2012 Automotive Logistics Special: MercurioPallia eyes increased biz from HCVs

Logistics player MercurioPallia, pegged to be the third largest automobile carrier in the country, is making inroads in a still nascent industry in India with its truck-on-truck concept of transportation. This involves transporting heavy commercial vehicles (HCVs) on another truck. To facilitate this venture, the logistics player has floated a new vertical around five months ago and has tied up with Tata Motors, Ashok Leyland, Mahindra Navistar, Daimler India Commercial Vehicles, MAN Trucks and Force Motors for outbound logistics from plant to dealers or ports around the country.

Till recently, HCVs used to be driven on their own power to prospective customers from the dealerships, the vehicles chalking up considerable miles even before they were delivered to the owner. The truck-on-truck system will do away with this anomaly, ensuring zero mileage for the HCV after being bought at the dealer’s showroom.

According to Vipul Nanda, managing director of MercurioPallia Logistics, if most HCV buyers demand specialised truck transportation over the next three to four years, the market for these trailers would be around 7,000 units. At present, this market constitutes around 150 trailers from four to five key logistics players; MercurioPallia holds a trailer portfolio of 30 to 35 units that can transport 300 HCVs a month. With its new product portfolio, the company is targeting a 20 percent growth in its topline this fiscal over its existing Rs 150 crore turnover and growing above the industry’s 10 percent growth.

Growth plans

MercurioPallia has concrete plans to drive new growth. On the export front, it plans to tap its overseas partner Gefco that has operations in 60 countries. Gefco, the logistics arm of PSA Peugeot Citroën, which was earlier mulling establishment of warehousing operations at Sanand in Gujarat for Peugeot and has since shelved it after the carmaker put its India plans on the backburner, holds a controlling 70 percent stake in the Italian transport and distribution company, GruppoMercurio. While GruppoMercurio functions as an independent company, synergies are present in providing services for existing customers.

Mercurio has a local joint venture with Pallia Transport Company of India since 2008 and together they manage inbound and outbound traffic for a host of automobile manufacturers in India.

Pallia Transport was founded in 1962 by chairman and MD Vipul Nanda’s father at Pallia, near the Nepal border. In 1982, following a shift in headquarters to New Delhi, it began to provide logistic support to MarutiUdyog. Thereafter, coinciding with the automotive boom in 2003, Pallia multiplied its fortunes as a car carrier by introducing car trailers to its fleet. Gradually, its client list grew with the likes of Mahindra & Mahindra, Tata Motors, Hyundai Motor India and General Motors India using its services to transport their vehicles.

The JV has invested $2 million (Rs 11 crore) through its subsidiary MercurioPallia Auto Works in a manufacturing facility that builds bodies for automobile carriers at Rewari in Haryana. Now, the company is increasing its capability to manufacture specialised trailers and trucks and also its truck-on-truck concept that transports three to four HCVs on a single truck. The manufacturing capacity at Rewari, which is 30 units per month at present, is slated to increase to 40 units per month by year end.

More for less

In a bid to expand capacity innovatively, MercurioPallia has been leveraging a triple-decker trailer for transporting two-wheelers since the last four months. This trailer can carry 106 motorcycles at one time and can also be converted into a car carrier carrying eight cars at one go.

Currently, the company caters to Hero MotoCorp, Mahindra 2-Wheelers and, to a smaller extent, to Honda Motorcycle & Scooter India (HMSI). Since it began transporting two-wheelers, it has handled 10,000 to 12,000 units on these carriers. It has now set a target of harnessing 30 trailers with a load factor of 10,000 bikes a month. This is likely to reach fruition before the festive season commences, given the growing customer demand for two-wheelers. Nanda says that HMSI has evinced its keenness for increased transportation services to boost Diwali sales.

The car carrier business though remains the cash cow for the company which has, over the years, expanded operations to include transport of two-wheelers and HCVs. It currently transports about 12,500 cars a month on regular Tata and Ashok Leyland trucks for OEMs like Maruti Suzuki, Hyundai Motor India, Mahindra & Mahindra, Tata Motors, General Motors India, Nissan Motor India, Renault India and Toyota Kirloskar Motor. With Maruti's production impacted by the recent month-long lockout at its Manesar plant, MercurioPallia’s trucks on Maruti duty lay idle. In terms of business, the company transports upto 2,000 Maruti cars a month with a similar number accounted for by M&M and Tata Motors; for GM India, it shifts 1,000 units a month, 500 for Toyota and Nissan, and 700 to 800 units for Hyundai. These cars are transported from the OEMs’ factories to dealers within the country and from the plants to the port for M&M and Hyundai.

Using common rail

MercurioPallia hopes to benefit from the India Railways Automobile Freight Train Operator (AFTO) scheme, which was formulated in July 2010 to increase the rail share of automobile traffic from the 3-4 percent level to about 30 percent by 2015. Under this policy, private players, for the first time, have been permitted to benefit from the usage of rail transport to end users. Nanda says the logistics industry is still awaiting finalisation of the revised AFTO scheme after which rail logistics could catch up. In Italy, Gefco and Mercurio transport Tata and M&M cars from port to dealer outlets. Overall, the logistics provider is waiting for the market in Europe to pick up before it beefs up its export plans.

Focus on training

The company says it maintains a standard transit time with global positioning systems fitted on all its trucks to facilitate just-in-time deliveries. Driver training forms a major part of this exercise and is undertaken at the Rewari facility. About 25 to 30 drivers are trained on a daily basis with a refresher training course that is more a motivational initiative on defensive driving, health awareness, use of hardware in trailers and ways to maintain higher fuel efficiencies and reduce maintenance costs.

Nanda cites the shortage of trained drivers as the biggest challenge faced by the logistics industry. While road infrastructure and bottlenecks at state borders remain a bugbear, in comparison the logistics sector overseas is a lot more advanced due to better road conditions, educated drivers and advanced quality of trucks.

For Nanda, the key obstacles to speedier growth in the automotive logistics industry in India today are the existing road infrastructure, congestion at ports, lack of social security for drivers, bottlenecks at state borders and the delay in implementation of GST.

On its side, the company is modernising operations on the fleet front by sourcing the latest trucks from Mahindra Navistar and Ashok Leyland. It will also soon be buying Tata Prima trucks while DICV’s BharatBenz trucks are also in the pipeline.

Modern specialised trucks help deliver cost benefits both to OEMs and to the logistics provider in terms of increased load factor on the trailer with less turnaround time. MercurioPallia is keenly waiting for the enforcement of the GST regime to ensure smooth transit between states in the presence of a uniform tax structure.

It is optimistic of a hub-and-spoke system prevailing once the GST and railway networks are in place for cargo supplies. This would also give a fillip to warehouses as most of the manufacturers could maintain regional compounds to facilitate local deliveries to the dealer instead of movement from far-flung areas which raises costs.

SHOBHA MATHUR