What Does the Maersk-BlackBuck Tie Up Offer?

110

 

 

  • Maersk has announced its entry into India’s trucking services by tying up with an aggregator, BlackBuck, which has some 300,000 open trucks on its platform.
  • The tie-up with BlackBuck will help customers of Maersk book containerised trucks to carry export-import containerised cargo within India.
  • Although its inexperience in the container market could pose risks in delivering on the contract involving hundreds of lanes across India.

By striking a partnership with Maersk Line, the on-line truck aggregator BlackBuck is making itself attractive to big venture capital funds, reports the Hindu Business Line.

However, its inexperience in the container market could pose risks in delivering on the contract involving hundreds of lanes across India, says logistics industry sources.

Big advantage for Maersk

For Maersk, it is a ‘bigger advantage’ as it frees the world’s biggest container shipping company from the ordeal of dealing with multiple truck vendors – particularly on the sensitive rates – which has become operationally difficult.

A logistics industry executive familiar with the business said, “Maersk is seeking to control the door to door model; so, right from a place such as Dubai, it is going to deliver the container all the way up to Aurangabad at a certain cost including shipping and inland logistics, just like how it does with trains now.

Maersk is running block trains in India that give customers haulage till their door-step,” he added.

Downside for Blackbuck

For Blackbuck, this happens to be great deal. But, there are downsides to the partnership.

BlackBuck may find it difficult to deliver because aggregation of container trailers is tougher than bulk trucks which they have only been doing so far,” the industry executive said.

In the container business, the vehicle types are different and the asset ownership market is also different.

In bulk, there is a large segment of single truck owners, whereas in containers, the smaller ones will be owning not less than five trailers while the bigger players will have some 1,000 trailers.

So, trailer aggregation in containers would be difficult, he said.

Negotiations between Maersk and Blackbuck

Plus, the rates that BlackBuck have negotiated with Maersk could fetch negative freight for the aggregator,” he said. “Because, BlackBuck would not be able to place a truck on the rates which they have got from Maersk on most of the lanes even after factoring in a margin,” he said.

The market is very competitive and for aggregators, bulk of the routes are running currently on very thin margins, and another layer will make it more negative ensuring the middle-man losses money,” the executive said.

He added,For instance, if Maersk is offering BlackBuck Rs 46,000 for a round-trip on the Mumbai-Aurangabad lane, BlackBuck will best be able to get a trailer at Rs 50,000. So, it will be running on a negative freight of Rs 4,000.

Road bridging platform

By accepting the terms set by Maersk for the road bridging platform, BlackBuck is going after the volumes, top line and for the valuation which they want because they can lock-in huge box volumes for the next 2-3 years, according to the industry sources.

He commented, “The Maersk contract can help BlackBuck attract other large investors into its fold at greater valuation. Any venture capital fund would put in money on seeing aggregation of such large capacity and volumes. That’s the philosophy behind taking such a big deal. Imagine, you are catering to a player like Maersk which handles more than 3 million TEUs annually in India.

But, relying on a single vendor for trailer aggregation who lacks experience in the business and segment creates risk for Maersk,” a second industry executive, said. “If truckers are not willing to play ball on margins, BlackBuck will be operating on a negative freight. Eventually, if BlackBuck is not able to cater to this kind of a last mile connectivity, then Maersk is at risk of losing business to rival lines,” he said.

Factors for success

As a pure logistics company, the new business model of Maersk, he said, requires network, freight control and container control to be successful.

The partnership could also potentially raise anti-competition concerns.

Because if a trucker has to work with Maersk, it will have to tie-up with BlackBuck,” the second industry executive added.

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source: The Hindu Business Line

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.