The automotive logistics market is fragmented due to the existence of big international firms, small- and medium-sized regional players, as well as a select few who hold most of the market share. To suit market demands and needs, most major international logistics players include an automotive logistics section. Local players are also constantly improving their technology, service offerings, product handling, and inventory management skills.
Based on dependability and supply chain capability, the third-party logistics (3PL) service providers in the industry are in fierce competition. Businesses would differentiate their service offerings by supplying value-added services. Growing e-commerce sales present opportunities as well as difficulties for logistics companies in terms of delivery, efficiency, etc.
Global firms with significant financial resources and assets can invest in cutting-edge technologies and distribution hubs and profit from the aforementioned scenario. On the other hand, local and regional businesses are developing better industry solutions to meet the needs of dealers, retailers, and manufacturers.
With cutting-edge transportation options, international automakers are overturning the conventional supply chain.
Although roll-on/roll-off (ro-ro) shipment of finished automobiles is the customary way, containerization is becoming more and more practical as the automotive industry decentralises and introduces more electric vehicles. The expansion of China and Southeast Asia presents lucrative potential for transportation and logistics businesses. Cargo Insights consults with seasoned professionals in the business to get their opinions on the changing market conditions.
Complexities of World’s Automotive Industry
Vijay Vashisht, AVP, Safexpress , explains to CargoInsights how the automotive industry is currently going through some unprecedented times, a few of which are its own legacy.
For the majority of the last five decades, the global automobile industry has experienced its best growth years. There was a surge in economic theories that prioritised individuals during the 1970s.
This ushered in an era of manufacturing that prioritised individual tastes, likes, and dislikes, and on top of that, manufacturers were aware of the possibility of people becoming tired or feeling stagnant after a while. Automakers are increasingly focused on developing high-tech, appealing, and glamorous models while reducing the need for warehousing built-in models, spares, and OEMs. It helped them save money by allowing them to release models that were sleeker than the previous ones. What is commonly known as ‘Just in time’ manufacturing, which was pioneered by the Japanese automaker Toyota, was a type of manufacturing in which parts and spares were delivered to factories just as they were needed, allowing manufacturers to pair production with demand while significantly reducing the burden of warehousing. The retailers could manage with a limited inventory while displaying a wider range of goods in the available space. Almost every business vertical has adopted the fad. This was a race to the lowest cost and highest profit.
It would seem that the supply chain’s equilibrium was unstable and rife with weaknesses. This was first put to the test by the financial crisis of 2008–2010 and then approximately ten years later by the pandemic when, in the words of one observer, “the globe ran out of everything,” as if “the supply chain has run amok.” The automotive industry is still stuck in a rut and experiencing some turbulent times.
Automakers have increasingly focused on developing more user-friendly and automatic versions of cars, which frequently incorporate critical components or sophisticated materials that require specialised technological skills to manufacture. It is extremely difficult for a single company to have the breadth and capabilities required to produce everything on its own. This necessitated specialised manufacturing and component sourcing. These component manufacturers, in turn, typically rely on numerous other sourcing units.
This arrangement has numerous advantages. It gives the automaker a lot of leeway in selecting the most cutting-edge technology. However, reliance on a single supplier, who in turn is reliant on other suppliers, creates a plethora of vulnerabilities. A disruption experienced by one component manufacturer anywhere, is a disruption in manufacturing worldwide. As the pandemic demonstrated, manufacturers almost everywhere were found to be vulnerable in their manufacturing and supply chain strategies, and the automotive industry was no exception. In fact, the automotive industry is still not out of the woods.
The vulnerabilities resulting from national trade policies and fissures between global economies are the second result of a globally complex supply chain. As has become increasingly clear, the complexities of the global supply chain have created economic nativism conditions in which manufacturers are encouraged to source components from within the country. Manufacturers must remain competitive if they are to survive.
The spectre of global warming is the third and most important aspect of the challenge the automakers are currently facing. The auto industry is staring at a very conscious consumer class that wants the best EV models available at the same prices as the gasoline versions. Automobile manufacturers must advertise their goods, make investments in battery technology, and build a competitive supply chain.
