Trucking 'uberisation' not expected to hit Tasco
Ng Wai Mun 
Tasco will benefit from the improving global economy which seeks higher demand for transportation for international trade

The Uber platform, which is a ride-sharing application, has transformed the cab hire market worldwide. A similar application is now being used in the logistics industry.

In particular, smaller scale trucking services, which provide faster delivery with greater convenience to customers, have mushroomed of late; giving rise to the coining of term ‘uberisation of the trucking industry’.

For many, time is of the essence, especially for those in the fast moving transportation sector. With the onslaught of the new trucking service platform, there are concerns such development will affect the business of transport services providers.

However, analysts do not believe the uberisation of the trucking industry will affect big size trucking companies or integrated transportation services providers such as Tasco Bhd.

“I am not convinced that these small-scale operations can impact the more established transportation (companies) like Tasco. Unlike taxis where one can just get onto any type of car, here, one is required to match the right vehicle to the cargo concerned, especially for the oversized loads. You just can’t dial for a truck and hope the size will fit,” says a regional analyst.

However, he believes the uberisation of the trucking sector will hit the smaller transportation companies, which use smaller size trucks.

“This type of faster and more convenient services has been in the market for quite some time now. It has only been growing lately,” he adds.

Tasco did not respond to FocusM queries for the article.

Similarly, JF Apex Securities analyst Low Zy Jing does not think Tasco will be affected by the uberisation phenomenon in the trucking business as the company is not operating solely using in-house trucks.

“When there is high demand for certain periods, they will just outsource. Therefore, uberisation of the truck industry may even give an edge to Tasco to utilise it and keep fees low,” Low says.

Tasco is a total logistics solutions provider involved in the business of truck rental, in-house truck repair and maintenance, insurance agency services and warehouse rental, as well as a provider of services related to freight forwarding.

It operates a fleet of over 330 trucks and more than 600 trailers. Tasco, whose major shareholder is Yusen Logistics Co. Ltd, has 21 logistics centres with 1,600 employees in Malaysia and Singapore. Meanwhile, Yusen Logistics’ is present in 514 locations and employs over 22,250 employees worldwide as at end March.

Low describes the transport industry as a competitive one. “In my opinion, I think it is very competitive especially when there are local and foreign players in the market. It is hard to achieve the critical mass for economics of scale.”

The regional analyst reckons the impact of the rising fuel prices will be minimal on Tasco’s bottom line.

“Any negative impact won’t be substantial and will be dwarfed by improving global economy which ensures higher demand for transportation for international trade. This is where Tasco will be one of the major beneficiaries.

“The potential revenue surge from global economic recovery will more than smother the increase in operating cost arising from higher fuel prices,” says Low.

“I believe Tasco is also able to buffer these impacts (of rising fuel cost) by partially passing on the hike in cost,” he adds.

In the financial year ended March 31, 2016 (FY16), the oil price was estimated to have declined by 30% to 45% on average. Tasco’s pretax profit margin improved by 0.1 percentage point to 8.5%.

However, the pretax profit margin declined marginally to 7.4% in FY17 as its cost was higher on the 8% rise in the average oil price during the period.

“I believe this (higher oil prices) is the reason why Tasco is suffering losses in its trucking segment,” Low adds.

He believes the ability for Tasco to pass on the higher fuel cost to its customers depends on whether it operates a business to business (B2B) or business to consumer (B2C) model.

While Tasco may not be faring well in its trucking division, the latter is essential to its business of providing total logistics solutions.

“No doubt it is facing losses but trucking is needed to provide integrated services to clients where they able to earn profits as a whole,” Low says.

In FY17, Tasco posted a flattish net profit of RM30.7 mil while revenue rose 13% yoy to RM584 mil. Revenue from its trucking division increased 5% to RM86 mil in FY17 but pretax losses widened to RM1.7 mil from RM1.1 mil in FY16.

The management attributed the division’s higher losses to increasing operating costs of cross-border shipments, mainly due to the weakened ringgit and the increasing fuel price.

The depreciating ringgit, against the US dollar, may not have a huge impact on Tasco, according to Low.

He explains that for the company to come out with a rate, the products, timing and destination, as well as the exchange rate are normally taken into consideration to ensure certain margins are met.

On the other hand, the weaker ringgit may lead to higher exports and this will result in an increasing demand for transportation services.

Meanwhile, JF Apex Securities is bullish of the potential impact of global economic recovery on Tasco. The research house points out that Tasco’s performance is closely correlated to Malaysia’s export performance.

The research house states that export trade recorded a compound annual growth rate (CAGR) of 2.92% between 2006 and 2016, while Tasco showed a revenue CAGR of 4.75%.

JF Apex’s report also highlights that global economic growth is projected to improve this year through expansion of domestic demand in the advanced and emerging economies.

Disrupting the trucking industry

Startup firms are looking to disrupt the freight industry the way that Uber disrupted the taxi industry.

Many of these upstarts aim to reinvent the normally fragmented trucking industry. Generally, the startups leverage on truck drivers’ smartphones to quickly connect them with nearby companies looking to ship goods.

As it is, Uber is also jumping on the bandwagon when it launched Uber Freight, a platform to help truck drivers find loads easier and faster payment.

There are a number of startups looking to disrupt the local trucking industry. For example, Ezyhaul Sdn Bhd offers a free-to-use service for shippers to connect with transportation companies and make bookings for domestic and cross-border transportation services.

It also includes a real-time tracking system for their dispatches and access to electronic documentation and e-PODs (proof of delivery).

Its Uber-like technology platform is able to match the needs of shippers with transportation companies in Malaysia and Singapore.

Ezyhaul aims to enable transportation companies to achieve better load utilisation as lorries tend to ply the roads with half loads and their return trips are often empty.

The startup is funded by private investors from the United States, Australia and Singapore. Its three co-founders are chief executive officer Raymond Gillon from the Netherlands, chief sales officer Nicky Lum from Malaysia and chief operating officer Mudasar Mohamed from India.

They have plans to set up a similar platform in Indonesia later this year.

Last year, they raised seed capital of S$1.2 mil (RM3.7 mil) to set up the company and with expansion on the cards, they plan to raise about the same amount later this year.

There are plenty of opportunities in the road freight market in South-East Asia, which is valued at an estimated US$27 bil (RM114.1 bil).

This article first appeared in Focus Malaysia Issue 254.