Auto firms take to multi-modal ways to cut costs

Written by Sajan C Kumar | Chennai | Updated: Sep 20 2013, 14:17pm hrs
Car exportEnnore Port has set an ambitious target to becoming the number one car exporting port in south by handling 2.5-3 lakh units by 2014-15.
Faced with infationary pressures and a slow market condition, the countrys auto industry is looking to embrace multimodal logistic system to reach the ports, as in the US and the Europe, to cut the costs.

The industry is miffed with non-availability of rail racks as well as congestion on roads and is, therefore, clamouring for coastal shipping to move cars. This move, apart from easily getting access to the ports like Ennore and Chennai, where exports have been happening at a brisk pace, will be benefitting dealers as they could get the consignments rather quickly, compared with the conventional road tansport mode.

For that to happen, there is a need to beef up infrastructure at the existing ports as well as necessary clearance has to be obtained from the concerned governments, said industry stakeholders.

According to a CII -AT Kearney study titled, Building world class automotive supply chains in India, while India is on course to become the worlds third-largest auto manufacturer by 2020, the challenge for supply chain professionals will be to build a supply chain that is prepared to manage long-term growth.

Indias logistics costs as a percent of sales are at least 30% higher than those in China and other larger automotive markets because of inefficiencies and high inflation in cost drivers such as fuel and wages.

The study released in Chennai on Thursday said that the cost of logistics has a big impact on the supply chain because of Indias predominant use of road transport.

Tom S Chackalackal, executive director (manufacturing), Ford India, said that major logistic challenge for car makers in India is the single mode of transport by road.

We are looking for a multi-modal transport system like in the US and Europe. Logistic costs are a challenge in India as diesel prices are going up constantly, Chackalackal said.

According to him, the single mode of transportation constraints the company in the number of units that could be sent to ports for exports. To overcome this, the surrounding smaller ports could be used to facilitate coastal shipping of cars to the major ports for export purpose.

Our Chennai plant will cater to both and domestic and overseas markets. We are in talks with a few of ports for the outbound consignment from our Gujarat facility, Tom said.

Sanjay Kumar, director (operations), Ennore Port, said that it is in the process of facilitating more car exports. We are increasing our storage space for the cars, in order to increase efficiency in handling more cars. The additional space of around 10,000 cars would be ready by the middle of 2014-15, he said

Currently, it has a storage capacity for 10,000 cars and an additional storage area for 2,500 cars near the wharf.

This capacity is almost fully utilised now and the port is looking at more car manufacturers to export from the facility for which the expansion would be required.

The Ennore Port had already inked a long-term agreement with Nissan Motors to facilitate export vehicles from the port. Under the 10-year agreement, Nissan has concessions up to 60,000 units per annum in the wharfage. Ennore port is also in the preliminary talks with Ford for signing a similar agreement. Ford currently exports around 20,000 cars from Ennore Port and this is expected to grow to 60,000 in two years, he added.

According to him, Honda Cars India has also expressed interest to start exports from Ennore Port.

The auto major, which has its manufacturing facilities in north India, has started trial run of bringing a few cars to Ennore Port for exports.

Ennore Port has set an ambitious target to becoming the number one car exporting port in south by handling 2.5-3 lakh units by 2014-15. The port, which exported 1.45 lakh units in 2012-13, is expected to see exports of 1.75-2 lakh units this year. Car companies that export from Ennore port include Nissan, Ashok Leyland, Ford and Toyota.