India’s Logistical Costs a Huge Disadvantage Compared to China Says Ford
Ford India President and Managing Director Nigel Harris, explains that Ford has the intent and purpose to turn India into a global excellence centre for the production and export of small cars. Ford is focused on shipping close to 50% of its Indian production volume to foreign markets.
However, as much as the car maker is eagle-eyed on success that is backed up by the strongest demand for Ford Ecosport in the Indian market and fulfilling the export demand. However the Indian market faces modest intimidations in its supply chain due to the lack of scale and efficiency Nigel Harris Recapped.
Ford India’s logistical costs are at-least 30% more per unit that Ford China logistical costs. The data is a result of an 18 month old study. Harris spoke these words during the Automotive Logistics India Conference held in Gurgaon.
The cost difference is capable of holding back India as it does its best to revive growth and better compete with its productive neighbours in the Asian Continent.
What Ails India
Harris was able to point out the following issues;
- Wasteful yard stock
- Poor transport efficiency
- Lack of scale
- Slow turnaround times in ports
He categorised the port issue as a critical factor not just because of vehicles being exported but also for components coming into the country. Auto components into the Indian market have however grown superfluous in the past year added Nigel Harris.
The Automotive Component Manufacturers Association of India (ACMAI) Director General Vinnie Mehta, added that the Indian import marker for components stands at $12.8 billion and the export market standing at $10 billion.
Approximately $2.5 billion components hail from the People’s Republic of China alone, drawing the competitive ground between India and China.
Ford India president and Managing Director Nigel Harris suggests how big an opportunity it is for Ford as well as the Indian Supply base to escalate localisation and minimize the total costs. Harris also pointed out that a-lot of OEMs quote localisation figures of 70-90%. But these figures only count for the 1st tier suppliers and not the 2nd and 3rd tiers.
Enhancing the localisation of the 2nd and 3rd tier is the best way of having components priced in rupees. Machinery, electronics and plenty of tooling equipment are all components that Ford imports almost wholly into India.
Ford India president, Harris wholly believes that it is critically important that multimodal logistics are supported. He gave an example that in the United States; Rail transport accounts for 50% while in India on the other hand Rail transport counts only for 3-5% of the internal logistic load.
India boasts of close to 70,000km coastline however the cabotage laws see India not able to use the coastline for short-sea shipping. Such are huge logistics opportunities that need to be utilized thus spurring growth.
A huge percentage of cargo is transported via roads and only 20% of the roads are in decent condition. It’s rather unfortunate that India has the 3rd largest road length world over registering at 3.8m kilometres and only 2.4m kilometres are paved.
Harris gave an example of how China’s 3.4 km out of 4.1m km paved and how the whole 6.5m km in the United States is paved. Should India improve its road network, automatically logistics would increase rapidly.
Made In India Hopes
As Nigel Harris and various other individuals agreed that there is still room for the improvement of Indian logistics, progress is slowly but consistently being made. The just launches “Make in India” comes as a strong statement from the government, Harris adds that Indian government intent of facilitating both new facilities and investments will optimistically progress the ease of conducting business on Indian soil.
But at this particular moment Nigel Harris points at substantial suppressed amount of demand in the market.
Harris charged that people are waiting for the perfect opportunity to buy and also the introduction of the best macroeconomic environment, unfortunately high interest rates hold them back, high inflation rates as well as concerns over the economy.
That said however, Harris added that he expects India to sell 6m-7m passenger annually by 2020 comparing this figure to the 3m sold today.
OEMs ought to be cost competitive and they should have a high level of reliability and be in a position of predicting timings accurately.
“Hope and Promise” Automotive Logistics India Conference Theme
Nigel Harris is quick to add that beyond Hope, India has a robust plan and Ford India also has a plan and adds’ that Ford as a company is delivering on the plan.
A report will come out shortly proving how Ford is making tailor-made improvements in its logistics. Ford’s vive-president of material flow engineering, logistics network and export operations for Ford Asia pacific and Africa (Amlan Bose), spoke out that with a second plant due to be open in Sanand in Gujarat State in the coming month.
Ford is now moving to a “lead Logistics Provider” (LLP) model which oversees, routine and scheduling, logistics strategy put through the hands of a dedicated provider (Penske Logistics) that works in cohesion with carriers optimising network.
Ford has also begun using a new APL Vascor Automotive rail service in India boosting dissemination from Chennai to New Delhi with further plans of expanding services.
Ford India President and Managing Director Nigel Harris adds that Ford was in talks with the Gujarati government in-conjunction with Tata Motors allowing the State Government to help construct a rail siding which will serve the two plants and help in moving vehicles from Sanand to the port allowing Global exports.