challenges of indian tractor industry’
DESCRIPTION
know the indian tractor industry ........TRANSCRIPT
“STRATEGIC PERSPECTIVE OF PRESENT AND
FUTURE OPPORTUNITIES AND CHALLENGES OF
INDIAN TRACTOR INDUSTRY”
INSTITUTE OF MANAGEMENT STUDIES, NOIDAA UGC Recognized Institute
A-8B, Plot –C, Sector-62, Noida
1
Summer Training ReportOn
“STRATEGIC PERSPECTIVE OF PRESENT AND FUTURE OPPORTUNITIES AND CHALLENGES OF
INDIAN TRACTOR INDUSTRY”
Submitted in Partial Fulfillment for the Award of the Diploma of
Post Graduate Diploma in Management (Session 2009-11)
Submitted To: Submitted By:
Faculty Name:- Vanja Gwosami Student Name:- Anmol Verma Internal Guide:- Kaship Panady Roll No:- 090109
PGDM – I yr
DEPARTMENT OF MANAGEMENT
INSTITUTE OF MANAGEMENT STUDIES, NOIDAA UGC Recognized Institute
A-8B, Plot –C, Sector-62, Noida
2
Certificate from Internal Guide
The project report titled “STRATEGIC PERSPECTIVE OF PRESENT AND FUTURE
OPPORTUNITIES AND CHALLENGES OF INDIAN TRACTOR INDUSTRY”
submitted by Mr Anmol verma Roll No. PG9009 may accept for being evaluated.
Signature Signature
(Ms.Vanja Gwosami) (Mr.Kaship Panady)
Date:
3
DECLARATION
I hereby declare that this project titled “STRATEGIC PERSPECTIVE OF PRESENT
AND FUTURE OPPORTUNITIES AND CHALLENGES OF INDIAN TRACTOR
INDUSTRY’’ conducted at “ SUMI MOTHERSON” submitted by me to Department of
Management, INSTITUTE OF MANAGEMENT STUDIES, NOIDA in partial fulfillment
of requirements of PGDM programme is a bonafide work carried by me under the guidance
of mr.kashep panday. This has not been submitted earlier to any other University or
Institution for the award of any degree diploma/ certificate or published any time before.
Place: Noida ANMOL VERMA
Date:
4
ACKNOWLEDMENT
I am overwhelmed in all humbleness and gratefulness to acknowledge my debt to all those who have helped me to put these ideas, well above the level of simplicity.
I express my sincere gratitude to Mr. Jitender Bhardwaj who gave me the opportunity to make this project. I express my sincere thanks to Ms.Vanja Goswami & Mr.Kaship Panady my project guide for his help as team to my project.
I find no way to express my deep gratitude and profound reverence to Mr.Manish Gautam his able guidance and co-operation during my work.
I find no words to acknowledge the moral support rendered by my parents, all the members of “SUMI MOTHERSON” in making this effort to success. This becomes a reality because of their blessings and above all by the grace of GOD!
Anmol Verma
5
CONTENTS
Page No.
Chapter 1 INTRODUCTION
1. Executive summary 22. Need for study 43. Scope of study 54. Methodology 6
Chapter 2 INDUSTRY PROFILE
1. Various categories in automobiles 82. Types of tractor 123. Top tractor manufactures in the world 134. Indian tractor industry 295. Market share of companies 346. Leading companies of tractor market of India 36
Chapter 3 DRIVERS FOR THE INDUSTRY
1. Some Long-Term Demand Drivers For The Industry 612. Drivers Of Tractor Growth 623. Agriculture In India 654. Agriculture Development In India 675. Indian Agriculture Industry Overview (SWOT Analysis) 706. Need For Agriculture Mechanization 72
Chapter 4 GROWTH OF TRACTOR INDUSTRY
1. Growth Of Tractor Industry 742. Technological Status Of The Tractor Industry 753. Capacity Utilization 764. Tractor Penetration 775. Industry Sale Across The Region 78
Chapter 5 FUTURE OF TRACTOR INDUSTRY
1. Future Of Tractor Industry 822. SWOT Analysis Of Tractor Industry 833. Challenges For Tractor Industry 844. Rate Of CAGR Of Domestic Market 86
Chapter 6 CONCLUSION & RECOMMENDATIONS
Limitations 90
Conclusion 91
6
Recommendations 92
ANNEXURE
Bibliography 94
Chapter-
I
Executive Summary Need For Study Scope Of The Study Methodology
7
EXECUTIVE SUMMARY
Indian tractor industry, comparatively young by world standards have expanded at a
spectacular pace during last four decades. Consequently it now occupies a place of pride in
India's automobile industry. Tractor industry plays an important part as agriculture sector has
a major contribution to India’s GDP. Tractors are part of agricultural machinery industry.
Tractors came to India through imports and later on were indigenously manufactured with the
help of foreign collaborations. Indian tractor industry is relatively young but now has become
the largest market worldwide.
There are currently 19 main players in the industry. Mahindra & Mahindra is the leading
player in the industry. Monsoon season is a key driver for sales of tractors. A series of good
or bad on soon can affect the sales. In recent years the industry has registered a good growth
in sales, both domestic as well as exports. This is also partly because of the initiative of the
government to boost up agriculture and agricultural machinery industry.
The tractor industry in India has made a significant progress in terms of production and
capacity as well as indigenisation of technology. It is a typical sector where both imported
technology and indigenous developed technology have developed towards meeting the
overall national requirements. The global spotlight on tractors manufacturers certainly in
terms of volume seems to be swinging away from the USA, UK and Western and Eastern
Europe towards India where growth in the number of producers and the total volume in
recent years have been impressive. In India tractor industry has played a vital role in the
development.
8
The tractor penetration level in India is very low as compared to the world standards. Also
the penetration levels are also not uniform throughout the country. While the northern region
is now almost saturated in terms of new tractor sales, the southern region is still under
penetrated. The medium horse power category tractors, 31-40 HP, are the most popular in the
country and fastest growing segment.
This report gives an insight into the tractor industry in India, discussing its inception and
growth. It analyzes the current scenario of tractors in India, industry size, domestic and
India’s share in global market. It discusses the players in the industry and profiles the top
players. Future plans of the main player in industry and also give the industry size in 2015
and India is become the leader of the world.
