The world’s second largest nation by population, India is currently experiencing a phase of economic ‘re-adjustment’ as it is starting to feel the impact of on-going financial turmoil around the globe. According to official data*, the continuing weakness in the Eurozone, fiscal uncertainty in the US, and weak Japanese sales to China have been limiting progress in the region in 2012. But while GDP growth in China, Russia and Brazil is already picking up again, a delayed monsoon season and weak industrial activity has set back the Indian subcontinent.
Rating agency Crisil thus lowered India's economic growth projection to 6.5 per cent for the current fiscal from an original forecast of around seven per cent, mainly due to muted domestic investment demand, a domestic policy logjam, and limited fiscal and monetary space to stimulate the economy.
Despite that somewhat puzzling economic climate – India’s trailer industry has been growing at a compounded annual growth rate (CAGR) of 13.6 per cent between 2004 and 2011 without any notable interference – one young company has quietly risen from zero to market leadership.
Lead by buoyant CEO, Nitin Chamaria, Tranztar has emerged as India's largest and fastest growing, fully integrated manufacturer of modern transport equipment. During the financial year that ended in March 2012, the company sold more than 7,000 tippers and 1,500 articulated trailers in India – taking over the top position in the country’s scattered trailer industry. According to Tranztar, the start-up business saw sales growth of more than 80 per cent in 2012 alone, and 307 per cent since 2009.
Considering the market for medium and heavy commercial vehicles will be down 40 per cent by the end of 2012**, it is no surprise that Tranztar is not an insider’s tip anymore. How come a company that was founded just before the GFC struck, and commenced business to the steady drumbeat of bad economic news, has come to dominate the Indian market in a time frame too short for some to write a viable business plan?
One reason is that demand for transport equipment is still strong in the 1.2-billion people country, as infrastructure development is high on the political agenda and construction still booming. Secondly, India is now close to the implementation of an integrated Goods and Service Tax (GST), which is said to the most anticipated taxation reform of the decade. “The transport industry in India is operating at a very low operational efficiency level when compared to Europe or the US. The introduction of a GST will waive the bottleneck in that area and transform the logistics landscape in the country,” says Chamaria. “The effective implementation of GST will certainly drive the demand for transport equipment and is largely expected to be an inflection point for our segment.”
As a result, the slowdown as more of a short, sharp shock than a prolonged correction if you ask Nitin Chamaria. A hard landing for India would require a far more severe shock to growth than is so far being expected as likely. However, he does not deny that Tranztar’s rise is somewhat of an economic miracle.
“I am aware that we started off trading during a very rough time. But since it was just the beginning and we were still in the project stage, we did not suffer as much as you may have expected. In fact, our timing proved to be just right because by the time the market revived, we could draw on the full manufacturing capacity, as well as a complete sales and service network. So we were actually able to take full advantage of the upswing.”
According to Chamaria, that ‘life lesson’ has also prepared the young brand for the second slump the region is experiencing today. “There is no doubt we are currently experiencing a drop again, mainly due to a momentary slowdown in public expenditure, poor industrial output, tight monetary policies and the basic cyclical nature of this industry.
“But, we feel that this is not going to last for long and the industry will bounce back sooner than expected,” he adds – pointing out that the Indian Government is already planning to spend some $716 billion on infrastructure in the near future. Hence, he is confident that Tranztar is only just scratching the surface of India’s flourishing trailer market.
No wonder Chamaria is a self-confident man, not only because the Tranztar business is bucking the economic trend, but also because he has overcome what has been the industry’s Achilles’ heel for a long time – disorganisation and widespread compartmentalism. “By nature, the Indian trailer market is highly fragmented and dominated by small and fairly unorganised businesses,” he explains. “They are inefficient and lacking economies of scale to compete nationally. That’s why we are now seeing a paradigm shift, with transport companies preferring large and reliable suppliers that can actively help the industry grow and mature as a whole.”
Chamaria is actively driving that change in the country, promoting a modern manufacturing style and the adaption of European quality standards, which small-sized companies cannot provide. “It’s all about the big picture view,” he says, calling for the re-alignment of the scattered transportation network to defined clusters.
“We live in a globalised world, so it would be negligent to assume that current events in Europe or the US do not affect us in India. And we also need to retain that big picture look when we our national market – everything is interconnected and only a structured approach can ensure you tap the full potential of that economic potential.”
A brainchild of local truck giant, Asia Motor Works (AMW), the establishment of Tranztar is a prime example for actively ‘creating’ a competitive supply structure instead of waiting for the industry to provide it.
Flashback: In 2006, AMW ventured into the field of trailer and body-building itself. Capitalising on the company’s experience in volume production, the original goal was to overcome lack of available trailing equipment and inconsistent quality across the industry. Looking back, Chamaria says that in a dynamic and fast growing environment, you can’t just wait for the market to achieve the old balance between supply and demand. You need to enforce it.
“To tap into the growing need for truck bodies and special transport equipment – which can put a notable strain on working capital – AMW decided to offer a complete transport package comprising of both truck and commercial vehicle applications – turning a potential problem into a new opportunity.”
