Rampraveen Swaminathan, MD & CEO, Mahindra Logistics, has been associated with the organisation since July 2019. He has also worked with Cummins, Tata Group and Schneider Electric in the past. Also an Independent Director on the board of Dodla Dairy Ltd, Swaminathan holds an MBA from TA Pai Management Institute and has completed Executive Education (Strategy) from Harvard Business School. He is currently responsible for the overall strategic direction and growth of Mahindra Logistics.
Mahindra Logistics projects itself as an 'asset light' organisation. What does the term signify?
'Asset light' for us means flexibility to customise and provide the right solutions for our customers. It also stands for risk management for Mahindra Logistics. Most of the flexible solutions are on the side of vehicles that are deployed under Mahindra Logistics, largely on the transportation side.
We do not get married to a certain asset category. Every time we go to a client, we present a solution that suits their needs and is optimal for them. Therefore, we do not like to put ourselves in an incumbent position by telling our clients that we have an asset situation.
This aspect of 'asset light' helps us put the customer first. From a risk management perspective, it helps us focus on our core abilities. Running vehicles and building facilities are not our core focus. Our focus is on building an ecosystem for moving goods and people around the globe. Asset light models are helping us grow quickly. You want to be clear about what you want to do.
How many vehicles are with Mahindra Logistics?
Mahindra Logistics owns around 1,000 vehicles at the moment. These include vehicles deployed on the supply chain side and for mobilising people. We have invested in about 700 electric vehicles for logistics and about 300 for people transportation.
We end up deploying around 16,000 vehicles every month for Mahindra Logistics. Deploying these many vehicles creates a good value for our ecosystem. We are a 10% gross margin business at the end of the day. We are actually providing business to others including fleet and vehicle owners and landlords.
That is one of the reasons that we have not automated ourselves beyond a certain point. We are proud that we are employing a certain number of people. People are Mahindra Logistics' biggest asset.
Where can you deploy more electric vehicles on the logistics side?
I think more and more electric vehicles will be deployed on the last mile delivery side of logistics. We deploy around 2,500 to 3,000 vehicles every month for last-mile deliveries, and that includes ICE vehicles as well as EVs.
Electric vehicles in logistics will also find more openings in the below-4 tonne logistics category and, of course, on the people mobility side of the sector. Below-4 tonne vertical, I think, can be completely electrified. The question is who makes the move and how does one build the ecosystem. By ecosystem, I mean the charging infrastructure, the EV manufacturing infrastructure, EV resale infrastructure and more.
A lot of drivers also own vehicles in this space. The resale value of an EV is still a big question mark for many of us, including these drivers. Mahindra Logistics itself owns close to 700 electric three-wheelers. If we decide to sell some or all of these today, I do not think we will be able to find buyers for the same. This is because the ecosystem is not built up to its true potential at the moment.
What's the best business potential for EVs in logistics?
The best business potential for EVs in logistics is in intracity logistical operations. Therefore, we may not have to invest in building much of the ecosystem. Moreover, the ecosystem that is being built will see its best utilisation.
EVs have got much regenerative braking. It's much better on the energy conversion side. Short distances - distances meant to be covered intracity - are best suited for EVs. It will also be easier to rescue an EV if it runs out of juice during an intra-city deployment.
You might find it difficult to rescue an EV if it gets stuck in the middle of the Delhi-Jalandhar highway. However, it will be easier to rescue one if it gets stuck somewhere in Delhi or Gurugram. Covering 150 to 170 Km using an EV for logistics looks attractive as it expands to around 4,000 Km a month.
Being asset light on one side and investing in buying 1,000 EVs on the other - how do you justify that move?
The philosophy is being asset right, and the decisions are based on the asset-light model. We make our choices based on economics, risk, and value add. Mahindra Logistics does not invest in ICE vehicles because we focus on building the solutions without owning the vehicles. The economics change when you own vehicles.
The problem with EVs is that the ecosystem is very fragile, and the vendor base for EVs is not growing. EVs need to be driven in a certain way. They need to be allowed time to be able to get charged. Many vendors do not know this.
Investing INR 25 to 30 crore for buying 700 EVs is still feasible for many smaller transporters even now. There is no guarantee for small transporters on how their investment will turn out in the longer run. Then there is the problem associated with reselling commercial EVs as no such ecosystem exists in the country. The case in ICE vehicles is entirely different as transporters know they will be able to sell the assets if they cannot make a profit out of them.
Look at the two-wheeler guys delivering food, groceries and goods using ICE vehicles. Many are not investing in EVs because they do not know what they will do with the EVs if their business or job fails. On the other hand, an ICE two-wheeler gets sold the moment it arrives in the market. Two-wheelers are and will remain the largest part of the last-mile delivery ecosystem.
How many EVs will we see in Mahindra Logistics' fleet in the future?
Our vision is to completely electrify our fleet in the future. Mahindra Logistics will have 40% of its fleet electrified by 2026. We are also aiming to touch revenues of INR 10,000 crore by that year.
You run a programme called Catapult; is that targeted towards enabling more EVs in logistics?
Catapult is an incubator programme that we run for start-ups focusing on solving problems for the logistics ecosystem. This is actually the first such start-up programme for start-ups focusing on the logistics industry. We launched the programme last year and had about 12 start-ups in the first cohort. This year we have seven companies under the programme.
Mahindra Logistics provides these companies with financial help and deploys their solutions around use-cases in the real environment. We also help them with technology partnerships. The intent is to help them grow. For example, the electric bikes deployed inside the campus of Mahindra Logistics are from a start-up we had helped incubate recently. We are also running pilots of using those for last-mile deliveries in Delhi.
We are also using EVs inside our campus for people movement. Catapult does not aim only to help start-ups which are developing solutions around EVs. The focus is logistics. Last year there were around five start-ups around EVs; this year, we have around three. There is no pre-medicated allocation for EV start-ups and other start-ups.
Do you think the transportation prices will come down once more alternate fuels are introduced?
I think the numbers on the supply chain side are just bellwether. It is about how two parties close a contract. A lot of things change when you sit and close a contract. Consider someone transporting something from Chennai, and this guy does not have a return load. He will be happy to cover the distance as long as the fuel prices are covered. Drivers running away would be a bigger concern for him.
There are multiple factors involved; therefore, I think the commercial vehicle side is much more complicated. However, things are not as complex on the mobility side. The costs depend on the type of service in the mobility side of logistics.
There are many other factors, such as the cab charges in Delhi are close to INR 15 to INR 18, whereas, in Bombay, these are close to INR 30. If you look at the charging prices, those are different too. For instance, if you want to charge your car near Delhi Airport, the process will be higher than what charging your car costs you 6-km away from the airport.
Would you want to explore any other fuels apart from electric?
We already have a large CNG fleet. I personally feel that Hydrogen will be a big thing in India. I think Hydrogen will out-date every other fuel. For me, it will be electric for shorter hauls (last mile) and Hydrogen for longer hauls.