India fragmented trucking industry, worth about $50 billion, has been an epitome of slow progress. Vehicles are generally older than 15 years, and work hours are so long that falling asleep at the wheel is a major cause of highway accidents.
The Uber truck model
Blackbuck, founded by Rajesh Yabaji, has raised $31 million in funding from venture capital firms such as Tiger Global, Accel, Apoletto (Yuri Milner’s Founders Fund) and Flipkart.
Yabaji has implemented a Uber-like model, wherein BlackBuck functions like a third party logistics firm and its platform brings truck drivers and business customers on one platform. That has never been done before in a B2B sector like transport.
“The truck owner has our app thorugh which he gets requests. We have our own pricing engine and algorithm. For higher demand, we need more trucks and so there can be a ‘surge’ pricing. We are basically taking the offline market online,” said Yabaji in a chat with DEALSTREETASIA.
BlackBuck, which counts Unilever, Godrej and Marico among its clients, is the country’s only truck aggregator operating at its scale. The average price point for orders is between Rs 35,000 and Rs 1 lakh. The surge component varies between 10-30 per cent, which is way less than what Uber or Ola might charge in a major city, but a totally novel concept for truckers.
Yabaji said that there are more than 30,000 trucks on its platform across 200 cities in India. The company has expanded to a thousand members, from just 200 in December 2015.
“We will look for another round of funding mainly to bolster team strength,” Yabaji said. “Operationally we are cash positive, and should be EBITDA positive in the next six months, as we expand to become India’s largest freight company.” In the next couple of years, it wants to have 10 per cent of the market.
Huge opportunity in challenging industry
India’s transport sector offers a big opportunity for change. In the last three decades, road freight traffic has grown 9.2 per cent on a yearly basis while the road network has expanded only 4.2 per cent. This disparity has put a lot of pressure on existing road networks, leading to frequent congestion, delays and higher costs for companies using such services.
Third party logistics, which accounts for about half of all freight traffic in the US, accounts for just 16 per cent in India. India’s fragmented industry — more than 75 per cent of fleet owners have 5 trucks or less — is in contrast with the consolidated nature of the industry in other Asian nations such as Korea and China.
Unlike BlackBuck, which does not own vehicles, Rivigo has gone for owning all of its trucks and is building a big fleet. Rivigo, previously known as TrucksFirst, is an express surface logistics firm. It has also attracted VC interest, and raised more than $39 million in funding, most recently from Trifecta Capital Partners and SAIF Partners.
Founded in 2014 by former McKinsey employees Deepak Garg and Gazal Kalra, the company has claimed to reduce transport time by as much as half. It deploys Internet-connected trucks equipped with sensors that feed data to coders. They then try to map the fastest routes, to avoid long traffic jams or queues at numerous inter-state checkpoints, that are governed by each of India’s 29 states.
The company currently has a thousand trucks and is on the way to expanding the fleet three fold by 2017. Their truck drivers are better rested than those in traditional companies, because they reach destinations faster.
Low cash-burn expansion
Rivigo and BlackBuck are now rivals in the race to capture a major share of India’s trucking market, and both are solving problems that have remained unresolved for years. BlackBuck has made it possible for trucking companies to have a clear idea of demand and position their fleet accordingly. That has come with benefits of higher pricing, and more control over the fleet. It has allowed BlackBuck to expand rapidly with an asset-light model, something it is now planning to do in overseas markets. It might raise more funds this year to fund those plans.
Rivigo on the other hand caters more to e-commerce and cold chain segments compared with BlackBuck’s standard deliveries, and is making it possible for deliveries to happen at unheard of timelines.
Through both these companies, India’s land transport industry is going through a revolution of its own. And unlike consumer facing companies, they are doing it with low cash-burn while expanding swiftly. Most of the money goes into upgrading tech and product, and investors are not averse to further funding in the tech-enable logistics space.
It still remains to be seen if they can compete consistently with established players such as VRL Logistics, which has 3,739 goods transport vehicles, and has been operating since 1976. But they do have the resources to make life difficult for other players and force them to change the way they operate.