'We are the largest logistics service provider to the top 7 of the top 10 automobile companies in India.'
The Transport Corporation of India foresees a gradual recovery in the cargo movement and expects 8-9 percent overall growth in FY2015-16. Jasjit Sethi, CEO, TCI Supply Chain Solutions, speaks to Amit Panday.
The Rs 2,800 crore Transport Corporation of India (TCI), one of the largest logistics service providers to the automotive industry in India, foresees a gradual recovery in the cargo movement and expects 8-9 percent overall growth in FY2015-16. Jasjit Sethi, CEO, TCI Supply Chain Solutions, speaks to Amit Panday.
How big is the automotive logistics domain for Transport Corp of India?
In the passenger car segment, which is slightly more than 3 million units per year, we transport around 10 percent of that volume in outbound logistics including rail and road. If we look at yard management and other services, we do a bit more than that. This is for the entire TCI Group including its exclusive JV with Mitsui & Co called as Transystem Logistics International.
In terms of two-wheeler logistics, our share is close to 10 percent (The SIAM FY2014-15 report suggests that over 16 million units were domestically sold). Peak cargo transportation happens around the Diwali season. So that is the large part of the pie and all the major OEMs are our customers. This is on the completely built up unit side.
On the production side of logistics, in the passenger vehicle segment, we manage (logistics for) about 13 plants across India for 13 automakers. I won’t be able to name them though.
We do a lot of business on the inbound side as well. This also involves port logistics, which majorly include the carmakers. They import a lot of CKD kits and components, which come in for example from the Chennai port or the Mumbai port and into the automaker’s plant. So in terms of production logistics, we would be doing close to 20 percent in terms of volumes for both the industries – passenger vehicles (PVs) and two- wheelers.
In the farm equipment industry, we are working for large companies based in south India as well as the north Indian region. We are doing production and outbound logistics for the companies in this segment. We are providing outbound logistics services using trailers (road) and trains as well. That is also true for passenger vehicles and two-wheelers.
Typically, for the automotive industry, we are running close to 10-12 rail rakes (full trains) per month. That mainly involves two-wheelers, passenger vehicles and farm tractors. Last year, I think, we ran close to 130-odd rail rakes. There have been years earlier when we have done 200-250 rail rakes for automobiles, but that was also when there was a shortage for trailers in the country. However, that is not the case anymore. And the price differential between rail and road is also not much now, thanks to the correction in the fuel prices.
We also serve the automotive aftermarket wherein we provide a lot of services related to warehousing, parts distribution across the country, and (production) plant logistics, which includes transporting parts from the suppliers to the parts centres.
We also provide services covering QC (quality check), binning, kitting, holograms and other jobs as well. A lot of these services are in demand in the aftermarket segment as well. We are also involved in the aggregate movement, which is a major part of the inbound supply chain in the CV industry.
What would be the percentage split between rail versus road when it comes to despatching the passenger vehicles and two-wheelers across the country?
The rail percentage is not very high. It would be, in two-wheelers, at a maximum level of 3-4 percent of the overall transportation. For passenger vehicles, it would be close to 2.5-3 percent. The percentage is very similar in case of the farm tractors also. Automotive logistics in India is mainly serviced by the trailers on the road. Railways have a very small share.
How big in terms of annual revenues would be automotive logistics including commercial vehicles and farm tractors for TCI as a whole?
That would be about 30 percent of our overall annual revenues for group TCI. But for the supply chain division, automobiles contribute close to 70 percent.
As per your estimate, what would be the overall size of the automotive logistics industry in India?
It would be approximately 4-5 percent of the total turnover of the automotive industry. If the size of the auto industry is estimated to be US$ 70 billion per year, then US$ 3.5 billion (or Rs 20,000 crore) would be the annual size of the automotive logistics industry.
What are the growth prospects of this domain?
We are expecting a lot of recovery too soon. Besides the latest rate cut stimulus that has been given to the industry, I think it will take its own time as I don’t see much happening on the manufacturing side. The inventory is high, retail is not good specially for two-wheelers and tractors, and production capacity utilisation is on the lower side. I think it is more of a stable market currently and not much of growth. However, having said that, we are not looking at declines either.
How do you plan to tackle these times?
For a company like us that has been around for last few decades, we have made our business quite secure. For us – we keep our existing customers and margins secure, and in case of each new customer acquisition, we are very clear about why we are acquiring that client and how we can assure benefits of the economies of scale. For us, it is more about consolidation and growth right now rather about big growth. There is no customer in PVs or two-wheelers who is not our client. We are the largest logistics service provider to the top 7 of the top 10 automobile companies in India.
What are the challenges that the automotive logistics industry in India faces?
The issue of empty hauls in CBU transportation remain. The cargo skew also comes into existence due to festive season. For example, during Onam, traffic goes down south, during Durga Puja, the cargo requirements increase in the east. Similar movement is created during Ganpati, Diwali and other festivals. It will take some time for this challenge of reverse logistics to be completely addressed. Some companies have set up yards to deal with this but the skew remains. This challenge has worsened in the past 3-4 years.
Other major challenges would be volume fluctuation, high investment and low throughput for car carriers. A new set of challenges have come up pertaining to the changing CMVR guidelines (for vehicle carrier trailers) are going on. On the inbound logistics side, since this is a high precision work, the service providers are expected to continuously innovate and keep introducing new services but within the same cost pressures. So, overall, the business challenges have only increased over years.
How is Transystem Logistics International faring? Is it focussed only on Toyota Kirloskar Motors or does it cater to other OEMs as well?
Yes, we are servicing other OEMs as well. It is an unlisted company, and is doing very well. TLI provides very high value logistics and is known for being a class leader in safety standards in terms of personnel, material and vehicles.
This interview has been published in the November 1, 2015, 'Automotive Logistics Special' of Autocar Professional
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