Bill Villalon (pictured), senior vice-president of global automotive for APL Logistics, as well as chairman of the APL Logistics Vascor joint venture in India, talks about his companies strategy for success in introducing advanced rail services in India.
Ramesh Kumar: What brought APL Logistics and Vascor together in India?
Bill Villalon: We have a long history of working together for more than 25 years. The opportunity in India actually started with the container operations that moves on rail. That’s the genesis. Our research showed that the usage of rail for finished vehicles is underserved in India, given its vast geographical landscape compared to rest of the world. So, it’s a challenge and an opportunity.
The focus of Indian Railways, a government-owned entity, is more on passenger movement. Even on the freight front, the emphasis is on ferrying essential goods such as food grains, coal, fertiliser, oil and milk. Does it worry you?
Our container operations on rail did not pose any challenge. Secondly, we understand auto OEMs have impressed upon the government the need for building up this kind of transport solution from a development perspective and to encourage foreign direct investment. Obviously, this means fresh jobs and economic growth. Therefore, I strongly believe there is government support for this initiative. Having said that, of course, foodgrains and essential commodities will have priority, as they do in China as well. There is room for an accommodation of automotive movement on rail, I trust.
You seem to be very optimistic.
There is good reason for such optimism. Over the past several years, we faced no challenges in container operations on the Delhi-Mumbai rail corridor. [sam_ad id=6 codes='true']
Maruti Suzuki has said that its rail movement will be for its own captive use. This basically offers the entire automotive segment, barring Maruti Suzuki, to APL Vascor. Is that good for your business?
First of all, let us not jump to conclusion that there will be only two licencees. Others will join. Maybe they are evaluating. It is early days.
Currently, OEMs move vehicles on rail to northeastern India. Are you ready to offer wider coverage?
Yes. We are looking at multiple factors and locations where OEMs show interest. We will definitely be exploring locations beyond the northeastern sector. As we all know, the marketplace decides our destinations. Presently dialogues are on with multiple OEMs to understand their needs, such as their production planning, market absorption capacity, etc.
Are you planning point-to-point or multi-stop deliveries?
We are examining all options, including multiple halts. We are not just considering point A to point B alone.
Are you offering end-to-end solution from plant yards up to dealers?
Yes, it will be a complete supply chain operation for finished vehicles, with pricing that includes tracking and tracing. Admittedly, in North America where we have this service, there are rail sidings at the plant, which makes operations a little more comfortable. I understand that such facilities are being contemplated for new plants in Gujarat.
My understanding is that you will be offering scheduled services on pre-fixed dates. Are Indian OEMs ready to commit to those schedules?
Things will evolve over time, we hope. You have to start somewhere. Pooling will happen as we progress. If you look at the geographic spread, three rakes is relatively small to carry the volume we are looking at. There are definitely risks. But that is part and parcel of entrepreneurship.
Considering rail capacity of 300 plus vehicles per train, it would be difficult for a single OEM to fill all loads. Indian auto OEMs are fully aware of the challenges. I don’t think that the mix-n-match route as a means of conveyance is an issue with them. Price and quality will be differentiators for them.
How do you plan to handle the empty backhaul?
As far as northeast is concerned, rakes have to come back empty. In other areas, we can even explore the movement of two wheelers to address the backhaul challenge. One must think more creatively.
No cuthroat pricing
OEMs may demand rail rates to be at par with road rates. Is it possible?
Rail movement offers several advantages over road, including less damage. Rail is more economical holistically speaking. It cannot be radically cheaper. OEMs are seeing rail as a choice for a long-term perspective. The entire volume is not going to move away from road. But long hauls on rail make more sense.
Will you be working out an ‘introductory offer’ kind of pricing to entice OEMs?
We are not going to try to grab a quick market share. Quite frankly, we will not be pushing an inferior product, and our pricing has to reflect our investments and service. But it will be competitive.
When is the actual launch?
We are in the process of finalising commitments with OEMs. Soon we will be converting our letter of intent issued to Texmaco Wagons into purchase orders and the launch may be in the third quarter.
"We are not going to try to grab a quick market share. Quite frankly, we will not be pushing an inferior product, and our pricing has to reflect our investments and service. But it will be competitive. " - Bill Villalon, APL Vascor
Others are likely to be waiting and watching how you do before jumping in.
Well, that is what the government policy is anticipating: more players. If you are running wagons and moving vehicles in the west, it does not mean you will be successful in India automatically. We were running containers on rails and then we brought in Umesh Bhanot, who is familiar with the Indian Railways and knows how it works. We are starting with so much knowledge. That’s why we jumped in without hesitation.
What is the one thing you desire the most to happen that will enable APL Vascor to thrive in this segment?
I wish to wake up in the morning and read that the GST [Goods and Service Tax] has been rolled out in India.
Do you think the Indian Railways and auto OEMs are really serious about this movement of finished vehicles by rail?
Yes, they are all serious. It is a larger issue than that concerns just the Indian Railways. This kind of infrastructure is crucial for overall economic development. This message has been communicated at the highest level of government. With 5m vehicles expected to be sold in India by the end of this decade, deliverying them only on roads would be tough. That’s where rail comes in. This will be a new big business opportunity for the Indian Railways as well. So, to answer your question, everyone is serious.