When dream become reality, for the world the journey is easy and successful, but people don’t know the tough time. Similarly, Indian logistics industry is also going through phase of transformation from unorganised to organised sector. Below are few factors which are impacting the transportation industry in bringing structural change –
- Industry which was started as 1st generation in 1980’s at their 20’s is now competing with 2nd generation who is again now in its 20’s. Industry is seeing change in its ecosystem from all stake holders. Whether we call that cost pressure, economy opening up, entrants of start-up’s with new ideas, PE investments companies, govt. initiatives, digitalization, demonstration which all leads to consumerisation.
- Indian railway is also extending hands to private players to operate on freight movements. Which help in reducing per kg cost on long line haul distance, warehousing funds are investing medium and large warehouses which will help in managing large volumes at low cost, implementation of GST has removed state boarder which helped in reducing compliances and transit time.
- PE investment in start-ups who helped in creating new company into large corporates to grow and provide services at low cost with the help of technology. They want to create big companies at a very short span of time by infusing lots of money.
- Financing push to MSME companies help them to invest in trucking business and provide custom tailored services to customers at low cost.
- India’s employment generation is dependent on Auto industry and it is going through worst phase of growth in last 4 decades after touching all-time high in 2017-18. Which created excess capacity of 40% of vehicles. Now volumes are 20% less than peak resulted to 60% excess capacity in India. The total number of automobile carriers are 16,000 car carriers and 20,000 two-wheeler carriers and 4000 tractor carriers in industry.
- Financial institutions are giving finance almost 125% of the cost of vehicles. Which gives them liquidity to do fabrication of body of a vehicle and running expenses for 2-3 months. All this pushed small truckers to grow medium size and drivers to become trucker owner. All this helps in providing personalised services to shippers at very reasonable cost. This impact the medium-large truck owners who have not grown in their service value chain hierarchy.
- Truck OEMs are giving huge discounts to increase their sales as due to excess capacity in the industry big trucking companies are restricting themselves to invest as industrial output is shrinking.
- Global slowdown or Trump Impact – Now a days all countries want to protect their own industries and nothing wrong in that but as a 3rd law of Newton ‘Every effect and an Impact’. Any change in Impex policy of one country will impacting the impex policy of another country.
I believe it is more of a structural change along with slowdown due to few reasons highlighted above.Authored by:Sachin Haritash