Technology and innovations
Recent advances made in the electric vehicle segment, however, make a tectonic shift from gasoline-powered internal combustion engines to battery-powered. These vehicles use electricity, typically stored in a battery, to power an electric motor.
EV technology is used in hybrid electric vehicles, plug-in hybrid vehicles, and battery electric vehicles. Electric vehicle technology has advanced rapidly since its introduction, and today there are many plug-in, hybrid and battery electric vehicle options available. These are the most energy-efficient and produce zero tailpipe emissions.
Automobile transportation is a multimodal distribution process that goes through various stakeholders and phases. The method also requires extensive preparation for the cost-effectiveness of the procedure and the safety of the vehicles. Ships with many decks are recommended in the first stage, especially when importing automobiles, to maximise capacity. These ships are designed in such a way that cars can be rolled on and off the ship.
Depending upon the distance, railroads or auto trucks are used to transport them.
Electric vehicles have gained significant traction in recent years as a cleaner and more efficient alternative to traditional gasoline-powered vehicles. With advancements in battery technology, a growing network of charging infrastructure, and increasing consumer demand, EVs have become a viable option around the world. Secondly, and especially in middle-income countries like India, the market for electric vehicles is very promising. In the case of India, the Economic Survey 2023 predicts that India’s domestic electric vehicle market will grow by a CAGR of close to 50 percent between 2022 and 2030, with 10 million annual sales by 2030. A new breed of EVs will take centre stage, with manufacturers from around the world increasingly focusing on shifting their production from gasoline-powered to battery-powered vehicles. Thirdly, market for smaller SUVs will gain in comparison to the large electric SUVs because of their affordability and yet being a symbol of aspirational middle class.
Next decade will see automakers vying for space in the EV segment, especially in the LMV and two- and three-wheeler segments. There are talks of hydrogen-powered vehicles too, but there has not been much progress visible so far.
All in all, the auto industry is going to enter very exciting times, and for good.
In the case of India, the Economic Survey 2023 predicts that India’s domestic electric vehicle market will grow by a CAGR of close to 50 percent between 2022 and 2030, with 10 million annual sales by 2030
Evolution of Automotive Logistics Sector
According to Aditya Shah, Executive Director of V-Trans and CEO of V-Xpress, the automobile logistics industry has undergone significant changes in the last decade as a result of factors such as technological advancements, environmental concerns, e-commerce, and regulatory changes.
Changes in the automobile logistics industry have increased demand for more efficient, cost-effective, and environmentally friendly logistics solutions, as well as greater flexibility and reliability in delivery processes. Customers have also become more research oriented as a result of the large amount of content available on any topic of interest these days.
- Technological advancements have enabled the development of more advanced tracking and monitoring systems, improving the efficiency and accuracy of automobile logistics. The use of GPS tracking devices and real-time data analytics, for example, has enabled businesses to better manage their fleets and optimise their routes.
- Growing environmental concerns have increased pressure on businesses to reduce their carbon footprint. This has resulted in the development of more environmentally friendly logistics solutions, such as electric or hybrid vehicles, as well as an increase in the use of intermodal transportation.
- Loan rates, particularly for cars, have been low, and financing has become much more easily available, which is driving automobile sales.
- The construction of new highways, motorways, and dedicated freight corridors has resulted in faster and more efficient automobile transportation across the country.
- As consumers demand more personalised and on-demand services, new delivery models such as door-to-door delivery and multi-modal transportation have emerged.
Automobile logistics in India faces various challenges due to factors such as poor road infrastructure, traffic congestion, inadequate transportation modes, the high cost of logistics, etc. Here are some of the most significant challenges faced by the sector and the measures companies are taking to address them:
- Logistics Costs: One of the biggest challenges faced by automobile logistics companies is the high cost of transportation. This is due to various factors such as rising fuel prices, congestion on roads, and increasing toll charges. These costs can impact the profitability of the logistics companies and lead to higher prices for consumers. Companies are working with new technologies such as artificial intelligence, data analytics, and automation to bring in efficiencies.
- Inventory Management: Managing inventory in the automobile logistics industry is very challenging, as it involves handling a large number of vehicles, spare parts, and accessories. Companies are working to integrate efficient warehouse management systems to ensure that inventory is tracked and managed effectively.
