Nearly three years after Punjab-based International Tractors Ltd (ITL) began scouting for a suitable partner to enter the Chinese market, the homegrown tractor manufacturer on Monday announced a joint venture (JV) with Shandong Luyu Heavy Industry Company Ltd to foray into the world’s second-largest tractor market.
In a statement today, the Indian company said the JV agreement was signed by Deepak Mittal, managing director, ITL, and Yang Shao Jie, founder and chairman, Shandong Luyu Heavy Industry Company Ltd. in New Delhi on 19 October. The joint venture entity will be named Luyulika (Laizhou) Agri Machinery Company Ltd. The note mentioned that KPMG was the financial advisor to ITL in the said transaction.
The new JV will invest $10 million to set up an assembly plant for tractors and engines with a manufacturing capacity of 50,000 units in phase-1. “Further investments will be planned as per the future expansion," the statement note said.
Shandong Luyu Heavy Industry is a $400 million company with presence in small-sized loaders, small and medium-sized excavators and forklifts in China. With its existing facility located at Laizhou Shahe Industrial Park in Shandong province, the Chinese company also exports products.
Under the new JV, the Indian tractor maker will look at additional overseas business and also help the Chinese company expand its product line up with tractors and tractor engines. The statement also said the JV will assemble engines for wheel loader application for captive consumption of Shandong Luyu Heavy Industry and other wheel loader construction machinery manufacturers in China.
ITL exports tractor engines that can also be deployed for several other similar applications in adjacent sectors including construction equipment.
“Today ITL has presence in more than 120 countries and is a trusted brand among more than one million farmers in both India and overseas. We are taking a leap ahead with the formation of this JV. The engine assembly plant in China is a first by an Indian company," said Mittal.
Jie of Shandong Luyu Heavy Industry Company Ltd said, “We believe that this JV will be able to penetrate with Sonalika range of tractors in China. It shall also help us to offer the globally accepted engine technology of Sonalika to its customers.
Meanwhile, in India, ITL plans to consolidate its portfolio of tractors and farm equipment by introducing two new brands - Solis and Yanmar. The two brands will sell alongside ITL's domestic tractor brand Sonalika, which already is among the top three tractor brands in India.