9
NEED FOR THE STUDY
Every business enterprises required vital information to keep alive it’s day to day business
activities. The nature of information required, differs from situation to situation. Supporting
organization is evaluating its marketing effort. Then marketer has to appraise the marketing
effort and then has to find means of improving it, and then information required is of
consumer research. After the evolution of marketing concept, marketing effort of
organizations is channelised towards target market. So, understanding of tastes and
preferences of target market assumed greater importance.
The Indian automobile industry is very fast growing and there are need for know the present
and future growth of the industry. For the knowing of what is the future aspect for OEM like
SUMIMOTHERSON the need to the where the industry are going in the future and where
its stand. India is fast growing country in the world as par the auto market But India is
differing economy form other country like America, Canada, Brazil, Japan, and European
country.
10
SCOPE OF THE STUDY
This study on tractor industry gives full view about opportunities and challenges strategies in
current and future. The Indian tractor industry is largest tractor market in the world. Auto
component industry is one of the core sectors for India.
Tractor industry is related to two main sectors of Indian economy one is agriculture and other
is manufacturing both are very important for Indian economy. Indian economy is very
complicated as per compare to other countries. The scope for tractor industry is very large
due to agriculture.
11
METHODOLOGY
The research is based on secondary data and collected from varies sours. Full information about tractor industry that will give a view of its future aspect and current position of tractor industry. Viewing the annual reports of market player to know the working method. The main volume of is agriculture and manufacturing core sector and using the report of national and international report give full view of industry.
12
Chapter-
II
Various categories in automobiles
Types of tractor
Top tractor manufacture in the world
The Profile of Indian tractor industry
Indian tractor industry
Market share of companies
Leading companies of tractor market of India
13
VARIOUS CATEGORIES IN AUTOMOBILES
No, one product can meet the needs, wants and desires of the complete market in universe.
For every product, market segmentation will result in targeting the right customer and thus
capture major market contributing to high scales.
Market segmentation is done on the basis of the consumer’s preferences, tastes, likes, usage,
purchasing power, application, etc. Thus different customer group can be grouped on the
above basis. The Indian automobile industry has, over the years, grown in scale with a
diversified product range. This product range will cater to the needs of different customers.
The several of automobile manufactured in India are:
The above categories are being made on the basis of product design payload etc., In addition,
numerous shapes, colours, sizes, prices, utility and applications form as intelligent choice to
the consumer who can make a purchase in parallel to his/her tasters, preferences and liking.
This also helps the manufacturer to define his business acute. Since automobile industry is a
crore sector, it is beyond the reach of Indian manufacturer to manufacture all category types
of vehicles. Hence, he decides to take up the business in his capacity and cater to the demand
in particular segment.
This also helps the manufacturer to stabilize and concentrate on the business while being
capable to complete in the competitive environment adopting the latest technology and other
developments taking place in any part of the world.
14
Light Pass Vehicle
Commer
cial Vehicle
Tractor Two
Wheelers
Three Wheelers
PCs/MUVs/S
UVs
LCVs/M&HCVS/BUSE
S
Farm/Earthmoving & Construction Equipments
Motorcycles/Scooters/Mope
ds
Passenger Carriers /
Goods Carriers
Automobile Industry
Indian Automobile Industry: An overview
Automotive Industry, globally, as well in India, is one of the key sectors of the economy. Due
to its deep forward and backward linkages with several key segments of the economy,
automotive industry has a strong multiplier effect and acts as one of the drivers of economic
growth. The well-developed Indian automotive industry produces a wide variety of vehicles:
passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as
jeeps, scooters, motor-cycles, mopeds, three wheelers, tractors and other agricultural
equipments etc. The sector has tremendous potential of providing employment which will
increase the present figure of employment in manufacturing sector which is quite low at 12%
as compared to the countries like Malaysia (50%); Korea (62%) and China (31%).
Installed capacity:
The automobile industry especially over a period of time and particularly after liberalization,
has installed a robust capacity. In present scenario world over, it is an accepted view that
competitiveness is no longer totally dependent on variables like availability of cheap labour
and materials, low interest rates and fiscal incentives. The sustained competitiveness in
industry can come only through improvement in productivity both of labour as well as
capital. This calls for continuous efforts for innovation by the companies. There is also a need
to improve the cost competitiveness in the auto sector. Global auto companies are
increasingly sourcing components and vehicles from low cost countries. Outsourcing is also
being extended to services like engineering design and other business processes. The globally
competitive OEMs (Original Equipment Manufacturers) and auto makers will make their
base in places which are high on productivity factor and low on costs, so that their
competitive advantage can be sustained. If India has to take advantage of this, its cost
competitiveness has to improve. The industry has identified certain factors which are
inhibiting the growth of automotive sector.
15
Opportunities and threats
The Automotive Sector
The current low level of vehicle ownership in India is 14 per 1,000 people as compared with
the world average of 120 per 1,000 which implies a huge opportunity for growth of the
Automobile Industry. India's Automotive Sector is expected to be one of the fastest growing
in the world over the next several years. However, the industry faces increasing competition
from the presence of a large number of automotive companies in the country. The
Automobile Industry is also a key contributor in economic growth. The Indian Government's
Automotive Mission Plan 2016 (AMP 2016) envisages a doubling of Automotive Industry's
share of the Indian economy by 2016.
The increased investments in infrastructure and the consequent growth in industrial activity
will lead to increased goods movement, resulting in a growing demand for commercial
vehicles.
The Farm Equipment Sector
The improvement in rural liquidity and increase in non-agri component of rural
incomes is a strong positive since demand will have lesser sensitivity to a single
deficient monsoon as compared to earlier periods.
Food security and rural development remain high on the Government agenda, with the
Union Budget for 2010-2011 showing an increase in agri credit outlay by 15% to
Rs.3.75 lakh crores; interest subvention on crop loans and various initiatives for rural
development also have enhanced outlays. This, coupled with significantly low levels
of mechanisation in Indian farms compared to the global average, indicates that there
is significant growth potential for agricultural mechanisation in the country.