- Safety and Security: The transportation of automobiles involves high-value cargo, which makes it vulnerable to theft and damage. Logistics companies work through various methods, like barcoding, lock and seal, etc., to ensure that the vehicles are transported safely and securely to their destination.
- Rising fuel prices—in the last couple of years, fuel prices have been very unstable and skyrocketing, directly impacting the sentiments of consumers. The companies are therefore exploring the options of using electricity and biofuel as alternatives.
Role of Technology
Technology plays a critical role in the logistics of automobiles, enabling greater efficiency, safety, and cost-effectiveness in transporting vehicles from manufacturing plants to dealerships and other destinations. Some of the key technologies used in automobile logistics include:
- GPS tracking and telematics: These technologies enable companies to monitor the location and status of vehicles in real-time, improving logistics planning and enabling rapid response to any problems that may arise during transit.
- Warehouse management systems: These software systems allow companies to manage inventory, track shipments, and optimize storage space, improving efficiency and reducing costs.
- AI and ML—these technologies are supporting multiple areas like manufacturing, inventory management and supply chain management, preventive maintenance, etc.
In terms of emerging innovations, there are several trends to watch in the automobile logistics industry. These include:
- Electric and hybrid vehicles: As the demand for electric and hybrid vehicles grows, logistics companies will need to adapt to new charging requirements and transportation methods.
- Last-mile delivery solutions: Companies are exploring new ways to deliver vehicles directly to customers, such as using drones or autonomous vehicles for last-mile delivery.
Logistics companies prioritise safety and efficiency by employing a diverse range of strategies and processes, such as professional driver training, advanced tracking systems, meticulous loading and unloading protocols, regular maintenance checks, driver education initiatives, risk assessments, and contingency planning, all aimed at ensuring safe and secure cargo delivery.
The automobile logistics industry may see several potential trends emerging in the next five to ten years, including the rise of autonomous vehicles, the shift towards electric vehicles, supply chain optimization, and a focus on sustainability. Companies may respond to these trends by investing in new technology, infrastructure, and personnel, developing new partnerships; and conducting research and development to stay ahead of the curve. Also, a significant focus has to be on sustainability and green mobility.
Logistics companies prioritise safety and efficiency by employing a diverse range of strategies and processes
Burgeoning Automobile Logistics Industry
The automobile logistics industry has undergone significant transformations in the last decade, driven by a myriad of factors that have revolutionised the sector.
One of the most important changes that have changed the industry, according to Vivek Juneja, Founder and Managing Director of Varuna Group, is the adoption and use of technology. This has allowed logistics companies to manage their supply chains more effectively, communicate better, and track their operations in real-time. Real-time tracking, automation, and data analytics have improved operational efficiency, decreased costs, and minimised delays. Furthermore, innovative technologies like the Internet of Things (IoT) have brought forth more transparent and secure transactions, further enhancing the industry’s efficiency.
The automotive logistics sector has seen a substantial increase in the importance of sustainability; hence businesses have embraced sustainable methods such as cutting emissions and optimising routes to use less fuel. These measures have increased productivity and decreased expenses in addition to meeting consumer expectations.
Global supply chain disruptions, increased demand for sustainability, and a shortage of skilled labour are just a few of the issues that many logistics organisations are dealing with today.
The COVID-19 pandemic has brought to light the fragility of supply chains, and the automotive logistics industry is no exception. Despite these challenges, the automotive logistics industry is taking proactive measures to address them, by leveraging technology, forming partnerships, diversifying, and embracing automation. These strategies are critical for businesses that want to stay competitive and successful in an ever-changing industry.
The integration of technology has transformed the industry, and exciting innovations continue to emerge. Several ground-breaking technological advancements are propelling the automobile logistics sector forward. Among them are:
- IoT sensors are critical in monitoring vehicles, tracking shipments, and detecting supply chain anomalies. They collect real-time data to help identify inefficiencies and bottlenecks in the logistics process while also improving safety and security by tracking vehicles and cargo.
