Logistics

Trucking trouble

TE Raja Simhan | Updated on December 27, 2020

Grind to a halt: Typically, the truck industry is the first to be hit when there is a recession   -  THE HINDU/ NAGARA GOPAL

Brought to a screeching halt by the lockdown, the segment is slowly picking up speed and learning life lessons from pandemic

“The year 2020 was like a tsunami,” said Senthil, a truck owner in Tamil Nadu’s Namakkal, one of India’s largest trucking hubs. His words summarise the industry’s bumpy ride in 2020 as the pandemic turned the sector upside down. However, as the industry bounced back in 4-5 months, the truckers had many takeaways from the crisis.

Typically, the truck industry is the first to be hit when there is a recession or any major disturbance in the economy. The pandemic that started in March was no exception and brought over 10 million trucks to a screeching halt — paralysing cargo movement completely.

As the pandemic spread, drivers fearful of getting infected, abandoned trucks on the highways and fled to their home towns. This left vehicle owners bleeding. While their trucks were parked for days without any business, they continued to pay their equated monthly instalments (EMIs).

As the Covid-19 restrictions were eased in phases, trucks were back on the highways. But, even eight months after the pandemic was declared, 10-15 per cent of the trucks were still idle, said P Sundarraj, MD, Subham Freight Carriers India Ltd based in Tiruchirapalli. The situation, however, has improved “considerably”, he added.

Anjani Mandal, CEO, Fortigo Logistics, said that in 2020 if there was a tornado that could hit all at the same time, it was the pandemic.

For most of the trucking industry, however, it had started from the beginning of the year itself. The industry had already been negatively impacted because of a combination of factors such as the slump in the auto industry, fall in demand of goods being transported, cyclones and heavy rain.

What did the trucking industry learn from the pandemic?

Sundarraj, who has been in the industry for nearly three decades, said: “We have not seen a situation like this before, but we managed to survive. In the future, it will be easy for us to handle a similar situation as we learnt a lot from the crisis.”

For example, he said, a contingency fund should be created to handle such a crisis. Loan liability of any business should not be more than 60 per cent of the total investment. Monthly repayment should not exceed 50 per cent of total earnings. More important, vehicles should be maintained well as a crisis could mean non-availability of spares and workshops.

Those in the business should not panic in a crisis, when drivers leave vehicles on the highways and employees are unable to reach warehouses that hold goods worth crores of rupees. However, maintaining a good relationship with spare part sellers, petrol bunk owners, local associations and ‘dhabas’ will help, for vehicles can be left under their custody during emergencies, he said.

Mandal of Fortigo Logistics said a key takeaway from 2020 was that those who survived the pandemic had already invested in digital technology, had a profitable business model and managed their collection cycles well.

The transport industry will move to the new-normal characterised by some consolidation; rationalised assets in terms of the number of trucks; rationalised pricing for customers; and exiting of several unorganised players that were over-leveraged and were barely surviving in pre-Covid-19 times too.

Ramesh Agarwal, Chairman, Agarwal Packers and Movers Ltd (APML), said during the pandemic only innovators could survive in the market, and APML and other organised companies would benefit from this change.

Overall, 2021 will be digital. Productivity, efficiency and digital technology deployment with a rationalised profit and cash-flow model are the only solutions for the industry as a whole.

Published on December 27, 2020

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