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" 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 annum 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 fulfilment. 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.
How India compares with Global Transport & 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 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 200-250 km per day, as compared to the global average of 400-500 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. An 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.
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Mytrux is the future of managed transportation and trucking in India. It brings fleet owners and the service users together on a single technology platform enabling trade to manage complex global logistics in real time. Solutions that will be more efficient, leaner, more productive and definitely more profitable.