Why the Transportation industry is likely to see “Acchhe Din”...

The transportation sector has been at the heart of India’s economic activity. Even within the gamut of transport, road transport has accounted for a chunk of the movement of goods within India. The ownership of the road transport sector (trucking sector) has been largely skewed towards small and medium sized operators who run family-owned businesses. This has restricted their ability to scale up their operations substantially. Additionally, inter-state taxation, strict jurisdiction rules and poor quality of roads have contributed towards slow development of the road transport sector in India. However, all that may be changing. To put it more colloquially, the trucking industry may be in for “Acchhe Din”.

There is a big push to road infrastructure...

Since the beginning of the first plan in 1951, road freight traffic has grown annually by 9.1% but the road network has grown annually by just about 4.2%. This has put tremendous pressure on the existing road network leading to congestion, delays and eventually higher costs and lower profitability in the trucking business. In India National Highways account for 2% of the road network but they account for 40% of total road freight movement. That is why road infrastructure becomes so important and can have a multiplier effect on the trucking industry. The National Highway Development Program (NHDP) envisages an additional 50,000 km of national highways by this year end with a total investment of Rs.3 trillion. This could be a big boost for the trucking and road freight business.

However, at Mytrux.com the belief is that while road infrastructure is critical to move goods, the trucking industry can benefit substantially through the rapid adoption of technology. Mytrux has, therefore, focused on a platform where truckers, users, brokers and the fleet owners can use technology to find critical paths for efficient and effective transportation of goods.

GDP growth will give a big push to the transportation segment...

It has historically been seen that the goods transportation segment has a 1.3 times sensitivity to GDP growth. That means, if India’s GDP grows at 8% per annul for the next 5 years, the transportation industry will see a growth of 10.4% per year. For a $130 billion industry, that is a huge boost each year. Additionally, the improved spread and quality of roads will also give a 1% boost to GDP which will in turn create a virtuous cycle of GDP and the transportation sector helping each other grow.

Then there is a big opportunity in the form of growing inland water transportation in India. The inland water transport has been growing at 7.2% CAGR (compounded Annual Growth Rate) over the last 8 years and that is likely to increase as the government focuses on expanding the inland waterways network. The waterways can only operate up to a point and from that point you need an efficient road transport system to ensure last mile delivery and on-land fulfillment. That is likely o emerge as a big opportunity for the trucking segment. These developments are also likely to trigger “Acchhe Din” for the trucking segment.

Mytrux believes that the big challenge to capitalize on these trends is efficiency and technology. There is a need for greater private investment in this segment to enhance efficiency and that will only come if ROI can be assured. The mytrux platform can combine technology and simplicity to offer a compelling solution for the owners and the users of trucking. This add-on is essential to help the trucking industry realize its full potential.

GST could be a real game changer for the trucking industry...

Even as the GST Bill has been postponed to the next session, most decision makers realize the importance of GST for the economy. It is likely to boost GDP by 2% per year and that is another $40 billion of GDP added each year. But most importantly, the GST Bill is likely to restructure and take the logistics industry to a new level. Till date logistics and warehousing were based on state taxes. With GST there will be a single tax and hence logistics and warehousing will be determined by business needs and not by regulatory compulsions. That will lead to a more efficient transport and logistics system in India.

GST will also be a major boon for transporters. With state level taxation going away, trucks will not have to wait endless hours at check points for clearance. This will add substantially to their running up-time and improve their ROI. Also a rationalized warehousing system will create a more rationalized transport system. That will mean that unnecessary movement of goods will come down and the trucking capacity will be better utilized in productive avenues.

Mytrux platform is created with the post-GST scenario in place. The post-GST scenario will create a changed focus for trucking and also release a lot of surplus trucking capacity. The mytrux platform can be a critical support system to ensure that truckers and users can register and find the most efficient method of using their resources.

How India compares with China in trucking (and the opportunity)...

To understand the big opportunity in transport and logistics, on needs to look at how India compares with China and the rest of the world. That gives a clear picture of the big opportunity ahead of us in the transport and logistics space.

·         The average Indian truck moves at a speed of 30-40 km per hour as compared to the global average of 70-80 km per hour.

·         India has about 8000 km in 4 lane roads as compared to China’s 34,000 km.

·         An Indian truck travels an average of 250-300 km per day, as compared to the global average of 600-800 km per day.

·         The average inventory days in an Indian warehouse are 33 days as compared to just 24 days in China.

·         Logistics accounts for 13% of total cost in India as compared to 6-7% globally.

All these open up a huge opportunity for Indian transport and logistics sector in terms of cutting their costs, enhancing their efficiency and improving their return on investment. Apart from the infrastructure investments by the government and the private players, this will also be contingent on rapid and lateral adoption of technology and central monitoring and information sharing. That is exactly where mytrux sees a good role for its platform in helping the Indian transport industry achieve scale, efficiency and profitability.

To understand the big opportunity in transport and logistics, on needs to look at how India compares with China and the rest of the world. That gives a clear picture of the big opportunity ahead of us in the transport and logistics space.

·         The average Indian truck moves at a speed of 30-40 km per hour as compared to the global average of 70-80 km per hour.

·         India has about 8000 km in 4 lane roads as compared to China’s 34,000 km.

·         An Indian truck travels an average of 250-300 km per day, as compared to the global average of 600-800 km per day.

·         The average inventory days in an Indian warehouse are 33 days as compared to just 24 days in China.

·         Logistics accounts for 13% of total cost in India as compared to 6-7% globally.

All these open up a huge opportunity for Indian transport and logistics sector in terms of cutting their costs, enhancing their efficiency and improving their return on investment. Apart from the infrastructure investments by the government and the private players, this will also be contingent on rapid and lateral adoption of technology and central monitoring and information sharing. That is exactly where mytrux sees a good role for its platform in helping the Indian transport industry achieve scale, efficiency and profitability.

What is the big opportunity in the transport and logistics space?

The third party logistics (3PL) is the big trend world over which is yet to catch up in India. In India, 3PL accounts for only 16% as compared to a global average of 40-50%. This is one big opportunity in this space. The second opportunity will arise from a pick-up in industrial activity. Corporate profits have been down for last 4 quarters and green-shoots are already visible. That will give a big thrust to the transport and logistics sector. The annual investment of $100 billion in infrastructure will be another big trend that will benefit the trucking business substantially. Acchhe Din will also come from other trends like vertical specialization in the logistics space, dedicated freight corridors, FDI in logistics and skilled manpower in this space.

The challenges to Acchhe Din will be lack of a world class logistics infrastructure and a highly fragmented trucking industry. We at mytrux believe that both these challenges can be addressed by adoption of the appropriate technology. The fragmented trucking industry can be brought under one online umbrella and the fleet owners can ensure zero idling time and users can ensure efficient delivery with control.  The twin challenges of logistics and fragmented trucking can be addressed through the intelligent use and adoption of technology in trucking. At mytrux the agnostic platform for users and fleet owners to come together; is exactly intended to address these twin challenges. The much touted “Acchhe Din” may have already arrived in India, at least for the transportation sector.