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The tractor industry is slated to grow between 12-14 per cent during FY18 due to two successive good monsoon years. This has buoyed the hopes of tractor manufacturers, who are expanding their global footprint through acquisitions and local assemblies. ETAuto’s Shobha Mathur spoke to Rajesh Jejurikar, president- Farm Equipment Sector of M&M as well as President of the Indian Tractor Manufacturers Association about the sector’s future prospects.
What are your expectations from the tractor industry in 2018?
The domestic tractor industry observed a growth of 16.5 per cent in cumulative for April-December 2017, over the previous year to record volumes of 540,232 units. In the domestic market, we (M&M) have sold 235,049 cumulative in April-December 2017, which is a growth of 16.5 per cent over the previous year and is in line with the domestic industry growth rate.
The agri economy has been positive this year. It has experienced healthy monsoons, higher kharif production, positive reservoir levels and Rabi sowing is progressing. We expect the growth trend to continue in the coming months.
What is your sales forecast for the sector during CY2018?
We expect the domestic industry to grow at the rate of 12 per cent to 14 per cent for FY18 (from April 2017 to March 2018).
What are the challenges the farm equipment sector is facing?
The tractor industry is largely impacted by the buoyancy in the rural economy. This year has been a positive one and going ahead, an expectation of improved farm as well as non-farm income and support from the government to push rural infrastructure and irrigation will continue to drive tractor demand.
How much investments are in store in CY2018 and in which areas?
We have set an ambitious target to make Mahindra a global brand. We aim to participate in the $150-billion (Rs 947,550 crore) global farm equipment opportunity, of which $90 billion (Rs 568,530 crore) is the non-tractor market. The aim is to cater to the entire farm value chain that is to go beyond just tractors.
By FY19, we are also expecting our global operations to account for 50 per cent of the total revenue of the division, from 30 per cent in 2015. We acquired 33 per cent stake in Mitsubishi Mahindra Agricultural Machinery, Japan in May 2015 to cater to global rice value chain and 35 per cent stake in Sampo Rosenlew, Finland in March 2016 to address the global combine harvester business.
Recently, we have strengthened our position in Turkey. The acquisition of Hisarlar will help us in addressing the global range of implements. And the acquisition of Erkunt announced in September 2017 will help us expand our tractor footprint in Turkey. All these deals will help us in getting into new segments and geographies.
We recently entered the Mexico and Brazil markets. We have chosen these markets carefully, understanding their current and future potential.
Could you elaborate on your growth plans in Turkey, Brazil and Mexico going forward?
Hisarlar in Turkey is into agricultural machinery, tractor cabins and other small businesses, while Erkunt is a large tractor manufacturer with a market share of 6.5 per cent in Turkey. It ranks number four in the pecking order.
We will use Erkunt’s larger range of tractors (50hp-105hp) to expand our product portfolio. M&M will look at further strengthening Erkunt’s export base from Turkey to Europe-UK, Germany and Africa.
It will leverage these companies and their brands to further consolidate the M&M footprint globally. M&M has created its own companies in Brazil and Mexico, and localized operations in Brazil with local assemblies of two of Mahindra tractors in the 85hp range.
We are exporting tractors from India to Mexico, and have established a dealer network to distribute our products there.
In India, along with the Swaraj brand, Mahindra holds a market share of 43.5 per cent and leads the market. Globally, we hold the pole position in volume terms.
How are exports doing and how much are they expected to grow? Will exports see any further push in terms of new markets or overseas presence for Mahindra and the industry?
In the export market, we have sold 11,699 cumulative April-December 2017, which is a growth of 7 per cent over the previous year. We expect the growth to continue.
Any acquisitions or joint ventures that are in the pipeline during the year?
We are continuously exploring the market for opportunities.