India’s largest automotive company is testing the startup waters.
The 73-year-old Tata Motors last week picked up a 26% stake in Bengaluru-based truck aggregator TruckEasy for an undisclosed amount.
This strategic investment will provide the automobile firm a toehold in the rapidly growing technology-driven freight logistics space and an understanding of intra-city freight movement, a joint press release from the two companies said on July 10.
TruckEasy has replicated the app-based taxi aggregation model to serve the freight needs of businesses within Bengaluru. The company offers various rate plans based on a combination of things like distance, time, and type of vehicle chosen by clients.
In a largely fragmented segment—most of the major players own one or two vehicles—TruckEasy’s tech-based platform has made the availability of small commercial vehicles relatively easier within the city. Its operational efficiency has brought down costs by 25%, the company claims, also highlighting the facility of GPS-based tracking of consignments. “Real-time tracking gives the client access to his precious goods during the entire trip,” its release said.
Meanwhile, drivers’ associated with it, too, get a better deal as their earnings are not only guaranteed but even 20% higher than their peers associated with other firms, it added. “Drivers also are given flexibility of working on different earning models based on their convenience.”
While right now it is focused on Bengaluru, the company intends to expand to other tier-one and tier-two cities over the next few months.
TruckEasy’s association with Tata Motors goes back to when some of the key dealers of the auto major in southern India seed-funded it at the time of its founding in 2015. The company was established by three young entrepreneurs Nikhil Thomas, Vikram Kodgi, and Avinash Achar.
Thomas, a graduate of the National Institute of Technology, Kozhikode, himself was employed with Tata Motors in various roles, including in logistics and warehousing for spare parts. Kodgi was Thomas’s colleague there and had also worked with Hyundai Motor India. Achar did his post-graduation from the University of Southern California and had a long stint with a financial products company in Silicon Valley before returning to India.
While handling logistics at Tata Motors, Thomas saw that the trucking industry was highly unorganised and inefficient, leading to cost escalations. He thought the efficiency of the app-based taxi segment, which was just evolving then, could be brought to trucks, too. Soon Kodgi and his friend Achar, too, were hooked to Thomas’s idea.
And TruckEasy took shape.
Years later, when Tata Motos decided to enter the logistics space in a big way, it started off by meeting up with and evaluating existing players in the segment. The company, in any case, enjoys a predominant position in the Indian commercial vehicles segment, with an over 45% market share in financial year 2018. Now, it is looking to tighten its grip through some forward integration.
“We, fortunately, were seed-funded by Tata Motors dealer partners and this synergy at a micro level was seen to be scaleable,” a TruckEasy spokesperson told Quartz.
For the startup, the biggest takeaway from having Tata Motors as a shareholder will be winning over customers through the established auto brand. The deal gives the startup immediate access to facilities provided by the auto major, like its financing arm and extensive dealer network, the TruckEasy official said.
On its part, Tata Motors will gain significantly from the startup’s strong base of over 3,000 driver-partners servicing more than 8,000 clients.
“The firm (TruckEasy) essentially is consolidating the rather fragmented one-tonne truck market (Tata Ace, Maruti Carry, Mahindra Maxximmo). Tata is the primary player in the segment but not the only one. Taking a stake in TruckEasy ensures that the portal and its consolidated operators would buy only Tata Aces,” said Deepesh Rathore, director of the auto consulting firm Emerging Markets Automotive Advisors.
If all goes well, TruckEasy could hope for fresh funding from Tata Motors, though it may be too early to talk of a merger, the company said in the statement.