- Artificial intelligence (AI) is a powerful tool in the automobile logistics industry, helping to optimise routing, reduce delays, and improve delivery times. AI algorithms can determine the most efficient shipment routes by analysing traffic patterns, weather conditions, and other factors.
- Blockchain technology is being used to enhance supply chain transparency and security. It provides a secure, transparent, and tamper-proof way for all supply chain stakeholders to share data.
By embracing these cutting-edge technologies, companies are boosting efficiency, cutting costs, and delivering better customer outcomes.
The automobile logistics industry is rapidly evolving, with several emerging trends shaping the industry over the next five to ten years. The increasing adoption of modern technologies is one of the most important trends.
Another key trend is the growing demand for environmentally friendly and sustainable logistics solutions as consumers become more aware of the environmental impact of their purchasing decisions. As a result, logistics firms are investing in alternative fuel vehicles, green supply chain practises, and leveraging technology to reduce carbon emissions and promote sustainability.
Companies are preparing for new challenges in the form of regulatory compliance, geopolitical instability, and shifting consumer preferences by developing strong risk management strategies, investing in R&D, and forming partnerships and collaborations to capitalise on emerging technologies and industry expertise.
Moreover, there is a growing trend towards collaboration and integration among various supply chain partners, such as logistics providers, manufacturers, and retailers, in order to improve supply chain visibility and efficiency. Companies are leveraging technology and data analytics to enable real-time tracking and communication, allowing them to respond quickly to changing market demands.
The automobile logistics industry is rapidly evolving, with several emerging trends shaping the industry over the next five to ten years
Decarbonization: Emerging Trend in Automobile Logistics Sector
According to Varun Chopra, Executive Chairman (GEAR India), the speed of eliminating carbon emissions from the supply chain would significantly increase over the next three to five years.
The automobile logistics industry has evolved over the past decade, and there are numerous factors that have driven to these changes. To assure speed, efficiency, and flexibility in the supply chain for the manufacture of the finished product, the automobile industry has always operated in “clusters,” or manufacturers of vehicles and auto-ancillaries in a single cluster. One of the significant changes noticed in the last ten years is the use of MHEs (Material Handling Equipment) like forklifts, reach trucks, BOPTs, and VNAs across RM and FG movement to increase speed and decrease manual interventions. This is in addition to using technology to drive better integration in the supply chain.
Regarding the trends you see emerging in the automobile logistics industry “I believe that one of the biggest challenges faced by automobile logistics today is that of decarbonizing the Supply Chain and moving towards Net-zero emissions – given India’s target of Net-zero (Scope 1, 2, & 3 emissions) by 2070, the automotive logistics industry has to move rapidly to zero emissions across the supply chain,” says Chopra.
“The single biggest innovation, in my opinion, might be the use of zero-emission MHEs (Material Handling Equipment), such as forklifts, reach trucks, BOPTs, and other items that are driven by lithium-ion. This is in addition to the use of technology to automate supply chains. As rental alternatives on Opex are also available through businesses like GEAR to start on the path of removing carbon emissions from the supply chain, they are low-hanging fruits that vehicle companies can quickly adopt. During the next three to five years, this will gain substantial pace thanks to major corporations like Tata Motors, Ashok Leyland, Apollo Tires, and Michelin, to name a few, who have already announced their ESG and Net-Zero ambition,” he adds.
The single biggest innovation might be the use of zero-emission Material Handling Equipment
Collaboration and Innovation Will Be Pivotal
Globalization, the industry shift towards electric mobility, the rise of e-commerce, sustainability, digitalization, and outsourcing have all driven specialization, innovation, and the development of new logistics services in the automotive logistics industry.
According to Mohit SETHI, Head, Automotive, South Asia, Bollore Logistics, the automotive logistics industry has evolved rapidly over the last decade, driven by a combination of global trends and technological advancements that have resulted in greater efficiency, sustainability, and flexibility in how goods are transported and distributed globally.