16
Risks and Concerns The Automotive Sector
the Indian Automobile Industry is expected to be one of the fastest growing markets in the
world, many global players are significantly expanding their presence in India. There is a
concern that this will result in an ever increasing level of competition and intense pressure on
the profit margins of all participants. Increased competition will lead to more frequent
product launches in all industry segments and raise customer expectations in terms of
performance, quality and technology, leading to higher costs.
Regulations Stringent regulatory norms are being introduced to safeguard the environment,
especially in the area of emissions. Many of these measures are likely to result in an increase
in costs which cannot always be passed on to customers through price increases in a highly
competitive market environment.
In India, there is a large differential in taxes levied on small cars and larger vehicles. With the
resulting lower price tag for small cars, many customers may opt to postpone large car
purchases or buy a small car, which could impact the growth of UVs and the large car
segment. Fuel prices and alternate fuels
Fuel prices are an important element of the overall cost of ownership for vehicles and
tractors.
17
TYPES OF TRACTOR
In this study only include agriculture tractor. Tractor industry having 2 type one is agriculture
and contraction equipments that is defers from the Indian tractor the basic pretend we follow
is that tractor to the world. Same the world having two types but here we only talk about
agriculture tractor.
18
Tractor
Agriculture Construction equipment
There are several tractor brands around the world, but there are a few brands that stand out
because of their performance and global market leadership.
Every company has its own market and some of them working as deferent brand name in
deferent country. All company working with joint venture with local company or its own
brand name.
19
23.11
13.80
6.72 6.60
20
World leading tractor manufacture
The world tractor scenario is the two worlds best company is belonging to America (USA)
and one from Europe (Italy) and one from India. The most famous company is deer &
company it is leading company in the world but also the Mahindra is also famous because the
world most tractor maker company in the number.
21
Deere & Company
Deere & Company the firm founded by John Deere began to expand its range of equipment
to include the tractor business in 1876.
Deere & Company, Usually Known By Its Brand Name John Deere Is An American
Corporation Based In Moline, Illinois,
And The Leading Manufacturer Of Agricultural Machinery In The World.
Listed As 107 Place In The Fortune 500 Ranking In 2010.
A US$23.11 billion company.
Deere & Company is the world's leading manufacturer of agricultural tractor by revenue. In
FY 2009 Deere generated over $23.1 billion in revenue, marking however, a 19% decrease
from FY 2008 which had revenues of $25.8 billion with an overall profit margin of 7.2%.
Deere's success hinges upon the success of the agriculture industry and crop prices. Increased
research in renewable energy sources that use ethanol, a chemical material typically derived
from corn will benefit Deere. Ethanol-based energy research and development over the next
several years could cause a large growth in corn prices, leading to higher agricultural activity
which would increase Deere's sales..
Agricultural Equipment: This segment develops and manufactures farming equipment such
as tractors, harvesters, balers, sprayers, utility vehicles and other machines. Deere is the
world's leading producer of agricultural equipment.
Deere & Company, founded in 1837 (collectively called John Deere), has grown from a one-
man blacksmith shop into a corporation that today does business around the world and
employs more than 50,000 people. The company is guided today, as it has been for more than
170 years, by core values that were exhibited by its founder and have been long adopted by
our employees: integrity, quality, commitment and innovation.
PRODUCTS AND SERVICES22
John Deere manufactures, distributes, and finances a full line of equipment for use in
agriculture, construction, forestry, and lawn and grounds care; manufactures engines and
other power train components for John Deere equipment and other manufacturers; and
provides credit and other services to customers around the world.
MARKETING
The company markets its products through a worldwide network of independent dealers
supported by a decentralized marketing organization with offices in Argentina, Australia,
Brazil, Canada, China, England, Finland, France, Germany, Ireland, Italy, Mexico, Norway,
Poland, Russia, Singapore, South Africa, Spain, Switzerland, the United States, and Uruguay.
MANUFACTURING
John Deere factories are located in Argentina, Brazil, Canada, China, Finland, France,
Germany, India, Mexico, New Zealand, The Netherlands, Russia, South Africa, Spain,
Sweden, and the United States. Affiliated companies produce John Deere products in the
United States and South America.
RESEARCH AND DEVELOPMENT
John Deere has a long-standing history of investing heavily in research and development.
Activities are divided among support for current product activity, development of new
products, and the search for new product-oriented businesses.
Most factories have a product engineering department responsible for the design and
development of their products. Research and development activities also occur at the Moline
Technology Innovation Center, Moline, Illinois.
DIVERSITY
23
Throughout John Deere, diversity is an important part of the company's goal of growing a
great business - a business that serves all constituents of the corporation including customers,
employees, shareholders, business partners and communities throughout the world. As Deere
continues to expand its global reach, inclusion of employees, suppliers and other business
partners from a wide range of ethnic backgrounds is essential to the long-term success of the
company.
DIVERSIFICATION
John Deere remains committed to its core businesses, yet future growth will also be driven by
products and services new to the company. John Deere Credit is among the United States'
leading equipment finance and leasing companies. It provides financing of farm and
construction equipment, recreational and homeowner consumer products, commercial
equipment, and revolving credit financing for agricultural purchases.
TECHNOLOGY
Technology is at the heart of business innovation and John Deere utilizes the latest software
and technological breakthroughs in providing customers with state-of-the-art products and
services. For example, product development uses the latest virtual prototyping techniques to
produce John Deere products. Other major initiatives include precision-farming systems and
global vehicle communications systems, designed to help customers become more productive
and profitable. These technological initiatives will provide a major competitive advantage
and continued industry leadership position to John Deere.
24
Deere and company is the most famous company. Company having biggest market share in
the tractor industry world company working the world level manufacturing plants.
25
Deere And Co. Worldwide
CNH
A fiat group company.
CNH manufactures its products in 38 facilities throughout the world and distributes its
products in approximately 170 countries through approximately 11,600 full line
dealers and distributors.
The CNH banner has given rise to some of the best-known brands in agricultural
equipment worldwide. A full lineup of products from Case IH, New Holland and
Steyr in the agricultural equipment segment assures customers of some of the greatest
choices and value available in the market today a majority-owned subsidiary of Fiat
Group, was formed in 1999 through the merger of two renowned companies at the
international level: New Holland NV and Case Corporation. CNH is one of the
world’s leading manufacturers of agricultural tractors.
