slides. Meanwhile, the EU's EV tariffs and U.S. import duties (e.g., 25% on non-USMCA-compliant vehicles) are creating a regulatory fog that complicates long-term planning, as highlighted in a TCI Ships analysis (TCI Ships).

Margin Pressures: Rising Costs and Softening Rates

Operational cost pressures are intensifying across the sector. Non-fuel expenses for trucking operations rose 3.6% in 2024 to $1.779 per mile, with truck and trailer payments alone up 8.3%, according to an ATRI report. While car shippers are less directly impacted by land-based costs, similar inflationary trends in maritime logistics-such as higher port fees and compliance costs for EVs-have squeezed margins. Höegh Autoliners, for example, reported net rates of $80.4 per CBM in Q1 2025, down from $86.7 in Q4 2024 (Investing.com).

Freight rate softness is compounded by the influx of large newbuilds. The delivery of 9,100 CEU vessels like the Höegh Aurora and a fleet of 30 pure car and truck carriers (PCTCs) by China COSCO Shipping Corporation has intensified competition, MarineLink noted. Despite this, VesselsValue observes that demand from China remains resilient, with 1 million cars expected to shift back to roll-on/roll-off (RORO) modalities by 2025/26. However, this shift is unlikely to offset the broader bearish trend.

Profitability Metrics and Strategic Adjustments

Q2 2025 profitability metrics highlight the sector's fragility. The car shipping industry reported a Gross Margin of 81.76% and an EBITDA Margin of 14.92%, with a Net Margin of 8.43%-figures that, while improved sequentially, mask underlying vulnerabilities, according to CSIMarket data. Höegh Autoliners' Q1 net profit before tax rose 11% to $155 million despite declining gross rates, a testament to its robust balance sheet (Investing.com). Yet, the company's mixed performance-47% volume growth from Asia versus Atlantic imbalances-illustrates the uneven recovery, as discussed in the TCI Ships analysis.

Strategic responses include fleet modernization (e.g., Aurora-class vessels) and short-term chartering to manage capacity, per the TCI Ships analysis. However, these measures come at a cost. EVs, which require specialized handling and add $500–$1,000 per shipment, are further straining margins, a point raised in the same TCI Ships piece. Meanwhile, labor shortages and sustainability investments (e.g., alternative fuels) are adding to operational complexity, according to a WC Shipping blog.

Investment Implications

The car carrier sector's 2025 outlook remains bearish, with structural headwinds and margin pressures likely to persist through at least mid-2026. While companies like Höegh Autoliners demonstrate resilience through strong cash generation and strategic flexibility, the path to profitability is fraught with uncertainties. Investors should monitor tariff developments, newbuild delivery schedules, and the pace of RORO modal shifts. For now, caution is warranted, as the sector's ability to navigate these challenges remains unproven.