The dismal southwest monsoon hitting agriculture this year notwithstanding, there is no dearth of competition in the tractor segment. Market leader Mahindra & Mahindra (M&M) has planned an investment of Rs 450 crore this year and is set to launch about ten models in the next two years.
The Mumbai-based company is desperately trying to ward off competition from eating into its share of the Indian tractor market, currently about a third.
Bishwambhar Mishra, chief executive (tractor and farm mechanisation), M&M, said, “We had plans to launch four upgraded products this year; three have already been launched. New platforms are also being added, with one being introduced this year. The next would happen after two years. These are completely new tractors. Besides, in the lower range, a lot of products are being planned.”
The new tractors, built on a completely new platform and slated to hit the market later this year, had a project cost of Rs 380 crore. More new platforms are also being developed by the company, with one scheduled to be launched in the next two years. The company operates in the market through two brands---Mahindra and Swaraj.
“In the next two years, six-seven upgraded versions and at least two new products would be launched. We are not just thinking about holding on to our market share, but improving it,” Mishra said.
With seven manufacturing plants, including a foundry, last year, the company recorded 10 per cent growth in tractor sales at 2,22,944 units. However, the outlook for this year remains grim, as the company expects the industry to grow just two-three per cent. In the quarter ended June, M&M’s tractor business recorded contraction of one per cent, even as industry growth remained flat. Competitor TAFE, however, grew nine per cent during the quarter.
Mishra stated typically, the first and third quarters were the best for sales.
According to a company presentation, M&M has a share of 41.4 per cent in the tractor market, followed by TAFE at 23.4 per cent and Escorts at 11.4 per cent.
One of world’s largest tractor makers, US-based John Deere, is ramping up presence in the small tractor category, in which M&M has a stranglehold. In India, John Deere accounts for a market share of only 7.5 per cent.
A questionnaire to John Deere remained unanswered.
“The small tractor segment is a new one. About 85 per cent of the farmers in India have a plot size of up to 2.5 acres. In the small tractor segment, we have a market share of 60-65 per cent, but as competition increases, that would decline,” Mishra said.
Chennai-based TAFE, which operates through the Eicher brand, is also ramping up its presence to boost market share. Despite the current slowdown, the company has not scaled down its plan to invest Rs 100 crore in a new plant at Madurai, expected to start operations next year. The new plant would raise TAFE’s annual capacity to 2,50,000 units a year.
Though the outlook for this year is subdued, labour shortage due to government-funded projects like the Mahatma Gandhi National Rural Employment Guarantee Scheme are expected to boost demand for tractors, owing to greater mechanisation in agriculture.
The industry is expected to record growth of 10-12 per cent in the next few years. Last year, the industry saw sales of 5,35,210 units, compared with 4,80,377 units in the previous year.