The Indian government’s efforts to reduce logistics costs in the country and improve the surrounding infrastructure to boost faster movement of goods in the country have started to get recognised on a global scale, John Pearson, global CEO of DHL Express, told Moneycontrol in an interview on March 13.

“The Indian government has taken significant steps to improve logistics infrastructure in the country and that improvement has been recognised by the amount of foreign direct investment coming into the country,” Pearson said.

He added that foreign investors would not be looking at India as such a favourable market if the country had not shown significant improvement in global policy.

According to the DHL Global Connectedness Report 2024, India ranks 35th out of 159 countries in foreign direct investment, mergers & acquisitions and portfolio equity investment.

However, Pearson added that despite the improvement made in India, the country still needs to do a lot more to meet global standards.

Citing the example of time taken to travel between Delhi and Mumbai and an equal distance in other countries, Pearson said that the infrastructure in Europe, the US, and Australia would facilitate faster movement of goods when compared to India.

“The time taken to travel between Delhi and Mumbai has fallen from around 70 hours 20 years ago to 24 hours now, but it’s still short of the 14 hours it takes to cover the same distance in Europe or Australia,” Pearson said.

Pearson added that as infrastructure improves in India, the country will move towards becoming more efficient in moving cargo, and the cost of logistics in the country will also fall in line with the best global standards.

The total logistics cost of India stands between 7.8 percent (lower bound) to 8.9 percent (upper bound) of total GDP for 2021-22, according to the estimate by the Indian government last year.

Globally, the US, Japan, and the European Union are viewed as having the lowest total logistics costs as a percentage of total GDP at around 8 percent, 8.5 percent, and 8.7 percent, respectively.

Investment in India

Pearson said that DHL Express plans to invest 200 million euros, or Rs 1,810 crore, in India over the next five years.

He added that India continues to be among the top five markets for DHL Express with the company witnessing a strong “double-digit growth”.

According to Pearson, sectors like e-commerce have been driving growth for DHL Express in the country with every third shipment in the country being an e-commerce shipment.

About 20 percent of DHL Express’ revenues from India come from the e-commerce segment, followed by the business-to-business category.

Sectors driving growth include engineering and manufacturing, technology, automobiles (including electric vehicles), and retail fashion.

Pearson said that DHL Express currently flies 28 weekly flights out of India internationally, which has risen from around 17 weekly flights in 2020.

“At our peak, we were operating 37 weekly flights from India, and going forward we expect demand from India to outpace demand even more in the coming years,” Pearson said.

He also said that India continues to be an outlier in comparison to most global markets apart from the US as it is drawing in more foreign investments.

India is expected to be one of the few countries which will benefit from the world’s ‘China +1′ strategy, he added.

Although the trend is modest and there are implications on the supply chain, India is attracting multinational corporations seeking to mitigate risks and diversify manufacturing bases, Pearson said.

Apart from India, Vietnam, Malaysia, the Philippines, and Thailand are the other countries that will benefit from the China+1 strategy.

In September 2022, another DHL Group company, DHL Supply Chain announced an investment of around Rs 4,000 crore in India over five years to expand its warehousing capacity, workforce, and sustainability initiatives.

Sustainability

Pearson also said that DHL Express will continue to grow sustainably in India, and going forward 30 percent of the company’s fleet of 460 small commercial vehicles will be made electric in the next five years.

“We are working with every OEM (original equipment maker) to test out electric vehicles, and in the next 5 years, 30 percent of our fleet will be EVs,” Pearson said.

He added that 19 percent of DHL Express’ energy needs are met through solar energy and most of the company’s new facilities are Gold certified under LEED (Leadership in Energy and Environmental Design) standards.

DHL Express also plans to increase the use of Sustainable Aviation Fuel (SAF) in its global aircraft fleet from 2 percent currently to 3 percent in 2024.

“We bought 15 percent of the global SAF in 2023 and going forward we remain committed to our use of SAF,” Pearson said.

However, DHL Express does not have plans to invest in SAF manufacturing in India, he said.