Good monsoon augurs well for tractor units

By Ramnath Subbu

MUMBAI, AUG. 26. The Indian tractor industry which has been facing difficult times for lack of demand following drought conditions in many parts of the country last year is now in a hopeful mood thanks to a satisfactory monsoon this year.

The demand for tractors tapered off after the first quarter of last year. There was a lowering of retail demand in the large markets of Punjab, Madhya Pradesh, Gujarat and Haryana and flattening of demand in Maharashtra and Bihar. Demand has remained weak in the current fiscal, accentuated by drought conditions in Rajasthan and Gujarat and a loss of crop in Andhra Pradesh.

According to Ms. Mallika Srinivasan, director of the Chennai based TAFE (Tractors and Farm Equipment), ``The reason for the slowdown in the industry is the lack of demand due to drought conditions that were prevailing in several parts of the country.

Also, overproduction last year and spill-over have contributed to the situation. The wholesale billing was higher than retail sales. Usually stocks are flushed out during the year but this time it was not so.''

Industry sources indicate that the situation is bad enough for the players to resort to advancing wherein the product is delivered first and the paperwork follows. A cessation of this practice seems likely only with the return of better days.

The main engine of growth has been the 31-40 hp (horse power) segment while the market for higher hp tractors has been small. The 35 hp tractors has been found to be the most suited machine for farmers having agricultural holding of between 4 and 20 hectares and NABARD (National Bank for Agriculture and Rural Development) studies have shown this to be the average land holding of most farmers who can afford to buy tractors.

According to Ms. Srinivasan, ``There is some movement in a few States towards higher hp tractors. There is some informal consolidation of land which could also be causing this shift.''

Industry majors' aggressive plans

Meanwhile, the industry majors are going ahead with their aggressive plans. Mahindra & Mahindra (M & M), the market leader, has announced its plans to launch a series under the umbrella of Horizon I and Horizon II.

It has already launched the first of its series of new generation Horizon tractors - the Mahindra `Arjun 605 DI' (60 hp tractor). In the current quarter, the company will consolidate its presence in the 35 hp segment with the launch of another tractor.

Arjun 605DI is touted by M & M as the most advanced tractor in its category and, Mr. Anand Mahindra, Managing Director, M & M said during its launch, ``The Mahindra Arjun represents a quantum leap in technology over existing Indian tractors. It will further consolidate our leadership in the domestic markets against competition from the multinational tractor manufacturers.''

In recent years, Punjab Tractors (PTL) has been trying to correct the geographical bias in its reach by targeting newer and growing markets. With major presence in Madhya Pradesh, Punjab, Uttar Pradesh and Gujarat, the company has been targeting emerging markets of Bihar, Andhra Pradesh and Tamil Nadu where the tractor density is low.

In fact, there has been some breakthrough with its recently introduced Swaraj 744 that has gained market share in all these markets. The Swaraj, introduced at the end of the last fiscal, signalled the company's entry into the 40-50 hp range. The market for this range is more than 50,000 units and PTL has already put in place an aggressive plan for the rest of the year and has strengthened its dealer network plus.

Meanwhile, Escorts has worked out a strategy to strengthen its position and plans to introduce three or four models every year. It is already a leading player in the higher segments of the market and by introducing new products in the lower hp category, it plans to increase the market share. The company hopes to export around 2,700 units in the current year and has set an export target of 3,500 units for next year.

Escorts entered into a joint venture with POL-MOT of Poland to form POL-MOT Escorts Spokia Zoo wherein POL-MOT will assemble and market tractors in Poland. It plans to export around 500 tractors to Poland in the current year.

The company recently launched a new range to cater to the South where the hard soil requires higher hp. Three of its Powertrack brands with straight axles are targeted at these areas of wetland cultivation.

For TAFE, retail sales have held up in spite of the fall in Rajasthan and Gujarat. It has a significant presence in the 31-40 hp range and according to Ms. Srinivasan inventory levels are down and there has been a much larger cut-back. ``In fact, this year, in the last eight to nine months, we have grown in the 21- 30 hp segment and have even gained two to three per cent market share in this segment. In terms of retail sales our market share is close to 18 per cent while in wholesale terms we have about 11 per cent market share.'' said Ms. Srinivasan.

Bajaj Tempo recently moved into the tractors business and set up a plant for the 35-55 hp range. It will have a capacity of 20,000 units annually. Among multinationals, New Holland has entered the 50 plus and 35 hp segments.

L&T plans to move into the 40 hp segment and sell 35,000 tractors in a year while John Deere has set up a unit near Pune with a capacity of 8,000-10,000 tractors per annum.

HMT Tractors has a capacity of 19,000 units at Pinjore and is moving into the higher hp range. Regarding competition from the multinational players, Ms. Srinivasan said, ``The multinational players are here for the long term and the domestic companies have to strategise. They would have a tough time competing with the domestic companies' agility and their understanding of the Indian consumer.''

There is hope for a recovery in the fortunes of the industry soon. It is expected that by the end of the current fiscal, volumes will increase. Bumper wheat production and a good monsoon are signs that augur well for the industry with the consequent impact on demand and offtake likely after the rainy season.

According to the TAFE chief, ``We expect some pick up in the second half - from September onwards. October retail sales are usually good. There would be a full pick up only from next season onwards as there is always a one lag season.''

Send this article to Friends by E-Mail

Section  : Business
Next     : TNPL goes ahead with expansion plan