CNH has organized its branded agricultural equipment operations to effectively
satisfy the needs of retail customers in approximately 160 countries and serve a
network of more than 11,000 dealers and distributors. CNH’s broad manufacturing
base includes 39 facilities in Europe, North America, Latin America, China, India and
Uzbekistan. Among key CNH strategic objectives is to emphasize and focus on
customers and further improve distribution and service capabilities and enhance
product reliability – all designed to increase customer satisfaction and market
penetration.
26
27
Mahindra
Mahindra Tractors operates in 10 courtiers and has a fairly large customer base in the
United States, Australia, Chile, Serbia, Indian Subcontinent, Iran, Syria and a major
part of the African continent among many more Mahindra operates in China, North
America and Australasia through its subsidiaries, Jiangling, Mahindra USA and
Mahindra Australia. These subsidiaries are also responsible for sales.
Mahindra & Mahindra builds and sources tractors that are sold worldwide across six
continents.
Mahindra is also among the top three tractor manufacturers in the world.
Mahindra has a huge consumer base in India, China and America and a growing base
in Australasia. The company builds more tractors in India than any other
manufacturer.
Mahindra have 5 largest tractor company of china china.Mahindra Yueda Yancheng
Tractor Company (MYYTCL).
Mahindra having its fully subsidiary companies in America(US) and Australia.
International Operations- Farm Equipment Sector are spread across six continents
and in around 25 countries. FES has state-of-the-art manufacturing plants in India and
China with a combined capacity to produce more than 1, 70, 000 tractors a year.
Besides, these plants there are assembly plants USA and Australia. FES has more than
1000 dealers world-wide. Currently, the tractors for international market range
between 25 to 85 HP.
Mahindra USA (MUSA): Mahindra USA (MUSA) is a wholly owned subsidiary of
Mahindra & Mahindra. Over the years, Mahindra USA has reinforced its position in
the 'Compact' and 'Utility' segment of tractors. It has a network of hundreds of leading
tractor dealers throughout the country to provide customers based at US a complete
product support with a quality after sales service. The company has three assembly
plants in USA - Houston (Texas), Calhoun (Georgia) and Redbluff (California).
28
Mahindra Australia: Mahindra Australia, based in Brisbane offers a complete range
of 2WD and 4WD compact tractors (20-30 HP range) and utility tractor models (45-
80 HP range).
Africa- The world. Some of the major markets are in Africa (Major countries:
Nigeria, Mali, Chaad, Gambia, Angola, Sudan, Ghana, Morocco), Latin America
(Chile, Brazil), South Asian countries (Srilanka, Bangladesh, Nepal), Middle East
(Iran, Syria etc) and East Europe (Serbia and Macedonia; FES has entered the Turkey
market .
29
Mahindra in china
Mahindra have 5th largest tractor company of china Mahindra Yueda Yancheng
Tractor Company (MYYTCL), has been formed between Mahindra’s Farm
Equipment Sector, one of the world’s top tractor brands and the market leader in India
and Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd., a leading Chinese
tractor manufacturer. The registered capital of the JV is RMB 265 million. Mahindra
holds 51 per cent share in the JV through its subsidiary, Mahindra Overseas
Investment Company (Mauritius) Ltd.
Mahindra China Tractor Company Ltd. (MCTCL).With MCTCL’s Feng Shou and
MYYTCL’s Jinma brands, Mahindra’s tractor operations in China position it well to
exploit the fast growing market.
30
AGCO
AGCO is the 4th largest manufacturer of agricultural tractor world-wide. The company makes
products such as tractors and combines, and distributes its products through a network of
dealers and distributors to the farmers. The company earned $6.6 billion in revenue and $136
million in net income in 2009.
Since AG generates nearly all of its revenue from sales of agricultural equipment, much of its
success hinges upon the health of the agriculture industry and crop prices. One current trend
that may play to AG's advantage is the increased interest in corn-based ethanol. Ethanol-
based energy research and development over the next several years could lead to continued
growth in demand for corn and, of course, the tools needed to plant and harvest more of it.
Increasing demand for food in developing countries could also positively impact AG's sales.
As both populations and personal incomes grow in emerging markets, demand for both grains
and grain intensive products such as meat should increase as well. With three-quarters of its
revenue generated outside of the U.S., AG has greater exposure to developing countries than
any of its competitors
Company Overview
AGCO primarily makes tractors, combines, and other agricultural equipment:
Tractors (66% of sales): the company sells its tractors under a variety of brand
names including AGCO, Challenger and Massey Ferguson. Its sizes range from
compact tractors (used on small farms), utility tractors (used on small and medium-
sized farms), and high horsepower (used on larger farms and on cattle ranches).
31
Contents
Combines (5% of sales): are used to harvest various grain crops. AG's combines
come with a variety of crop-harvesting heads for different kind of crops.
Application Equipment (4% of net sales): self-propelled 3 or 4 wheeled vehicles
and equipment such as chemical sprayers which are used in the application of
fertilizers and crop protection chemicals.
Other Products (10% of net sales): the company makes a wide range of other
products such as mowers and tools used to cut hay.
Replacement Parts (14% of net sales): in addition to new equipment, AG sells
replacement parts for their products. These parts keep farm equipment in use,
including products no longer in production.
Business Growth
FY 2009 (ended December 31, 2009)
Net sales decreased 21% to $6.6 billion. The company attributes the decline to net
sales decreases in most of its geographical regions as well as unfavorable foreign
currency translation impacts
Net income decreased 61% to $136 million.
Trends and Forces
Alternative Energy & Biofuels drive up Corn Prices
The USDA anticipates ethanol production to top 12 billion gallons annually by 2016, derived
from over 4 billion bushels of corn. This would represent an increase of 168% from the
estimated 1.6 billion bushels of corn used in ethanol production in 2005. This be
32
accompanied by significantly higher corn prices, which would combine with the increased
production to result in more revenue for farmers. Due to the increased demand for corn and
higher prices, many farmers might use their increased income to make large investments such
as purchasing new farm equipment like tractors and harvesters.
