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Mahindra and Mahindra, India’s biggest tractor manufacturer, is aiming for a 50 percent market share in the domestic tractor market aided by the newly introduced brand Trakstar.
With a 43 percent market share, the company clocked 3.04 lakh tractor sales in the domestic market last financial year, a growth of 22 percent, compared to around 2.5 lakh tractors sold in 2016-17.
At a recent investor conference held at Nagpur, the Mumbai-based company said that the peak requirement of tractors in India is about 16.2 million as against the current tractor population of 6.5 million.
The industry saw volumes of 7.09 lakh last year, a rise of 22 percent compared to 5.82 lakh sold in 2016-17. Farm loan waiver, subsidy support by states, a bumper crop produce on the back of a favourable monsoon and availability of retail finance helped the sector post record sales last year.
A report prepared by Motilal Oswal stated, “M&M is targeting 50 percent market share in domestic tractors, driven by strengthening position in relatively weaker market by offering market and crop-specific solution and targeting price conscious market through Trakstar brand. M&M’s farm equipment segment revenues can double in 6 years at a compounded annual growth of about 12 percent”.
M&M presently has three brands – Mahindra, Swaraj and Trakstar – under which it launched a number of models such as Nuvo, Yuvo and Jivo. The farm equipment segment, or FES, has turned into a cash cow for the company generating Rs 15,804 crore last year.
The FES segment generated profits of Rs 3,145 crore, a growth of 23 percent during last year. This was higher than M&M’s automotive segment profit which stood at Rs 2,872 crore.
While M&M is the leader, the closest competitor to it is the Chennai-based TAFE with a share of around 20 percent followed by 12 percent of Sonalika and 10 percent of Escorts. A number of smaller players make up the balance of 15 percent.
“The demand undercurrent is strong driven by labour shortage (especially for hazardous activities), normal monsoon and government focus on infrastructure in rural India. Long-term demand outlook remains healthy given low penetration and rising awareness about the benefits of agri-implements. In India, agri-implements revenue is about 20 percent of tractors versus 2x globally”, said a report made by Edelweiss.
Presently all of Mahindra’s tractor making facilities are operating at more than 75 percent capacity. The company had said that it will have to explore the idea of setting up a new plant for tractors if the current rate of growth continues.
Research agency ICRA expects the tractor industry growth to moderate in FY2019 (growth in volumes of 6-7 percent), given the high base attained in the current fiscal. The long term growth forecast for the sector is predicted to be between 8-9 percent.