03 August, 2016
Satish Nadiger, managing director of John Deere India, speaks to Autocarpro.in on the company’s growth plan, consolidation in markets less explored, evolving farmers' tractor requirements, shrinking crop cycles and the locally developed advanced JDLink technology, which tracks the running time of a tractor, which directly impacts a farmer’s income.
How would you evaluate last year in terms of business for John Deere India?
Our exports grew well last year. Although our domestic numbers did not grow, we grew in terms of the revenues and market share. We gained about 0.6 percent market share last year when the industry was de-growing.
What is your forecast for the current year?
The ongoing year looks quite well on the domestic front and the industry is also poised to grow (on the back of good monsoons). Currently, we are seeing around 10-11 percent industry growth for the year-to-date period, which is November to June for us. We are growing by around 43 percent for the same period this year. We expect that this ongoing year would be a better year for John Deere India than the last year.
However, our exports for this year are impacted by the global agriculture downturn, which covers our major export markets such as North America, South America and Europe.
In the domestic market, some of the southern states are growing stronger. For example, Tamil Nadu has been growing since December last year. Telangana has also started to pick up in terms of tractor demand. The southern region, in general, is performing well.
On the other hand, in the north India, Punjab looks difficult as we see that the sentiments are just not positive currently.
You want to focus and consolidate John Deere’s presence in the vast agriculture markets of north India including Uttar Pradesh, Bihar, Rajasthan and others. With a more concentrated presence in the southern and western regions, you have been competing with the top two industry players. Do you think growing market share in north India would be relatively easier?
No. In fact, we think it would be challenging for us. Those markets have been challenging for us. It takes time to grow a network of channels, which is very important in the tractor business. Our competitors have been there for decades and, hence, the network is a big differentiator. We have great products and we think we are ready to make more progress in the northern and eastern markets.
John Deere was the first company to introduce several features first in the tractor industry (power steering, wet brakes, four-wheel drive, and warranty on clutch among others). How are you educating farmers about the advantages that John Deere tractors offer?
We do educate the farmers through demonstrations and experience-based activities across the country besides running conventional advertisements and campaigns. These essentially are percolated marketing activities, where we meet potential customers and give them demonstrations, educate them about our products.
How many dealerships does John Deere currently have in India and how many more do you plan to add? Since agriculture is the largest sector in the northern states, how big an opportunity do you foresee?
We have 427 dealerships across India. Each dealer’s coverage contributes a lot in being successful in this market. For example, our dealership based in Pune, which is a large district, will cover all the customer segments located in several talukas, mandals and smaller areas. The second crucial factor is the capability development of the channel / dealership, which could be measured in terms of right infrastructure to provide customer support, to be able to sell products and provide service parts, and the financial capabilities – all of them are very crucial in developing the right network. Some of these distribution channels have more than 10-15 branches.
Selling tractors is not easy because you don’t have walk-in customers as in car showrooms. You have to go out and engage with the customers, give demonstrations. Farmers are much more skeptical than others because it is their livelihood.
Do farmers in India have a varied perception of a foreign brand as compared to a domestic brand in the tractor market?
No, I don’t think that customers in this industry are worried whether the brand they buy is Indian or multinational. At least I have not seen it.
The question that essentially comes to us is if the parts would be available, and we address that very efficiently. We ensure that our customers get service parts in time. As far as we have the right products, we are providing them value and assurance and then delivering them in time, they are happy.
Further, the farmers today are much more evolved. They are looking for tailor-made solutions irrespective of the fact that it comes from a domestic or a foreign brand.
John Deere’s India portfolio of products, which lie in the 35hp-75hp range, cost more or less or at par with the competition in India? The tractor market is a very price-sensitive market.
Yes, this is a very price-sensitive market. However, more than the price, we believe in providing value for money to our customers. For example, we offer tractors with power steering, a convenience feature. Our customers can use the tractor for 12 hours instead of 8 hours on the field, adding more productivity.
Thus we ensure that the customers are convinced about the values and get those functionalities delivered with those values that we promise. We measure the value in terms of better productivity, better uptime, the cost of operations over the life of the machine and other parameters.
How much has the company invested in India on a cumulative basis? How many manufacturing facilities does the company currently operate?
We have invested more than Rs 1,400 crore in India so far. We have three production plants – in Pune, Dewas and Sirhind, and a technology and R&D centre too.
What is John Deere’s local production capacity and what is the current capacity utilisation?
For tractors, we have an annual production of around 120,000 units, and the current capacity utilisation stands at 50-60 percent.
What is the rate of localisation of the tractors manufactured in India?
The localisation for tractors sold in India is more than 90 percent. However, the same for tractors exported to foreign destinations is around 80 percent. This is so because we have to import certain engine components to adhere to stricter emission norms of foreign markets. Interestingly, there is a lot of commonality of suppliers for automobiles and agricultural equipment in India, which is not seen in any other part of the world.
Could you throw some light on some interesting trends in the Indian tractor industry?
We see some niche segments emerging such as products for orchid tractors. These are small 20hp-35hp tractors sold in select markets.
Customers continue to evolve over time. They are looking reducing the number of processes on the field. For example, if they had four different processes for say potato farming, they are now looking at mechanising the same as much as possible. They have become very versatile about using technology for their work. They have become much better than what we think in terms of knowing what they want and how to use technology at work. They are willing to pay for the right products.
Tractors are highly seasonal products. We are seeing that the overall cycles are going down. For example, the harvesting window is shrinking. This is due to erratic monsoons, which have reduced the crop cycle from four months to, say, three months now.
Is the company looking at bringing new products in the segments where it is not present, for example in the small (below 35hp) and large (above 75hp) tractor segments?
We are looking at all potential opportunities to grow. Our strategy includes bringing in products with new features and value.
How do you see the large tractor (75hp and above) segment? Is it evolving at all?
I think it will evolve and will evolve very slowly. For tractors above 55hp, the demand has been low in the local markets. The main challenge, in that case, is the size of landholdings.
Can you tell us about the locally developed advanced tractor technology linked with the mobile phone?
This technology is branded as JDLink, which has been completely developed at our local R&D centre. It speaks about capabilities in telematics.
Most of the tractor owners do not drive themselves on the fields. They are essentially driven by the operators. In most of the cases, the owners do not know if the operator is at work. It’s a real-time data transfer technology where the customers can learn about what their tractor is doing on their mobile phones.
The application can disclose information such as engine rpm, fuel level, ploughing activities, land area ploughed, and other important data. This has a direct impact on the productivity and income of the owner. The real-time data transmission from the tractor can instantly communicate when the engine is switched off or if the transmitting SIM-card has been taken off the machine.
We launched this technology in India around two months ago and it is currently functional in many tractors in the market. Our existing customers are asking for additional kits of this technology, and we are working to provide them with the same.
We will equip their machines with this technology (field improvement kits) to help them improve their productivity and income. 40hp-75hp tractors will come equipped with this technology.
What are your immediate priorities?
Our immediate priorities include building the distribution channel in markets where we plan to consolidate, continue to focus on quality and provide the right customer support along with best-in-class products.
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