Emerging Markets Buy More Grain
AGCO is much more focused on emerging markets than peers such as Deere & Company
(DE). The company generates over 75% of its revenue outside of the US, while Deere &
Company (DE) generates only 30%. These countries are experiencing rapid economic
development, which has fueled increased demand for food and energy. The interest in
biofuels has extended beyond North America to emerging economies such as Brazil.
For example, AG's exposure to the Brazilian market (South America - mostly Brazil -
accounts for around 15% of its revenues) could be a growth driver. Brazil makes ethanol
from sugar cane, instead of corn. There are 47 new sugar cane mills being built in Brazil, and
each one will require about 100 new tractors. AGCO has 60% market share in the Brazilian
tractor market, and a dominant position in the sugarcane industry.
• AGCO Corporation Is An Agricultural Equipment Manufacturer Based In Duluth,
Georgia, USA. As A Leading Global Manufacturer Of Agricultural Equipment.
• More Than 2,700 Independent Dealers And Distributors In More Than 140 Countries
Worldwide.
• Listed As 337 Place In The Fortune 500 Ranking In 2010.
33
34
AGCO Worldwide
TRACTOR INDUSTRY IN INDIA
Higher productivity and greater output are the two major contributions in farm
mechanization. Tractors form an integral part of farm mechanization and have a crucial role
to play in increasing agricultural productivity. Tractor is a highly versatile piece of machinery
having a multitude of uses, used in agriculture both for land reclamation and for carrying out
various crop cultivation and also employed for carrying out various operations connected
with raising the crops by attaching suitable implements and to provide the necessary energy
for performing various crop production operations involvedin the production of agricultural
crops. Tractors are capital intensive, labor displaying used as a mode of transport, in
electricity generation, in construction industry and for haulage operation. It has now become
an integral part of farm structure .The application of tractor for agricultural activities which
swept India during the last twenty years have erased the problem of farmers. Farm
mechanization program in India aims to integrate the use of available human and animal farm
power with mechanical sources of power for increasing
the productivity.
India's gross cropped area is next only to United States of America and Russia and along with
fragmented land holdings has helped India to become the largest tractor market in the world.
But it drops to eight position in terms of total tractor in use in the country when compared to
international figures, only 3% of total tractors used all over the world . It is to be noted that
while the overall automobile industry is facing recession the tractor industry is growing at
9%.About 20% of world tractor production is carried out in our country only.
The arable land in India is high as 12% of the total arable land in the world. Tractor market in
India is about Rs. 6000 crores. On an average around 400000 tractors is produced. Uttar
Pradesh is the largest tractor market in our country. One out of every four tractor is being
purchased here. Indian tractor market has to be viewed considering its position in the world
with respect to key parameters as given below:
35
INDIAN TRACTOR MARKET
The Tractors available in developed countries have advanced features and accessories that is
not found in Indian tractors .Tractor industry has made a steady and satisfactory progress
even in drought areas.
Four factors have contributed to the steady progress:
Government laid stress on the mechanization of agriculture with a view to boost food
grain production. Therefore agriculture sector started receiving financial assistance.
There is an increase in awareness among the farmers for the need of farm
mechanization and are keen to acquire tractor with the help of credit facilities from
financial institutions.
Agronomists believe that there is need for more tilling due to depletion of moisture
and repeated cultivation of land .It is precisely for this reason that the demand for
tractors was well maintained even during a draught period.
Animal power available is too inadequate to meet power demand of our farmers.
Mechanized operations are preferred to eliminate drudgery and delay, also labour
shortage during harvesting increased the use of tractor.
The automobile sector is a key player in the global and Indian economy. The global
Motor vehicle industry contributes 5 per cent directly to the total Manufacturing employment,
In addition, the auto industry is linked with several other sectors in the economy and hence
its indirect contribution is much higher than this. All over the world it has been treated as a
leading economic sector because of its extensive economic linkages.
India’s manufacture of 7.9 million vehicles, including 1.3 million passenger cars,
amounted to 2.4 per cent and 7 per cent, respectively, of global production in number.
The auto-components manufacturing sector is another key player in the Indian automotive
industry. Exports from India in this sector rose from US$1.0 billion in 2003-04 to US$1.8
billion in 2005-06, contributing 1 per cent to the world trade in auto components in current
USD. In India, the automobile industry provides direct employment to about 5 lakh persons.
It contributes 4.7 per cent to India’s GDP and 19 per cent to India’s indirect tax revenue.
36
Till early 1980s, there were very few players in the Indian auto sector, which was suffering
from low volumes of production, obsolete and substandard technologies. With De-licensing
in the 1980s and opening up of this
At the end of the day there are enough reasons to believe that the industry will grow because:
More farmers are opting for multiple cropping over last decade. Country's net cropped
area had remained virtually stagnant while gross cropped area increased by about
4.7%. This indicates the increased popularity of multiple cropping.
95% of tractor sales are on credit. Credit is extended by commercial banks, state land
development banks and regional rural banks.
Irrigation facilities reduce reliance on the monsoon and allow for quick yielding
varieties of food -grain .This reduces the cropping cycle to 3-4 months from the
traditional 5-6 months.
Reduced cropping cycle require deep tilling which translates into higher demand for
tractors.
Cost of tractors in India is the cheapest in world .The cost of a finished tractor here is
as much as the cost of gear box in developed countries. Hence there exists tremendous
scope for exports.
According to a study conducted by PHD Chamber of Commerce and Industry, Since
purchase of tractor involves a big investment its demand in affected by the availability
37
and easiness of credit. A higher availability of credit will lead to a higher demand for
tractors.
The tractors between the 31-40 horse power and 31-40 hp range dominate the market.
The reason for medium horse power tractors being more popular are that the major
tractor demanding states like Punjab Haryana and Uttar Pradesh have plenty of
alluvial soil which does not require deep tilling. Lately it is visualised that higher hp
segment has the maximum growth potential Higher horse powered tractors will be the
future requirement with the government intention to encourage contract farming
through the leasing in and leasing out of farm lands.
