More than 150 senior automotive executives came together at the Automotive Logistics India conference which took place on 20 - 22 January 2009, to discuss the future of the industry in this rapidly expanding automotive market.

Among them where representatives from carmakers, many of them important global and local players.

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Automotive Logistics India defies the downturn

Around 150 delegates gathered in Mumbai this week for the second Automotive Logistics India Conference, a month after the event was postponed following the Mumbai terrorist attacks. As India continues to add production capacity, and position itself as a global hub for compact cars, representatives from global and Indian carmakers and logistics service providers called for a new focus on logistics to cut costs and improve quality. At 13% of GDP, and costs as high as 27% in some areas, logistics cost can outweigh labour costs for OEMs. In an electronic survey taken at the conference, 42% said that the automotive logistic industry's biggest challenge in the country was an under appreciation of what good logistics mean for carmakers.

Speakers and delegates discussed the impact of the global economic downturn for India and automotive logistics, as the sale of new cars shrank by 0.5% in 2008, following several years of solid growth. However much of the discussion focused on a brighter future, in which carmakers have plans to double capacity in five years to more than 4m cars per year.

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

Ramakrishnan predicted that the 3PL market would achieve a higher penetration of the Indian market as outsourcing becomes more common at Indian manufacturers. Currently non-3PL companies, mostly local transport providers, perform 83% of the automotive logistics market. "But modernisation is coming, and with it, more value-added services," predicted Eicher Motors's Manoj Goyal. He said that by 2012 there would be 110 logistics parks built at a cost of $1 billion, and $500m invested in warehouses.

The survey showed that attendees believed that performing these value-added services would be Indian LSPs best option to survive the economic slump. It was no coincidence then that 64% 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 Mahindra's 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 Suzuki's MM Singh said that he would like to see the industry's modal share for finished vehicle distribution by rail grow from 2% to 20-30% in the next few years. There were several dedicated sessions at the conference focused on finished vehicle distribution by rail, including the Director of Freight Marketing from Indian Railways, Sanjay Goel.

Goel admitted that the IR's priority for automotive rail is low, considering its tiny market share. He pointed out that the dimensions of railcars do not always fit with the electricity lines on the railway, and that the government-run company could not justify spending the money to change these dimensions for such a small amount of freight. But carmakers persisted in their passion to increase rail. Prem Verma, CEO of Tata's new distribution company, TMLD, said that he had just returned from a meeting with the Indian Railways to discuss using rail service for the new Nano plant in the Western state of Gujarat.

Goel responded that he was open and willing to work with carmakers. Following a roundtable discussion on rail in a following session, a table of key decision makers, including Maruti Suzuki's 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."

Sponsors of the conference expressed satisfaction with the event's discussion and networking opportunities. Gold Sponsor GBA Group's Gulshan Varma said that the conference was an opportunity to help achieve his company's goal of bringing world-class facilities to India. "We need to come together on the same platform, from manufacturers, shipping lines and logistics companies."

Steve Hoffman, from Gold Sponsor Panalpina, called the conference "eye opening and enlightening" on subjects ranging from infrastructure and Customs. " Arun Modgil, of Silver Sponsor CKDpack, called the conference "well organised and good value for money, even when we don't have money."

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