The Ship is used for exploring the World Map and transporting loot from explored locations to the Home Island. Initially, the Shipyard has to be repaired, which then allows the player to repair the Ship as well. It can then be fueled with Diesel, and crewed by sailors, who are just workers. As you keep upgrading the ship, it will keep increasing the number of required sailors.
Before you repair a Cargo Ship, an Outpost, and setup automatic unloading at a Cargo Depot, you can send the Ship out to load cargo onto it instead. This is useful mostly for initial Wood and Crude Oil importing.
Once you add at least one weapon, it gains a "Battle Score", representative of how strong it is in battle. You should not attempt to defeat enemies at a location with a much higher score than the Ship. If the Ship is damaged in battle, it will need items such as Iron and Mechanical Parts to repair it, which gets more costly as you improve it.
Parts of the ship can be upgraded. These upgrades increase the ships battle score, and exploration capabilities. In addition, the ship's appearance will change as upgrades are added.
Weapons and Armor
Mainly improve the battle score. You can add two instances of each.
Increases the radar discovery range of the ship. This allows you to see further areas, and what they contain, although not the loot they have.
Also increases the battle score.
Increase the ship's movement speed and fuel capacity.
Increases the ship's fuel capacity.