Regarding exports India of latter has been exporting tractors to a number of countries,
but predominantly to Sri Lanka, Nepal and U.S.A .However the study reveals that
exports from India are going down in the recent years .The major reason for the
decline in exports of tractors of tractor from India is being the failure to find an
extensive market overseas ,deteriorating foreign exchange situation in African
countries and their poor buying capacity, comparatively cheaper imports of second
hand tractors by South East Asian countries from developed countries and the
disintegration of erstwhile U.S.S.R. but also the potential export markets can be
explored by Indian in the future. Since Indian tractors confirm to the international
standard by virtue of their foreign collaboration it is possible for India to export to
more tractors to the rice and wheat growing countries like Canada, Philippines and
Bangladesh.
The tractor industry in India has developed over the years to become one of the largest tractor
markets in the world. From just about 50,000 units in early eighties the size of tractor market
in the country has grown up to over 400,000 units. Today industry comprises of 19 players,
including 3 MNCs. The opportunities still are huge considering the low farm mechanization
levels in the country, when compared to other developed economies across the world. After a
downturn during last 3-4 years, the industry is back on a growth path, which we believe
would sustain in coming years as well. Key concern for the industry is its dependence on
Agricultural income in hands of farmers and the state of monsoon. Today there are as many
as 19 players operating into tractor manufacturing activity in the country. However, about 97
per cent of market is shared among the top 6 players only.
38
39
Mahindra & Mahindra.TAFE.L&T - John Deere.Eicher.Mahindra Gujarat Tractor Limited.New Holland.Escorts (Escort, Powertrac and Farmtrac).Sonalika (International Tractors Ltd.)Punjab Tractors Ltd (Swaraj Tractors).Same Deutz-Fahr Ltd.HMT Tractors.Balwan Tractors, force motors ltd.VST Tillers.Captain Tractors Pvt. Ltd.Crossword Agro Industries.Indo Farm.MARS Farm Equipments Ltd.Preet Tractors.Standard.
Current manufacture of tractor in India…..
Structure of the Indian Tractor Industry
The Indian tractor industry has around 13 national players and a few regional players. The
industry is dominated by Mahindra and Mahindra (M&M) with a market share of around
41.4%, followed by Tractors and Farm Equipments TAFE, which holds around 22% of the
market. The other major players include Escorts, L&T-John Deere, and International Tractors
Limited. During the last few years, the industry has seen some consolidation with M&M
acquiring Punjab Tractors (PTL) and TAFE acquiring Eicher Tractors. Most of the tractors
sold in India are in the 21-50 HP range, with the 31-40 HP category alone accounting for
around 50% of this.
The long-term prospects of the Indian tractor industry are highly dependent on Government
policies for the agriculture sector. Historically, most tractor sales are done on credit even as
over the last few years financial institutions, facing an increase in their non-performing assets
(NPAs), have resorted to some tightening of credit norms. Also, during 2009-10, there has
40
Market Share Of Company In India
been a sharp increase in cash purchases, reflecting the rise in disposable incomes in the rural
markets. Most of the tractor financing done by banks comes under priority sector lending, a
directed-lending mechanism of the Government of India.
In terms of volume, India is one of the largest tractor markets in the world, besides China and
the USA. The prospects of the domestic industry are highly linked to monsoon rains, which
remain a key factor in determining agricultural production. Better irrigated States like Punjab
and Haryana have a high tractor density (over 100 per 1,000 hectares), while States like
Rajasthan, Gujarat, Himachal, Tamil Nadu, Maharashtra, Andhra, MP and West Bengal have
low levels of tractor penetration—a pointer to the substantial growth potential that the latter
set offers. On an all-India basis, tractor penetration remains low at around 13 per 1,000
hectares. Besides being used in farming, tractors find application in activities such as
harvesting and irrigation, land reclamation, drawing water and powering agricultural
implements. In addition, lately, the tractors are also being used for non-agricultural purposes
including haulage in construction and infrastructure projects which has expanded the tractor
market. The Indian tractor market, thus, is expected to grow in future and remain one of the
biggest tractor markets in the world.
41
42
Leading Company In Tractor Market Of India 2010
Mahindra Tafe EscortSonalikaFiat New HollandJohan Deere
Mahindra
Mahindra embarked on its journey in 1945 by assembling the Willys Jeep in India and is now
a US $6.3 billion Indian multinational. It employs over 1,00,000 people across the globe and
enjoys a leadership position in utility vehicles, tractors and information technology, with a
significant and growing presence in financial services, tourism, infrastructure development,
trade and logistics. The Mahindra Group today is an embodiment of global excellence and
enjoys a strong corporate brand image.
Mahindra is the only Indian company among the top tractor brands in the world. Mahindra's
Farm Equipment Sector is the proud recipient of the Japan Quality Medal, the only tractor
company worldwide to be bestowed this honour. It also holds the distinction of being the only
tractor company worldwide to win the Deming Prize. The US based Reputation Institute
recently ranked Mahindra among the top 10 Indian companies in its Global 200: The World's
Best Corporate Reputations list.
Mahindra Tractors Is Number One In Sales In India - The Largest Tractor Market In
The World. And It Has Been The Market Leader Since 1983.
Its Sales Are Predominantly In The States Of Gujarat, Haryana, Punjab, Maharashtra
And The Southern States.
Its Sales In Gujarat Are Under The Label Mahindra Gujarat And Its Sales In Punjab
Are Under The Label Swaraj. In 1999, Mahindra Purchased 60% Of Gujarat Tractor
From The Government Of Gujarat.
43
Mahindra enjoying very large market share in indian tractor industry. its domestic
performance is very good amogng the tractor manufitures.
44
No.
Of T
ract
or+46% growth in 2010
*Includes PTL/Swaraj Division Sales From Aug 08 Onwards.
Exports grew 27.5% this year to touch 8,837 tractors as compared to 6,933 tractors exported
last year, outperforming exports registered by the Indian tractor industry which de-grew 6.5%
at 36,394 tractors.
45
No.
Of T
ract
or
6.3% CAGR F03 To F10
The Financial year ended 31st March, 2010 was a landmark year for the business. Mahindra
Company became the world's largest tractor Company, in terms of the number of tractors
sold, fulfilling a long cherished dream. 'Mahindra Tractors' is an iconic brand and enjoys a
Strong following in the India rural heartland. In this period, your Company sold 1,66,359
tractors
Under its Mahindra and Swaraj brands as against 1,13,269 tractors sold in the previous year,
a 46.9% increase. • This resulted in the market share going up to 41.4% from 40.8% last year
and marked the completion of 27 years of leadership of the Farm Equipment Sector in
the Indian Tractor Market. The above volumes included the sale of more than 1,00,000
Mahindra branded tractors in the domestic tractor market in a single financial year, the 1st
Tractor Company in the country to achieve this distinction.
