More Truck For The Road

But Baid and a select few truckers are demonstrating that the time for the upgrade has come. Late in 2009, Baid ordered 100 trucks from Tata Motors at 285 HP and Rs. 31 lakh price tag each. By going in for trucks 60 percent more powerful than the ones already in his fleet, he was taking a big risk. The upfront investment and the costs of operation would rise significantly. This is the fear that holds back smaller truckers from experimenting with such heavy pulling vehicles. But then, why did Baid decided to take the plunge.

Baid says he hopes to recover his investment by running more trips with these faster and more powerful trucks. The roads have improved, especially in the last two years, and the industry is quite willing to pay a premium for faster delivery. If Baid succeeds, there is no reason why hundreds of other truckers won’t follow. Truck makers have already begun to respond to this unfolding change.

The Green Signal
Modern trucks with new engines, air-conditioned cabins and power above 250 HP are nothing radical or new. Multinationals like Volvo have tried introducing them in India before. But, the market wasn’t ready. “When we entered India more than a decade ago, we found that the infrastructure was not ready for high performance trucks. Which is the reason why the need for a niche market was felt and Volvo entered applications like mining and over dimensional cargo,” says Milind Kulkarni, who manages brand and communication at Volvo Trucks India.

A lot has changed since then. And heavy commercial vehicle makers believe that this is just about the right time to raise the bar. “Modernization is happening across all portfolios of life. In commercial vehicles also it was in a sense due. It’s just that here the dynamics are around operating economics and profitability. So you needed a certain environment of cargo or high-tonnage mining operation where high horse power trucks are required and then you need the infrastructure in terms of roads for them to be justified,” says Ravi Pisharody, president for commercial vehicles at Tata Motors.

It helps that road-building has caught the fancy of the government. Minister Kamal Nath has pledged to award highway contracts at the rate of 20 kilometres a day. “Vehicles and the support infrastructure must go hand in hand. If there is lacking infrastructure then it doesn’t make sense to put the latest technology on the road,” says Ben Klaassen, managing director of TNT Express Road Network, one of the world’s largest logistics companies.

Even as truck makers started talking about high performance machines, Baid contacted his customers to know if they had the appetite for them. “We asked a lot of our existing customers like John Deere, TAFE, Tata Chemicals and Tata Steel if they would be willing to pay a premium for a fixed transit time. Most of them were willing only on the condition that if we failed then the normal freight rates would apply,” he says. Then, as soon as Tata Motors launched its global truck, Baid began trial runs for customers like Tata Steel and John Deere.

One trial run was between Tata Steel’s factory in Jamshedpur and Tata Motors’ plant in Pune, a distance of 1,800 kilometers. A conventional Tata 4018 truck would do it in six days. The new truck did it in just four. It was a resounding confirmation that the model would work. Baid went ahead and ordered the trucks.

His new Tata Prima trucks cover 700 kilometres as against 300 covered by the old ones. The quick turnaround translates into almost three times revenue from the new trucks. “While the variable costs are almost 40 percent higher for the Prima... the fixed cost is pretty much the same for both trucks. And when my revenue grows threefold while the cost increase is only by 40 percent, then I am making much more money on the Prima than on the 4018,” says Baid.

This might sound simplistic but there is a catch. The model works only if there is freight available at both ends and only if the Prima is on the road for more than 24 days in a month. “Otherwise this truck is a white elephant. If you keep it parked in your backyard rather than making sure that it spends most of its time on the road, then it can kill you,” says a Tata Motors official who doessn’t want to be quoted.