Auto Industry Opportunities & Challenges 2 nd SIAM Automotive Logistics Conclave Greater Noida 16 th & 17 th January 2015
Table of contents Auto Industry Global perspective India - Trends & Challenges Logistics sector in India Indian automotive supply chain Logistics Industry Challenges Skill gap Multimodal CV transportation by trailer Industry Initiative
Auto Industry Global perspective India - Trends & Challenges 3
Auto industry Global perspective Automotive industry is major driver of global economic growth contributes 6% to the world s GDP. In case auto industry was a country by itself, it would have been the 6 th largest economy in the World. Asian countries, especially China and India are expected to account for 40% of the growth in the auto industry over the next decade The automakers continue to shift their production facilities from high-cost regions to lower-cost regions such as China, India and South America. Auto industry is a leading driver of global economic growth and accounts for 5% of global manufacturing jobs Green cars are getting increased response, particularly in developed countries likely to contribute around 30% of total car sales by next decade
Auto industry India Trends & Challenges Indian Automobile industries accounts for 22% of India s manufacturing GDP and about 7% of India s overall GDP. Indian vehicle industry is the sixth largest in the world with an annual production of around 18 million vehicles (2.5 mn are exported) By 2016, India likely to overtake Germany, Brazil and Japan to become world s 3 rd largest automotive market. India is one of the world's fastest growing passenger car markets We are the largest two wheeler and tractor manufacturer in the world India is the fifth largest commercial vehicle manufacturer in the world Indian automotive industry will provide direct & indirect employment to around 200 million people by 2020 5
Auto industry India Trends & Challenges Automobile Production Volume (Nos. in Millions) Segment wise FY 2014 FY 2026 Passenger Vehicles 3.1 13.4 Commercial Vehicles 0.7 3.9 Three Wheelers 0.8 3 Two Wheelers 16.9 55.5 Total 21.5 75.8 (Source - SIAM) Vehicle market to reach volume of 75 millions by 2026 Auto Industry to continue its growth trajectory Two wheeler and passenger car to propel volume growth 6
Logistics sector in India 7
Logistics sector in India Logistics sector in India is currently valued at US$ 110 billion and expected to touch US$ 200 billion by 2020. Nearly 61% of the cargo is moved by road, 30% by rail and rest by airways, pipelines and inland waterways. National Highways constitute only about 2% of the road network of India though they carry nearly 40% of the total traffic. The trucking industry is largely fragmented as nearly 70% of the truck owners in India own between 1-5 trucks. Road freights in India less than US comparatively despite various constraints Country loses around Rs 600 billion P.A. due to congestion, slow speed and high waiting time at large number of toll and check post barriers. 8
Logistics sector in India Lack of proper training, not stringent process for driving license, inadequate facilities for boarding and lodging of drivers and poor maintenance of trucks makes them vulnerable to accidents. Estimated cost due to accident - 3% of India s GDP (estimated by transport and communications bulletin of Asia) JNPT, premier port in India, has more than 2 times TAT of Colombo & Singapore ports due to congestion on berths & slow evacuation of cargo. Railways have a tonnage based tariff structure which is more suitable for bulk cargo Indian rail freight rates are one of the highest in the world - nearly 4 times that of United States. 9
Indian automotive supply chain 10
Indian automotive supply chain - An overview Caters to a large and geographically diverse market base Sub optimal modal mix - 95% of vehicles (Cars, 2 & 3 Wheelers, Small commercial vehicles) were transported by road last year. Auto carriers are specialized vehicles high idling of trailers coupled with empty hauls adds to the cost Emergence of markets in rural, Tier II and Tier III towns throw a new challenge for Auto supply chain hub and spoke, most suited model. Railways share need to move from 4% to 20% by 2020 to decongest highways. 11
Indian automotive supply chain - An overview Multimodal transportation usage of general purpose rolling stock movement by containers viable option due to its intermodal flexibility and environment friendly mode OEMs and LSP need to collaborate to improve customer service level and rationalize logistics cost Shortage of skilled drivers as end of cleaner culture which used to be breeding ground for future drivers. Investment in IT still perceived as additional cost than investment can reduce operational expenses by almost 25%. Ambiguity in CMVR norms has resulted in multiple agencies interpreting different aspects of regulations in terms of carrier dimensions need support of Govt to consider all aspects before concluding the same in the interest of all stakeholders including society. 12
Logistics Industry Challenges Skill gap Multimodal 13
Skill gaps in logistics sector Employs around 60 million people Core activity still being transportation and warehousing Major part of industry unorganised Logistics being service oriented sector - workforce skill development is a key requirement Less than 10% of overall manpower costs (out of 600 billions) spent on non - salary area like employees development / training, welfare schemes etc. - 20%+ by global logistics companies Lack of quality manpower creates obstacles in adapting to modern management practices and technology
Skill gaps in logistics sector Key supply chain activities / services and its gaps A. Transportation / movement of goods by road - availability of trained drivers B. Storage and warehousing- requirement of warehouse managers and loading supervisors C. Value added and emerging services manpower capable of operating and maintaining systems e.g. track & trace technology Skill gap could be a key impediment in the growth of logistics sector
Skill development significance / criticality Managing business today is fundamentally different than it was even 10 years ago Most profound difference - level of complexity employees / managers have to cope with in current environment Managers need to know the difference between complicated and complex business Complicated vs Complex Complicated - Outcome can be usually predicted by knowing the starting conditions Complex - Same starting conditions can produce different outcomes depending upon the interactions of the elements of the system. Most senior logistics functions have started moving from complicated to complex in the recent past
Multimodal Transportation Traditionally transport policies have focused on individual modes of transport like rail, ships, road goods carrier etc. Need to interconnect such systems in a seamless multi modal transportation system which is supplementing each other besides Safe, efficient, flexible Environmentally sound Cost effective Meets the needs of large spectrum of industries Ultimate goal deliver greater value to customer or create compatible value at higher efficiencies 17
Multimodal Transportation Despite Indian railways network being 2nd largest in the world it is contributing just 4% to auto movements Indian Railways needs to be integral part of multi modal movement due to its sheer size & coverage. Railways have a tonnage based tariff structure more suitable for bulk cargo than auto. Unutilized coastal line huge potential untapped - could provide reduction in freight by sheer economics of scales. Most eco friendly mode of transportation Various constraints in Railways, underdeveloped waterways and ports - Impediment for implementing multimodal transportation
CV Transportation by Trailer Industry Initiative 19
CV transportation by trailer Conventionally OEM s have been transporting chassis and fully built vehicles by road / own power from plants to stockyards Challenges & Concerns Skilled driver availability Damages to vehicles due to en-route accidents Wear & Tear, thefts of parts Not eco friendly Safety of drivers No protection 20
CV transportation by trailer Advantages Environment friendly reduction in emission by at least 50% in the total transported vehicles Reduction in traffic congestion Reduced consumption of fuel direct and indirect benefits to exchequer Safety of drivers Factory fresh vehicles to customers 21
CV transportation by trailer 22
Thank You 23