The COVID-19 pandemic was one of the biggest challenges in recent times. Companies are addressing those challenges by being more resilient and agile by diversifying their suppliers and implementing digital technologies to enable real-time visibility and flexibility in their operations. Another important aspect is that the shift towards electric mobility is changing the supply chain for automotive manufacturers, especially the handling of lithium-ion batteries, infrastructure for EV charging and battery storage. The growth of online sales has led to an increase in the volumes of small individual shipments, which require different logistics processes and infrastructure. Significant investments are being made in technology and infrastructure, as well as changes to logistics processes and supply chain management. Innovation and collaboration will be the key.
Technology has become more relevant, especially with the automotive industry moving towards electric and autonomous vehicles. Connectivity is the key. Automotive companies are leveraging technology such as artificial intelligence, big data analytics, and the IoT to optimize their logistics operations, improve efficiency, and reduce costs. Innovations like Blockchain is being used to improve transparency and security in the supply chain, providing real-time data. Predictive analytics enables logistics companies to anticipate demand and adjust their operations accordingly. Not to miss Augmented Reality (AR) and Virtual Reality (VR), which support enhancing customer experiences and are also used to train technicians and warehouse workers, improving efficiency, and reducing errors.
Ensuring the safe and efficient transportation of vehicles throughout the automotive supply chain requires a combination of proper planning, the use of technology, proper packaging, compliance with regulations, training and development, and collaboration with vendors. Another critical aspect is ensuring proper knowledge of compliance with regulations, including but not limited to those related to load limits, driver hours, and vehicle maintenance. Training and development are key.
As the demand for electric and autonomous vehicles grows, companies will need to adapt their logistics operations to handle these vehicles. This includes developing new transportation modes and infrastructure, such as charging stations and autonomous vehicle routes. More focus on online and e-commerce companies to enhance customer experience and provide more personalised and responsive logistics services. Companies will need to invest in green fuel mobility, technologies such as IoT, data analytics to optimise their operations, improve efficiency, and provide real-time tracking and visibility. More than ever, collaborations between all stakeholders will be needed. Investing in talent, technology, and skill development will be key.
Technology has become more relevant, especially with the automotive industry moving towards electric and autonomous vehicles
Climate Effects Speed Up the Evolution of Automobile Logistics
According to Nivveddita Daash, Head, Learning & Development, Digital ITEs, the automobile logistics industry has changed dramatically in the last decade as a result of technological advancements, globalisation, and shifting consumer demand.
Environmental concerns have become a major driver of change in the automotive logistics industry, with a focus on lowering emissions and improving sustainability. As a result, alternative fuels have been developed, and more efficient logistics practises have been implemented. Over the last few decades, the industry has become more customer-focused, with companies investing in technologies and processes to improve the customer experience. As a result, new delivery models have emerged, as have more personalised and flexible logistics solutions.
The major challenges confronting the automotive logistics industry today are the result of changes in consumer behaviour. Consumer preferences are shifting, with an increase in demand for more sustainable, connected, and personalised mobility solutions. To meet these changing demands, automakers must develop new technologies. Another major challenge is a significant shift towards electric vehicles, which necessitates significant investment in charging infrastructure and new technologies.
Since COVID-19, technological advancement has become one of the most important factors in every industry. In the automobile logistics industry, technology plays a crucial role too, as it is required in the transportation, storage, and distribution of vehicles and their parts. The use of technology in the automobile sector is assisting in improving efficiency, lowering costs, and increasing transparency and traceability in the supply chain.
Block chain technology is also being investigated as a means of increasing transparency because it can provide a secure and tamper-proof record of transactions and data.
Consumer preferences are shifting, with an increase in demand for more sustainable, connected, and personalised mobility solutions
Technology-Savvy, Adaptable, and Agile Automotive Logistics Sector
Industry expert Dr. Pramod Sant Industry Expert & Former Vice President Head, Import-Export and Customs, Siemens, South Asia, indicates that the growth of the Indian automobile industry is a prime reason for the evolution of the automobile logistics industry.
India will be the world’s third-largest automobile market by 2022. The Indian automobile industry accounts for nearly 6.4 percent of India’s GDP and 35 per cent of manufacturing GDP, employing 4 million direct and 27 million indirect workers.