46
Total Sale Of Tractor On Domestic Market
Mahindra is India’s one of the best automobile company . In tractor industry Mahindra is
the leader and Mahindra has 3 brand fist is Mahindra Gujarat working only in Gujarat. Swraj
is also a only one region brand sailing tractor as sworaj and other state they sale product as
Mahindra brand name. 7 plant in india.
47
Mahindra Manufact
uring Plant In
India
TAFE
TAFE is a US $750 million tractor major incorporated in 1960 at Chennai in India, in
collaboration with Massey Ferguson (now owned by AGCO Corporation, USA)
TAFE acquired the Eicher tractors business, its engine plant at Alwar (Rajasthan) and
transmissions plant at Parwanoo (Himachal Pradesh) through a wholly owned
subsidiary, TAFE Motors and Tractors Limited. A member of the Amalgamations
Group of Chennai, this company has four plants involved in tractor manufacturing.
TAFE exports to 80 countries with major markets being Bangladesh, USA,
Afghanistan, Yugoslavia and Sri Lanka.
TAFE also has an ongoing collaboration with AGCO Corporation, one of the world's
largest manufacturers and distributor of agricultural equipments.
Low capacity utilization is the Achilles' heel of TAFE. The present capacity
utilization of the company is about 70%. Prior to Eicher's tractor division acquisition,
it was about 62.5%. With the industry expected to grow at a CAGR of 5-7% over the
next 5 years, it will take a long time for the company to achieve full utilization if it
grows at the expected CAGR. So the company needs to find ways to achieve 100%
capacity utilization at the earliest.
The Company is a very small player in the high margin large size tractor segment
(Above 41 HP). Even geography wise, TAFE has limited presence in states of
Western and Southern India which are expected to be the major growth drivers over
the years to come.
48
49
TAFE MANUFACTURI
NG PLANT IN INDIA
50
CAGR +11.79
TAFE+EICHER TRACTOR- SALES FY05 TO FY10
Escorts
Commenced manufacturing operations in 1964 and today has 4 manufacturing plants
in India.
Capacity: 98000 Tractors per annum.
Have 3 recognized and well-accepted tractor brands
Since inception, have manufactured over 1.1 million tractors. Current market share in
the tractor segment is 13%.One of the top 3 manufacturer & exporter of Agri
Machinery with leadership in 41-50 HP range Tractors. Markets tractors & farm
equipment in 41 countries. Developing and launching new products regularly
51
Escorts 3 Brands
Escorts have 3 brand of tractor and every tractor is differ from each other on the base of
horse power the escort is very famous for its low HP tractor.
Escorts Sales State Wise
The company having customer base in north India its maximum sales in that reign.
52
53
54
ESCORTS SALES FY05 TO FY10
CAGR 12.96
ITL- Sonalika
Sonalika group was established in 1969 and started with manufacturing of farm
implements. Subsequently, ITL was incorporated on October 17, 1995 for the
manufacture of Tractors. ITL mainly manufactures various Tractors of Sonalika brand
between 30 H.P to 90 H.P, alongside its two other brands viz. Solis and Class . ITL
had earlier sold 20% to Renault Agriculture (RA) but bought back the holding after
RA was acquired by CLAAS. The company has state of art manufacturing facilities
located at Hoshiarpur (Punjab) for tractors.
ITL is the fifth largest tractor manufacturer in India (around 8.9% market share in
FY09) having strong market position in Northern and Western India.
The company has a production capacity of around 49,000 tractors per annum. The
company sold around 29,500 tractors during FY09 with over 90% of the tractors sold
in domestic market and the remaining tractors exported to various destinations
including Nepal, Bangladesh, Africa and South America. The company’s exports at
2430 units grew by over 100% during FY09 and are expected to grow sharply in
FY10 as well.
The company’s export volumes are driven by large orders from African countries
which are financed by the Government of India. In the domestic market, the company
is particularly strong in the North Indian market; however the presence in the South
Indian market remains weak.
The company remains strong in the Northern market; however the presence
remain weak in South –
ITL is particularly strong in the Northern states such as Haryana, Punjab, UP,
Himachal Pradesh and J&K with strong market shares and the market shares in most
of these states has improved during the last financial year. The company, however,
remains weak in the Southern states including AP, Karnataka, Tamil Nadu & Kerala
and the market share in these states has declined during FY09 in spite of the
company’s efforts to improve its presence in this region. The main reason for the low
market share in Southern states is the weak dealer network in the region. The
55
company has a dealer network of around 750 dealers which is particularly strong in
Northern states; however the company’s presence remain weak in South India due to
inadequate dealer network in the region.
Future plan
The company having his more focus on north India. But he want to create his market
place in growing Southern state AP, Karnataka, Tamil Nadu & Kerala.
Stronger focus on exports - The export segment is more profitable than the domestic
market due to the export incentives available and it provides geographical
diversification to the company. The key destinations for the company include Nepal,
Bangladesh, Africa and South America. The company is able to compete in the
African and Asian markets due to the absence of stringent emission norms in these
markets. In addition, select ITL products have approvals for US and Australian
market.
56
57
58
FY15 Is 50,000 TractorCAGR 8.37
ITL (SONALIKA) SALES FY05 TO FY10
New Holland
New Holland Fiat India is a 100% subsidiary of USD 14bn. CNH Global, - is one of
the Worlds’s leading Agricultural Equipments Company, the Leading manufacturer of
Agricultural and construction equipment manufacturer in the world. a majority owned
subsidiary of Fiat Group.
Spread across 60 acres in the Greater Noida District of Uttar Pradesh, the state-of-the-
art plant with an initial investment of over Rs. 250 Crores, is designed on the lines of
New Holland’s international manufacturing facilities.
The company has focused its strength in agricultural mechanisation to build a world-
class tractor company in India. It’s rationale for investment in India to be driven
primarily by its long involvement and in-depth understanding of the Indian
agricultural industry.
