Indian Automotive Logistics Industry Outlook
According to the Society of Indian Automobile Manufacturers, a total of 29,075,605 vehicles including commercial vehicles, passenger vehicles, two wheelers, three wheelers, and quadricycle were produced from April to March 2018, registering a 14.78% growth compared to the same period in the previous year. Automobile export, on the other hand, increased by 16.12% in April–March 2018. The highest growth was achieved by the two and three-wheeler segment. The passenger and commercial vehicle segment witnessed a decline in the total export, whereas the domestic sales of passenger vehicles increased in April–March 2018.
India’s automotive industry is boosting its production every year, and with the government support, the production is expected to increase further in the coming years. There is a need to improve transport infrastructure to move the produced vehicles efficiently across the country. The transport mix can be improved with collaboration and by introducing a hub-and-spoke network.
In the Indian Logistics industry, the supply chain is still weak including inbound logistics, outbound logistics, reverse logistics, green logistics. The Indian logistics industry is underdeveloped and fragmented including inbound logistics, outbound logistics, reverse logistics, green logistics. The cost for logistics is relatively high because of poor communication and physical infrastructure, low containerization levels, and high lodging time at ports, leading to significant delay at the crossing point of the border. The efficiency of the logistics system including inbound logistics, outbound logistics, reverse logistics and green logistics is expected to improve with the increase in free trade warehousing, logistics parks, container freight stations, and dedicated freight corridors. Key reform initiatives from the government, improvisation of the investment climate, and promotion of trade and manufacturing are expected to drive growth and transform the industry in the medium to long term.
The industry needs an integrated multimodal solution. At present, the Indian logistics industry including inbound logistics, outbound logistics, and reverse logistics is heavily reliant on trucks. There is a need to move away from trucks and roads for fast and more efficient transportation of goods or green logistics. The country has tested short sea shipping in collaboration with various OEMs in the past, but the tests were unsuccessful because of the associated cost and turnaround time. The move from roads to railways track is one of the solutions to address the current logistic challenges.
The next breakthrough for automotive logistics in India will be to create an ability to connect trains through hub-and-spoke networks, with the last miles covered by trucks. This will increase the efficiency of the Indian Logistics industry.
In the current model, all means of transport is underutilized in India and the major focus is on road transport. With respect to other economies such as the U.S., China, and countries in Europe, road transport is utilized only to cover the last miles. One train can make 40 to 50 trucks redundant, resulting in less emission and increased efficiency with the fast response time. The automotive industry should fulfill its responsibility by reducing trucks on the road and minimizing the carbon footprint.
APL Logistics Vascor has obtained the Freight Train Operator license issued by the Indian Railways. This allows the company to operate specialized rail wagons. The company is expected to move approximately 80,000 cars this year, and the company is planning to increase its transportation by two-fold every year.
To make the rail and sea networks successful, the automakers need to operate in collaboration with logistics service providers. If the resources are shared, it will bring down the associated cost with respect to the assets and operating expenses will also come down. The vessels employed for sea transport will be occupied in both to and fro journey. Furthermore, it is also possible to remove the warehouses from the loop as it will help distribute the end product from the plant to the dealer. But keeping in mind the increase in production and government support, the storage hubs will continue to remain essential in the short to medium term until the transportation issues are fixed and every one operates in collaboration.
The government has made a significant change in taxation and it will hugely benefit the logistics industry. The introduction of Goods and Services Tax (GST) will replace the traditional tax structure. This will help the vehicle manufacturers and parts suppliers to move their products/freight with ease across the internal border at uniform prices. This is expected to bring about a significant change in the supply chain. The vehicles and parts will be distributed across the states with duties and it can also be stored anywhere. In addition, it will also encourage the employment of waterborne and rail transport as the consolidated supply chain will fulfill the distribution forward and over a longer distance.
The Indian logistics industry is expected to witness massive growth by improving connectivity and distribution networks, implementing uniform regulations, and wiping out the administrative hurdles. This will help prevent loss of time.
The Indian logistics market is witnessing the entry of startups that offer unique solutions and value-added services, which has the capability to disrupt the entire ecosystem. The entry of startups is also allowing new technologies to enter the industry. The technologies such as cloud computing, big data, connected devices, and others are expected to transform the industry and force the existing service providers to address bigger concerns by providing customized solutions. The more demanding customers will change the status quo of the existing business models such as the last mile and same-day delivery will be the key differentiators in the future.