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Oct, 2020     

Indonesia e-Trucking: Licensed To Thrill

Road transportation accounts for close to half of the transportation market by value representing a USD 50 Bn+ opportunity in 2019


1. Logistics cost as % of GDP in Indonesia is 22% – the archipelago structure and process inefficiencies contribute to this high cost

Indonesia with its Archipelago structure having 17,000 islands with 100+ islands permanently inhabited, has a fragmented logistics industry.

There is a dearth of quality of infrastructure if you leave the economic hubs. The regulatory environment can be complex and a lack of standardization of service and prices provides a lot of scope for driving up efficiencies.

This manifests in Indonesia’s Logistics Performance index being low compared to some of its Southeast Asia peers.

Indonesia map with Population density

LPI rank across countries

Note: LPI refers to Logistics Performance Index

2. Road transportation accounts for close to half of the transportation market by value representing a USD 50 Bn+ opportunity in 2019

Transportation accounts for ~45% of the logistics cost (highest) followed by Inventory, Warehousing and Admin costs.

Within transportation spend, road transport takes up the dominant share by volume but has a lower value share due to the high cost associated with air transport, high # of trips in road transport (of shorter distance).

Top Down Road Transport Market Sizing (2019)

Funnel, USD Bn

3. FMCG & Retail is the biggest sector for trucking, but there exists other niche segments that can be more profitable

FMCG & Retail sector is the largest one from a trucking standpoint. So this is definitely a sector to look at to scale up operations. The contracts are also typically long term in nature. However the margin spread available here is relatively lower owing to higher bargaining power of large FMCG brands.

The other categories are typically more specialised, requiring specialised vehicles, equipment and personnel to handle operations, thereby commanding relatively higher margins.

Market Split by Sectors
USD Bn

4. The Trucker Landscape is highly fragmented and Majority of truckers depend heavily on intermediaries for demand – massive opportunity to drive efficiencies and create value

Trucker landscape in Indonesia is quite fragmented with majority of truck owners in the market having a fleet of <5 trucks.

Owing to their low size and lack of network, they rely heavily on intermediaries for demand generation, having to compromise on the margins that they can make. Often these Truckers also have the burden of vehicle EMI payments that further diminish their net earnings.

eTrucking marketplaces are also playing the role of an intermediary while helping truckers gain access to more demand and bringing in more price transparency, leveraging technology.

Value Chain for B2B Trucking
Conceptual representation

5. Multiple eTrucking players have been targeting this opportunity – sector is poised for massive growth over the medium term

While most eTrucking players are targeting the most sizable FMCG segment, few are trying to capture other niche segments that offer higher monetization potential.

Java has been the centre of most of the eTrucking action, however players are also exploring niche opportunities in other islands that can prove more profitable in the long run.

Multi-modal capabilities, standalone tech offerings, eCommerce etc are other initiatives being adopted by players to gain traction and create more stickiness among userbase.

The sector has been seeing massive growth (100%+) from a GMV standpoint and is on the radar of investors with multiple rounds of funding taking place over the last year.

We expect sustained rapid growth in the segment over the medium term and as eTrucking penetration levels go north of 2% by 2024, this would represent a multi-billion dollar opportunity.

List of Key eTrucking players & Funding

Note: Includes only numbers from disclosed rounds