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Indian Trucking Industry Nears Inflection Point

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Siddharth Jain, Co-Founder, VaahikaIndian logistics industry is at an inflection point across several dimensions - the business model in trucking is changing fundamentally from truck as a product to truck as a solution. The infrastructure barrier, preventing smooth and expedited flow of freight is paving way towards the improved infrastructure and advent of digital solutions. Not just this, with the technology advancement, the interaction between shippers and carriers is getting fundamentally reshaped; thanks to new business models such as digital freight brokering.

GST, Eway Bill and now Fastags have played an important role to bring the required restructuring in the trucking industry. Moreover, these have successfully changed the end user’s behavior towards necessity and need of technology adoption in near future. Adding on to all of this, the infrastructural changes on National Highways which is predicted to bring the inflection point, where the foundation for next 10-15 years of innovations and transformations in trucking and logistics industry can be built with great deal of certainty and confidence. It’s time to gear-up and be ready for one the biggest opportunities in the making.

I believe one of the major transformation which we should witness in a shorter time frame is the way trucks are being sold in India. We are aware about the current facilities like five years of warranty, two lakh kilometer warranties or various AMC combinations, offered by truck sellers. I expect that soon these will be options of the past. Product innovation in diesel powertrain is coming to saturation and service offerings are more or less becoming less competitive. In a flooded market, such as India, availability of business will soon become the key selling proposition. Trucks installed with business finding search engines are expected to become a reality in India soon. Moreover, it will be first in the world which will witness its real success primarily riding on massive diversity which we see inherent in our business ecosystem.
By 2020 or 2021, these new offerings could be seen initially limited to intercity geography which will soon evolve into a PAN country phenomenon. Few global OEMs are already adopting truck as a service model and are prepared for truck as a solution model. Their presence in India will ensure these models to soon feature in our industry. This enables truck OEMs to develop and forge a continuing relationship with the truck buyer/user that does not end when the truck is sold, but begins at that point and creates unique revenue opportunities and value to both parties through the lifecycle of the vehicle.

Moreover, it will not only resist new truck sales, rather OES for genuine parts, consumables and accessories which have been looking for conditions where a direct bridge could be established between them and the driver. This will enable key stakeholders in the industry bring solutions that turbocharge the development and implementation of solutions that simplify and augment drivers’ and technicians’ work environment. It is expected to soon see Tyres, Lubricants and OES parts suppliers working on avenues to connect directly with the owner operators and form a long-term bridge of business association with no middleman in between.
All of this will bring two major changes in freight booking ecosystem, first and most important; with this, owner-operators (driver-cum-owner) are soon expected to become the real king of the Indian trucking industry. Currently, fleets own approximately 70 percent of all trucks on the road. Recent economic incentives and policy modifications coupled with opportunities enabled by online load boards and other digital freight brokerage platforms are catalyzing rising proliferation of owner-operators in trucking industry. Solutions and services that cater to this emerging truck owner-class will be seen driving most growth opportunities for industry stakeholders for the next 5-10 years and beyond.

Second, it will also start impacting the module of freight financing. Lately, Booking agents have played a very crucial role in arranging the capital and financing the freight, while forming a layer above the owner-operators; while benefiting from the interest for rotating capital. It shouldn’t be a surprise, seeing invoice financing houses jumping the guns and throwing their cap in this high margin arena which is up for grabs. While, it is definitely a High Risk High Margin zone; the way capital is easily available for larger aggregation there should be no doubt that many new age NBFCs and lending ventures will continue to enter this market.

If we look back to three years from now, we would definitely be able to point-out that there has been a lot of changes from then to today, some of which are good and some which did not help much to the industry. However, the net resultant of regulatory, business, econometric, and technology changes have definitely paved a way for a bright future. The future where truck OEMs can sell trucks as a solution, truck owners and drivers can use a truck to find freight, and the entire ecosystem can benefit from smart trucks that stoke smart business models - online freight brokering and online retailing of trucks.