Automotive Logistics in India defies the downturn

As India continues to add production capacity and position itself as a global hub for compact cars, Indian carmakers and logistics service providers convened at last weeks Automotive Logistics India conference and called for a new focus on logistics to cut costs and improve quality. The conference, which took place in Mumbai, attracted around 150 delegates from the countrys leading carmakers and from service providers across the globe.

Logistics can outweigh labour costs for many OEMs and in a survey taken at the conference, 42 per cent said that the industrys biggest challenge was an under-appreciation of what good logistics mean for carmakers.  The impact of the economic downturn on India has been a minor year-on-year reduction of 0.5 per cent in the sales of new cars in 2008, following several years of growth. Carmakers predicted a bright future in which plans were laid out to double production capacity in five years, to more than 4 million cars per year.

The economic situation for India is more of a serious blip, rather than a long -term change, said Frost and Sullivans VG Ramakrishnan. The fundamentals of the market have not changed, aside from consumer confidence. 2009 will continue to be a flat growth market but we expect that 2010 will pick up, he concluded.

The survey conducted at the conference also revealed that attendees believed that performing value-added services would be the best options for Indias LSPs to grow, it was no coincidence then that 64 per cent of carmakers and manufacturers said they wanted to see higher levels of service from providers. The 3PL should not be a pure executioner, said Mahindra and Mahindras SK Krishnan, adding that their services should include warehouse management, as well as supplier follow up, such as sub-assembly, billing and invoicing.

Specifically, carmakers like Maruti Suzuki, Tata Motors and Mahindra Renault said they wanted to see more vehicles move by rail. Maruti Suzukis MM Singh said that he would like to see the industrys modal share for finished vehicle distribution by rail grow from 2 per cent to 20-30 per cent in the next few years.

Following a roundtable discussion on rail, a table of key decision-makers, including Maruti Suzukis Rajesh Uppal, agreed to organise an industry-wide initiative through SIAM (Society of Indian Automotive Manufacturers) that would include all players to draw up a viable business plan and list of requirements to present to the Indian Railways. At this table, we have all the companies who can provide the services to make this work, from design of railcars, to logistics and network planning, he said. Now we have to make it happen.