15/07/2014
The importance and growth of the truck sector in India
– June 27, 2011Posted in: Articles, Automotive & Trucks
According to figures from a study by the World Bank into the efficiency of Indian transport – India’s transport sector caters for the needs of 1.1 billion people. Of this, roads are the main form of transportation and they carry 65% of India’s freight. Trucking is the number one form of freight transportation in India.
Trucks are regularly used by small businesses and they are the cheapest, hence the most popular, choice to transport small quantities of goods.
Also, trucks have the widest reach in freight transportation and can deliver goods to even the most rural and hilly areas of India.
While, on the whole, it takes longer to actually transport goods – as opposed to via rail – it takes longer to load and unload goods on and off trains and requires more labour costs to do so.
Also, rail transportation costs in India are significantly higher than other countries because freight tariffs – to subsidise passenger traffic – have been kept high. Truck transportation is by far the cheapest option and the truck sector is backed to continue to grow.
The general poor quality and increasing congestion of India’s roads are some of the challenges facing truck transportation. This congestion is especially severe in urban centres such as Mumbai and Delhi – pressurised by the huge growth in vehicle ownership in the past decade.
But, the government has received various grants – including $20.33 million from the World Bank programme – which will help expansion. The government has also signed a Memorandum of Understanding (MOU) with Malaysia to further develop India’s road network. In addition, they are searching for PPPs to aid the development of road infrastructure as well as setting up more terminals to increase connectivity.
Heavy investment is being made into India’s roads with better trucking facilities – such as free-trade warehousing zones (FTWZs) and special economic zones (SEZs). The Maharashtra Industrial Development Corporation (MIDC) is currently building 15 truck terminals – of international standard – in the state. They will include warehousing, rest facilities for drivers, counselling centres, medical facilities and fuel supplies.
This push and investment to increase connectivity in the truck sector will only help to enhance and further boost its popularity. And this is attracting the attention of private companies – with one of the world’s leading providers of freight management services, DAMCO, last month announcing intentions to expand in India. As well as trucking, they want to expand operations in airport warehousing and airfreight. The company currently operate 150 vehicles on a long-term lease in North India but they want to expand with more presence across the country – over the next two years. They also plan to invest in their own warehouse facilities and are currently in talks with several trucking companies to from tie-ups in Mumbai and Chennai. This is all part of their goal to – in three to four years’ time – be four to five times bigger in India than they currently are.
But how is this all affecting truck sales? Well, last month truck sales improved by almost double-digit growth. The added cargo demand saw the sale of commercial vehicles (5-49 tonnes) rise 9.3% from May 2010, too. Light commercial vehicles (5-7.5 tonnes), which deal with short to medium haul of goods, also shot up 29.9%. India’s LCV to CV ratio is currently only 48% – compared to 88% in other, similar emerging and developed countries. And analysts believe this will continue to push LCV growth – with predicted rises of 17% for the current year.