Following the example of automotive giant, Tata, which is sourcing trailing equipment in-house via subsidiary, Dutch Lanka; and Ashok Leyland, who own PL Haulwell; AMW created Tranztar to shake the long-established hierarchy.
Fast forward half a decade, and the plan worked out well. Since day one, the new brand has rapidly climbed the sales chart and delivered some 18,000 tippers and 3,000 trailers to the transport market. It is safe to say Tranztar is now the fastest growing commercial vehicle manufacturer in the Indian market and a stand-alone brand name.
While the parent company still is Chamaria’s largest client, he is not getting tired to point out that Tranztar is an independent entity in its own right. “We are here to serve the entire commercial road transport industry and are not tied up to a single manufacturer like AMW, although we will continue to work closely with them as well.”
A wise decision, considering AMW is bringing sufficient funding and a strong supply network to the table. “Our vision rests on three guiding principles – producing world class quality, delivering on time and maximising the economic advantage of large scale production,” says Chamaria. “AMW helped us by providing the financial and material resources to optimise all three.”
Only five years after turning the first sod, the Tranztar plant in Bhuj, west India, is already considered one of the most advanced manufacturing facilities on the subcontinent. It is split into two manufacturing sites – one 15,000m2 plant custom-built to manufacture tipping equipment; and a 10,000m2 one dedicated to trailers and other commercial transport applications. In addition, the brand has recently opened a satellite plant in Bangalore to cater to the Southern region, and plans to open four more plants across the country over the next eight months.
“We have the capacity to manufacture 24,000 tippers and 4,000 articulated trailers a year,” says Chamaria, bringing up a much-used, yet suitable term to describe the concept – one-stop-shop. “At this early stage, we are able to build flat bed, skeletal and side board trailers, as well as curtain siders and tipping trailers, ranging from 24m3 to 45m3,” he says, announcing that plans for hydraulic trailers, tankers, concrete mixers and bulk transport equipment are already in the making and will be presented in the near future. Moving up the market, the company will also offer a 100-tonne heavy-duty flat bed trailer soon.
The result is a solid market share of about 15 per cent, which, according to Chamaria, is a good figure considering the mere amount of small and medium-scale businesses competing for a slice of the pie. And, considering the typical Indian trailer is a one-size-fits-all 40-foot flat bed featuring a solid mechanical suspension and resilient drum brakes, the young brand is well on track on the design front, too.
The young CEO, meanwhile, does not consider slowing down anytime soon. “India transport industry is still in its infancy, if I may say so, especially compared to the Western world. What we need to do today is improve the current legislation and help introduce the latest in technology to India to compete at eye level with the global trailer manufacturing industry,” he adds, pointing out that the key issue India has to overcome is an age-old paradox. “The Indian market is dynamic, but also slow. There is a lot of willingness to move ahead, but sometimes it does take some time. I am sure we will soon match international standards, though.”
In that socio-economic context, Chamaria is often referring to Tranztar as an ‘agent of change’ that is contributing to shaping the Indian marketplace as a whole. Some in the industry even claim that there has not been any corporate structuring before the advent of ‘organised’ companies like AMW or global powerhouse, Tata.
Fortunately, that paradigm shift did not see any reluctance in the market, but was perceived as a welcome change. “Contrary to popular perception, we found that our clientele was very discerning and ready to pay for a quality product. They have long been waiting for new technologies and product innovations, so now they are very supportive. All they really think about is achieving the lowest possible total cost of ownership. That’s also the is the reason why more than 65 per cent of our sales come through repeat business.”
Criticising the market’s reluctance to consolidation, Chamaria has adopted a modern management philosophy that is influenced by the idea of globalisation and lean manufacturing. “We are a young company driven by energy, enthusiasm and a positive attitude. Our whole work philosophy is guided by the goal to offer a solid value proposition to our customers in every respect, be it through our products, services or in view of the overall business relationship. We have recognised that for us to be successful, our customers need to be satisfied and successful too.”
In that sense, it is no surprise that the young brand is already eying new opportunities abroad – not only to sell equipment, but also to source material. “We closely observe and monitor the global market, especially for new products and technologies that we could bring to India.”
On the home market, meanwhile, the global competition is still trying to get a foothold, giving Tranztar more time to cement its market position in and out of India. “So far, the international competition does not play a big role in India, except in the heavy-duty and modular axle segment. However, I must mention that there are many international players who have shown interest in the Indian market lately and also in Tranztar as a brand.”
Instead of being paralysed by that sudden attention, Chamaria has done what he can do best – taking the opportunity and creating new business as long as the competition is still a step behind. “We have already started to export to South Asia, the Middle East and Africa. And we are also in close contact with customers in Australia, Indonesia, Singapore and the US, who have shown much interest in our product.”
According to Chamaria, the export market could soon become a new focus area for Tranztar. “My vision for Tranztar is for it to become one of the leading commercial vehicle application manufacturers in the world,” he says. Considering the company’s recent success rate, it is highly likely it will happen soon. In fact, it shouldn’t take more than a decade if it was up to young gun, Nitin Chamaria.