Why Union Pacific Is The Leader In Automotive Shipments Amongst U.S. Railroads

+2.03%
Upside
246
Market
251
Trefis
UNP: Union Pacific logo
UNP
Union Pacific

Union Pacific (NYSE:UNP) is a leading railroad company in the U.S. It generated around 10% of its revenue in 2013 by transporting finished vehicles, pre-owned vehicles and spare parts, which constitute its automotive segment. Other major railroads in the U.S. also transport vehicles and spare parts, however, Union Pacific is the largest player in the automotive shipments segment. In this article, we will understand why Union Pacific is the leader in the segment.

See our complete analysis of Union Pacific here

Union Pacific Handles The Highest Automotive Carloads

Motor Vehicles and Parts Carloads (Ending 52 weeks)
Railroad 2013 2012 2011 2010
Union Pacific 481,011 465,455 420,992 396,975
CSX 432,622 427,060 362,609 336,337
Norfolk Southern 400,276 373,886 332,361 289,800
Burlington Northern Santa Fe 182,947 168,307 Data not available
Relevant Articles
  1. Should You Pick Union Pacific Stock At $250 After 20% Gains Last Year And Q4 Beat?
  2. Up Over 2x In 2023 Is AMD A Better Pick Over Union Pacific Stock?
  3. Should You Pick Union Pacific Stock After An 18% Fall In Q3 Earnings?
  4. What To Expect From Union Pacific’s Q3 After Stock Up Only 2% This Year?
  5. Should You Pick Union Pacific Stock Over McDonald’s?
  6. Earnings Beat Ahead For Union Pacific Stock?

The above data has been collected from weekly carload reports submitted by various railroads operating in the U.S. to the Association of American Railroads. It clearly indicates Union Pacific’s leadership in the automobile shipments segment. Union Pacific has been handling the highest volumes of Motor Vehicles and Parts for a long time, followed by CSX (NYSE:CSX) and Norfolk Southern (NYSE:NSC). Burlington Northern Santa Fe is far behind in automotive carloads.

Union Pacific Has Greater Access To Mexico

Union Pacific’s high automotive carloads are driven by the fact that it caters to 80% of the automotive shipments in and out of Mexico. [1] This is enabled by its access to all six U.S.–Mexico gateways. Union Pacific’s primary competitor on a geographic basis, Burlington Northern Santa Fe, has access to only five gateways. CSX and Norfolk Southern have no direct access to Mexico since their railroad network is limited to the eastern side of the Mississippi river.

IHS Automotive expects Mexican auto exports to grow to 1.69 million this year, surpassing Japan as the number two auto exporter to the U.S. in 2014. [2] Lower labor costs and weaker currency compared to dollar is what makes Mexico an attractive destination for automobile manufacturers to open assembly plants. The Mexican automotive industry has also benefited from increased exports to the U.S. due to lower tariffs enabled by the establishment of the North American Free Trade Agreement (NAFTA) in 1994.

Automobile manufacturers Nissan, Honda and Mazda have recently opened plants in Mexico. The growing presence of automobile manufacturers in Mexico shall also help boost Mexican auto exports.  Considering Union Pacific’s high market share of Mexico’s automotive railroad shipments and access to all gateways, it is well positioned to benefit from future growth in Mexican auto exports.

Additional Services Offered By Union Pacific’s Subsidiaries Helps Boost Carloads

Union Pacific’s subsidiaries, Insight Network Logistics and Union Pacific Distribution Services, offer various logistical services for automotive manufactures. The services of the subsidiaries are marketed along with Union Pacific’s railroad shipping services as a packaged solution that helps automotive manufacturer’s logistical requirements. Automotive manufacturers are attracted to such offerings and tend to sign up with Union Pacific.

Another one of Union Pacific’s subsidiaries, ShipCarsNow, offers marketing services for pre-owned cars and also helps in selling such vehicles through auction companies and car rental services, both domestically and internationally. Union Pacific benefits from the shipments of such pre-owned vehicles.

These services help Union Pacific gain a competitive edge over other railroads and help in boosting automotive shipments. As long as Union Pacific maintains its extensive network and offerings, it will be able to sustain its leadership in automobile shipments.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis) | Get Trefis Technology

Notes:
  1. Union Pacific’s 2013 Factbook, www.up.com []
  2. Mexico Surpassing Japan as No. 2 Auto Exporter to U.S., January 31 2014, www. bloomberg.com []