Another factor driving the growth of the automobile industry is the customer. No customer is willing to wait. This aided both automobile manufacturers and logistics service providers in their rapid evolution. Changes in technology in manufacturing and distribution, combined with the need for transparency and the availability of new technology companies, pushed the industry into the digital era. Last but not least is ESG (Environment, Social and Governance) push from customers, manufacturers, and logistics service providers to increase standards.
We have transitioned from the VUCA world to the BANI (Brittle, Anxious, Nonlinear, Incomprehensible) and RUPT (Rapid, Unpredictable, Paradoxical, and Tangled) worlds.
Other factors include changes in geopolitical situations such as the US-China trade war, the Ukraine-Russia war, COVID, an increase in freight, a container shortage, a semiconductor shortage, and a slowing of the economy in the EU and other parts of the world.
The logistics industry is learning from early challenges, becoming more agile, resilient, and increasing its dependence on technology. The speed of learning and innovations have helped find new solutions. Most important is increased trust and collaboration between manufacturers and logistics service providers.
To assure transparency and real-time status across all areas, including forecasting, planning, inventory, and the movement of inbound and outbound goods, manufacturers were required to link digitally with their suppliers and logistics service providers.
During COVID, digital connections with Tier II and Tier III suppliers became essential, and because of recurring disruptions, they eventually became a necessity. Technology has helped with improved planning, cost reduction, and time reduction. Spare component availability is crucial in the automotive sector. The use of software and AI to combine shipments, the best utilisation of vehicles, the choice of vehicles and routes, etc., are all important factors.
The automobile has already undergone a significant transformation from being mechanical with minimal electrical components to being fully electronic. It has practically all the necessary technologies, from seat heaters to roadside alerts, for any situation. Supply chain management has already transformed as a result, necessitating new skill sets.
Also, EVs will alter the logistics of all component parts and provide new standards for handling batteries. The management and storage of EV batteries will present additional difficulties. In addition to traditional storage, warehouses will offer new services.
Car manufacturers are currently utilising the best internal and external logistics mix. New EV manufacturers, however, lack internal expertise and will be more dependent on 4PL and end-to-end service providers. The skillset needed in the logistics sector will change as a result, and new skill sets and mindsets will be needed. Existing logistics service providers will be pressured by a new generation of asset-light tech startups looking to seize this opportunity and market share.
The logistics industry is learning from early challenges, becoming more agile, resilient, and increasing its dependence on technology
Significant Developments in Auto Logistics Industry in Last Decade
The last decade has seen three major revolutions in the automobile logistics industry: globalisation of supply chains, localization of production in India, and the growing importance of the (auto) industry to India’s GDP and thus its contribution to logistics industry growth. The next big change is towards outsourcing; the auto industry has always been at the forefront of modernisation and logistics outsourcing to 3PLs is another major trend or change we have profoundly seen in India. The last one has to do with what OEMs expect from service providers, namely value-based solutions through the use of TMS and WMS technology.
The biggest challenge today is the scarcity of components, mainly semi-conductors, and OEMs are looking at making largely global supply chains local to whatever extent possible in the short term. The longer-term challenges will focus on the ‘right sizing’ of supply chains depending on the OEM and the level of indigenization of components.
Innovations and Technology
Auto logistics has always been at the very forefront of innovation in logistics. Technologies like WMS systems and TMS systems have been in use for a long time. Technology enables inbound manufacturing to run more efficiently and lines JiT and JIS systems too. Finally, yard management systems enable the efficient storage and retrieval of finished goods. The way forward is going to be more about how these solutions and tech systems get integrated into a seamless and end-to-end flow of physical goods, information, and inventory costs.
Express Logistics service providers like Gati make sure that an OEM can fulfil its responsibility to dealers, distributors, and customers for all spare parts when it comes to the shipment of auto ancillaries. “We are able to manage the central or plant warehouse (or import consol warehouse), the regional distribution centres, and finally, design and run the distribution system all the way to the last dealer or even store in order to transport auto ancillaries safely and effectively throughout the supply chain,” says Nasarwanji. Gati is the top option in logistics for spare parts thanks to our unmatched reach and dependability, automated and technologically enabled warehouses, and inventory management systems.
Gati is the top option in logistics for spare parts thanks to our unmatched reach and dependability, automated and technologically enabled warehouses, and inventory management systems