Indian tractor makers’ US dream turns sour as recession takes hold

Indian tractor makers’ US dream turns sour as recession takes hold
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First Published: Sat, Apr 18 2009. 12 33 AM IST
Updated: Sat, Apr 18 2009. 12 32 AM IST
Mumbai: Two among three Indian tractor makers active in the US have stopped or pared production in the world’s second largest market for farm machinery by volume after demand fell due to a recession.
Tractors made by Escorts Ltd, Mahindra and Mahindra Ltd (M&M), and Tractors and Farm Equipment Ltd (Tafe) compete in the entry segment —ranging from 35 to 80hp—in the US, a market where demand by volumes is dominated by tractors in this range.
While Faridabad-based Escorts has stopped production in its North Carolina factory, M&M, which is India’s largest farm equipment maker by volume, has cut back production in one of its three plants in the US, according to executives at the two companies.
Rohtash Mal, executive director and CEO of Escorts’ agri-machinery group, said his firm is selling in the US, but not producing given that it has some 2,000 tractors in its inventory in that country. “As soon as the situation improves, we will reassess and we will feed the market with more,” he said.
Elsewhere, M&M has pulled back production at its Georgia factory, which Anjanikumar Choudhari, president of the Mumbai-based firm’s farm and equipment business, said was “in line with the market situation” there. He added the firm had retrenched some 30% of its employees and several daily wage earners in Georgia.
“We have, however, managed to protect our market share,” Choudhari said.
Tractor exports at M&M from India, too, have “marginally declined” in the fiscal year ended 31 March from 4,500 to 5,000 the firm sold in fiscal 2008, he added. Exports contracted by 19% to 7,013 in 2008-09. Other tractor firms such as International Tractors Ltd, which makes the Sonalika brand, also exports to the US but in small numbers. India is the world’s largest market for tractors by volume.
Not all tractor makers selling to the US, however, have suffered. Chennai-based Tafe, an Amalgamation group firm that sells the Massey Ferguson brand tractors with its collaborator AGCO Corp. in the US, said its exports to that country in fiscal 2009 had increased from the previous year. Tafe director Mallika Srinivasan declined figures for the US, saying only that the firm’s overall exports had grown by 11.4% to 8,835 units in the fiscal year.
In the US, “we have managed to grow and strengthen our market share because of newer products, which have been well accepted,” she said. Tafe sells tractors ranging from 35hp to 75hp in the US.
Tractor exports, excluding production at international factories, from India are estimated to have declined 12% to 39,000 units in fiscal 2009, according to M&M’s Choudhari.
The size of the tractor market in the hobby farming segment is estimated to have sales of 50,000 to 60,000 a year, accounting for at least 70% of the total tractor market there, Choudhari said.
Such tractors are owned by people who farm on the weekends more as a hobby than an occupation, Choudhari said. “Owing to the meltdown, lot of these farmhouses have been sold and leisure activities have come down,” he said.
The news of contraction in demand for M&M and Escorts products comes at a time of flat growth of domestic tractor sales. In fiscal 2009, tractor demand in India is estimated have been 303,882, which represents a growth of 0.5% over the previous year, according to Choudhari, who is also the president of industry body Tractor Manufacturers Association. He estimates domestic tractor sales will grow between 5% and 8% in fiscal 2010.
Samar Srivastava contributed to this story.
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First Published: Sat, Apr 18 2009. 12 33 AM IST