Gefco, the logistics arm of PSA Peugeot Citroen, is firming up plans to establish its India operations in Gujarat through Mercurio Pallia Logistics. This will involve managing both inbound and outbound traffic for the auto major for distribution of vehicles as well as spare parts.

Gefco, which manages logistics for Peugeot and other OEs globally, will establish a warehouse and related infrastructure including loading and unloading operations within the upcoming manufacturing facility of PSA Peugeot Citroën in Gujarat.

The French carmaker recently announced its plan to set up a Rs 4,000 crore, 170,000 unit facility at Sanand in Gujarat. Gefco Group-Asian Division president, Christophe Poitrineau, says Peugeot Citroën is mulling production of 200,000 cars per year from 2013-14.

While its priority is the domestic market, exports are slated to begin in 2014-15 and will be headed to markets in East Asia, South Africa and the Middle East. Logistics support will be extended for both domestic sales and exports.

Gefco acquired a controlling 70 percent stake in the Italian transport and distribution company, Gruppo Mercurio, following an agreement signed with Venice European Investments (VEI), the investment fund controlled by holding company, Palladio Finanziaria in 2007. While Gruppo Mercurio functions as an independent company, synergies are present in providing services for existing customers.

Gefco now plans to leverage the Mercurio acquisition to boost the development of its inbound and outbound automotive logistics services as well as diversify its client portfolio in India. Mercurio has a local joint venture with Pallia Transport Company of India since 2008 and together they are pegged to be the third largest automobile carrier in the country.

Riding the wave

Pallia was founded in 1962 by chairman and MD Vipul Nanda’s father at Pallia, near the Nepal border. They moved to New Delhi in 1982 and began to provide logistics for Maruti Udyog. Thereafter, coinciding with the boom period in the automotive sector during 2003, Pallia multiplied its fortunes as a car carrier by adding car trailers.

It then expanded its clients to include Mahindra & Mahindra, Tata Motors, Hyundai Motor India and General Motors India. The JV has invested $2 million through its subsidiary Mercurio Pallia Auto Works in a manufacturing facility that builds bodies for automobile carriers at Rewari in Haryana.

The company is increasing capabilities to manufacture specialised trailers and trucks and has recently introduced a new ‘Truck on Truck’ concept in India that will involve transporting three to four trucks on another truck.

The triple decker trailers and truck-on- trucks manufactured at Rewari will not only scale up the company’s fleet that is currently 600 vehicles but will also be exported to countries in the Asia-Pacific region. Vipul Nanda says the new facility will allow the company to deliver a new generation of trailers that bring about cost savings in deliveries and maintenance.

At present, all OEs except Volkswagen and Ford India are its customers. The company, at present, carries 125,000 cars annually with each OE accounting for a 15 percent share though M&M has the largest share of the pie at around 18 percent.

Eyeing two-wheeler and CV business

The logistics transporter is also exploring entry into the two-wheeler and truck transportation segment in a larger way. While it is looking to transport motorcycles and scooters for Hero MotoCorp, Honda Motorcycle & Scooter India and Mahindra Scooters, the CV clients it is gunning for are Tata Motors, Ashok Leyland and Volvo.

The car transportation business for the JV currently hogs the largest share of the company’s turnover of Rs 110 crore, at 65 percent. The balance is accounted by trucks and the two-wheeler business that is still minuscule. The JV is also exploring options of bringing in new technologies that are prevalent in Europe like double-deck vehicles with very high capacity and block trains but these will take not less than three years to materialise.

According to Nanda, the time taken by train transportation is a third of that taken by trucks with a higher capacity and is safer. Clearly, the condition of the country’s roads has to do with such a decision. Hence, it plans to manufacture special wagons for railways in India especially for carrying cars.

Once GST becomes applicable, the JV will look at the possibility of using the rail route. It has already signed a MoU with Freight Star for the new railway wagons whose manufacture will be outsourced to a third party. The wagons will have a 25 percent higher loading capacity, enabling transportation of about 270 cars. Existing wagons can transport around five to 10 cars at a time. Initial trials are currently underway.

The Indian logistics market, according to Andrea Guido Conti, president of Gruppo Mercurio SpA, is very different from the European one and has scope for further improvement. There is, additionally, the need to change the methodology of operations to tap its large potential. The JV’s market share in India is six percent while globally Gefco is worth over 3.5 billion euro transporting four million cars in Europe and other countries.

In India, Mercurio Pallia is targeting leadership in service and looking at establishing a large export base. The company is expanding its exports to Asian countries like Thailand, Malaysia and Indonesia with the aim of creating a network from India and China. Plans are afoot to also export from India to Africa besides exporting to Europe.

The company provides logistics for Suzuki in Italy, for Mahindra in Italy and France, for Tata in Italy as well as for Hyundai in Italy and France. As Gefco, it is keen to follow these OEs to new markets and countries of Kazakhstan and Uzbekistan, Ukraine and Russia though its services are already present in Ukraine and Russia. While Gefco has a 25 percent market share in Italy and 32 percent in France, its target for India is a 10 percent share by 2013. It plans to step up its fleet size by 100 percent and lift 150,000 cars annually by 2012 as well as grow at 35 percent per annum in India.