Trucking industry on cusp of growth….with challenges

India transports more than 4.6 billion tonnes of freight annually, generating transport demand of 2.2 trillion tonne-kilometres (tonne-km) at the cost of Rs 9.5 lakh crore. "Demand for goods is rising with urbanisation, population increase, the rise of e-commerce, and rising income levels. As this demand continues to grow, associated road freight movement is expected to increase to 9.6 trillion tonne-km by 2050," according to a 2022 analysis by the National Institution for Transforming India (NITI Aayog) and RMI, an independent nonprofit.

Road transport (i.e. trucks) carries the bulk of India’s goods, almost 70 percent of today’s domestic freight demand, the report added. "Heavy- and medium-duty trucks (HDTs and MDTs, respectively) are responsible for most of that road transportation. As road freight travel continues to grow, the number of trucks is expected to more than quadruple, from four million in 2022 to roughly 17 million trucks by 2050."

A view echoed by Kanishka Mohan, Partner, RedSeer Consultants. "The number of trucks in India is 12.5 million. This is projected to grow to 14-15 million by 2028 with a CAGR of four percent."

The growth has been phenomenal, approximately 3x in 10 years, according to Tansher Singh, Managing Director, ABC Express, a nearly seven-decade old trucking company based in New Delhi. "However, I think it's bigger than this in terms of load capacity. Ten years ago, vehicles were 10MT passing, now they have higher weight carrying capacity."

Growth factors for trucking
Mohan lists out various factors for the expected growth in the Indian trucking business.

Economic expansion: India's projected rise as the world's third-largest economy by 2027 drives the need for efficient logistics to support increased trade and commerce.

Infrastructure investment: Initiatives like Bharatmala, Gati Shakti and the National Infrastructure Pipeline focus on enhancing connectivity, leading to a robust transportation network that supports logistics growth.

Technological advancements: Innovations like FASTags and e-way bills streamline logistics workflows, enhancing efficiency and contributing to the sector's growth.

Digital transformation: Government reforms promoting digital adoption in logistics have led to improvements in India's Logistics Performance Index score, further fuelling sector growth.

Dominance of road transport: Road transport dominates logistics due to its adaptability, accessibility, and flexibility. And with road transport on a boost due to factors like expansion of capacity, short haul demand, and infrastructure development, logistics in turn is on a path to grow; and

Budgetary allocations: Increased allocations for road infrastructure development, coupled with significant investments in national highway construction, further strengthen road transport's dominance and contribute to logistics sector growth.

Tech outlook for industry
At Allcargo Gati, the objective is to drive transformation, which will foster business growth, says Sanjay Khiyani, Deputy Chief Information Officer, Allcargo Gati. "Sales acceleration and infrastructure development are the key areas of focus for Allcargo Gati. With the goal of increasing our market share while maintaining high customer satisfaction levels, we have restructured our sales team so that it can be more focused on achieving its growth objectives within specific regions. In addition to this, we would invest towards building modernised hubs equipped with the latest automation technologies; such facilities will not only improve service provision but also greatly contribute to overall operational efficiency improvement within the organisation."

Singh of ABC Express says: "Certainly, I believe tech is the only solution for growth in our industry. Tech is expensive and therefore you need scale to sustain an in-house team."

The vast geographical coverage and fragmented drivers elevate distribution costs, hindering accessibility for services like vehicle financing and insurance.
Kanishka Mohan, RedSeer Consultants

Green trucking a possibility?
Allcargo Gati's vision is to offer green express logistics solutions and support the government’s goal to cut net carbon emissions to zero by 2070. "For this, we have deployed electric three-wheeler cargo vehicles with companies like Ikea, Danfoss and Schneider Electric," says Khiyani. "We have also tied up with Gentari to lease 500 electric cargo vehicles through its VaaS offering.

"Allcargo Gati aims to fully convert its pickup and delivery fleet to EVs by 2025. As part of our EV fleet development plan, we are leasing EVs from a number of transport vendors with a commitment to service level performance. At present, Allcargo Gati has a total of 195 EVs and alternative fuel vehicles combined."

Singh of ABC Express offers a different view: “I personally am not a fan of zero emission philosophy. We don't need greenflation right now. We need growth. Burning carbon is the only way to grow. We should focus on cutting costs and driver benefits, rather than zero emission."

Smart fleet owners should start paying drivers well and implement schemes to keep them on the vehicles.
Tansher Singh, ABC Express

Growth challenges for Indian trucking industry
Operational complexity and management difficulty, according to Mohan of RedSeer, is a key challenge for growth. "Scaling a trucking company poses significant challenges as the need for owner oversight increases exponentially with the expansion of the fleet. Managing ownership beyond a few trucks becomes challenging due to the operational intricacies involved, impacting the profitability of operations, and making scalability a key challenge for the industry.

"High fragmentation and lower accessibility: Truck drivers across India are highly fragmented. So it is challenging for organised logistics players to reach them. The vast geographical coverage and fragmented drivers elevate distribution costs, hindering accessibility for services like vehicle financing and insurance.

"Truck underutilisation and reduced revenue: The intermediary-driven structure of the current trucking ecosystem leads to reduced revenues and truck underutilisation. With offline operations and reliance on brokers, mismatches between supply and demand contribute to lower truck utilisation rates and extended lead times for securing loads."

Driver shortage, according to Singh of ABC Express, is a massive challenge. "Smart fleet owners should start paying drivers well and implement schemes to keep them on the vehicles.

"Enforcement of law and order is a concern. India has a lot of laws and policies but zero enforcement. Every law is an opportunity for babus to earn more money. Reduce laws, improve enforcement."