Last year it produced over 23,000 tractors in 35-75 Hp segment with over a 90 per
cent indigenisation. Not just India, tractors made by New Holland India have made
their mark in the rest of the world. Today completely built tractors manufactured in its
state-of-the-art Greater Noida plant are being exported to over 51countries in Asia,
Africa and Middle East, Australia, New Zealand, Latin America and North America.
A true testimony of the New Holland India quality, that the world admires.
Exports
Not just India, tractors made by New Holland India have made their mark in the rest
of the world. Today completely built tractors manufactured in its state-of-the-art
Greater Noida plant to over 39 countries around the world in tractors to Asia, Africa,
Australia, Europe, Latin America and North America.In addition to tractors, New
Holland India exports sub-assemblies and components manufactured in the plant are
also exported to other CNH subsidiaries worldwide. A true testimony of the New
Holland India quality, that the world admires.
59
The company's manufacturing unit in India has already achieved 90 percent
indigenisation, including its engines in 55-75 HP range under license from IVECO.
New Holland also exports from India fully-built tractors to about 40 countries in
North America, West Asia, Africa, Australia, South-East Asia and Latin America.
Besides this, it exports sub-assemblies and other tractor parts to the production
facilities of its parent company, CNH Global, across the world.
Future Plans
New Holland India plans to expand its operations in the country with a strong focus
on the domestic market as well as creating an important global source hub for small
tractors. It does not want to confine its presence to the tractor market and intends to
add some of the products from its global portfolio in India. These include farm
machinery and agricultural equipment, such as sugar cane harvesters, balers, mowers
and implements for industrial applications. In short, it is aiming to become a major
farm equipment company in India over the next few years.
60
61
62
NEW HOLLAND SALES FY05 TO FY10
CAGR +14.59
John Deere
John Deere established a green field project in 1999 under a 50:50 joint venture with
Larsen & Toubro Limited (L&T).
John Deere was established in 1837 in USA. The company started its operations in
India by setting up a green field project for manufacturing modern agricultural
tractors at Sanaswadi near Pune. The plant was set up in 1998 – 99 and production
commenced in early 2000. Global Technology center to support product development
was set up at Pune in 2007.
John Deere Says About Indian Market
63
64
CAGR +30.29 Maximum in the industry
JOHN DEERE SALES FY05 TO FY10
65
Chapter-
III
Some Long-Term Demand Drivers For The Industry Drivers Of Tractor Growth Agriculture In India Agriculture Development In India Indian Agriculture Industry Overview (SWOT Analysis) Need For Agriculture Mechanization
66
Some Long-Term Demand Drivers for the Industry
India is mainly an agricultural country. Agriculture accounts for approximately 25 percent of
India's GDP. Agriculture in India is the means of livelihood of almost two thirds of the
workforce in the country and employs nearly 62 percent of the population. It accounts for 13
percent of India’s exports. About 42 percent of India's geographical area is used for
agricultural activity. It is therefore considered to be the vital sector of the Indian economy.
The Indian tractor industry is the largest in the world, accounting for one third of global
production. The other major tractor markets in the world are China and the USA . Volume
growth in the tractor industry in the past four decades shows a compound annual growth rate
(CAGR) of ten percent, despite seasonal variations that cause changes in tractor demand and
subsequently impacting industry volumes.
In the long term, the industry growth is expected to continue from a moderate CAGR rate of
five percent to seven percent largely due to the continued thrust by the government to
increase agricultural GDP. We expect the domestic industry to stabilize at about 350,000
tractors per year and exports to reach in excess of 60,000 tractors per year by 2010.
Many factors influence the tractor demand. Primary demand comes from agricultural growth
and the secondary demand comes from allied uses of tractors, primarily haulage. Credit and
money availability has always impacted tractor industry and mechanization fortunes.
Tractor testing facilities are currently available in India at CFMT & TI, Budni.
67
DRIVERS OF TRACTOR GROWTH
Many factors influence tractor demand. Primary demand emanates from agricultural growth
and the secondary demand from dual use of tractors, primarily haulage. The primary usage
(agriculture) is dependent upon the following drivers:
• Expansion and Extension of Agricultural land:
1. From the past 20 years, it is evident that irrigated and arable land has not
increased. There is an immediate need to expand agri-land by conversion of
wasteland.
2. Availability of water is another important factor in guaranteeing a predictable
agricultural yield, without having to depend on the yearly variations and
unpredictability of monsoons. In the last four decades, very few additions have
occurred with respect to direct-irrigation potential. Almost all growth has
resulted from exploration of groundwater, which has led to exploitation and
depletion.
3. Government sponsorship of major and monumental projects like the
interlinking of rivers /national policy on water resources and implementation
is a foregone need. Even if the final completion is a generation away, the
incremental progress that will be made during the process of implementation
will catapult Indian agriculture to more than the targeted four percent of GDP.
The short-term focus must be on increasing and maintaining natural water,
such as natural water storages, ponds, lakes and retention dams.
68
Value additions in Farming
1. Land is limited. Therefore, it must be our aim to get the maximum yield from every acre of
farmable land.
2. We have to look at the world as the source and consumer. The government must enable
farmers to move away from low-yield to higher-value crops in a judicious manner, in order to
increase farming income and to attract a new crop of young farmers.
• Return on Investment (RoI) increases in farming will attract educated youth and will
become another satisfying, future job-opportunity. Mechanization will, therefore, justifiably
increase,
helping the tractor industry as a whole.
1. RoI can increase only if price uncertainty and distress-selling can be
controlled. Storage of produce and the creation og infrastructure to distribute
on the world market is one solution.
2. Integration of Indian farmers to the world of commodity trading needs to be
expedited – road, rail, port and airport infrastructure must be enhanced to
expedite delivery.
• Credit and money availability has always been a big factor in the tractor industry’s and
mechanization’s fortunes. The government must initiate a long-term policy of zero or
marginal interest rates to enhance the use of agricultural mechanization.
1. Post-harvest use of agricultural mechanization and the sophistication in accessories and
supplements are inadequate There is a need to selectively subsidize these initiatives for a
69
short time to popularize usage and acceptance.
2. Commercial banks must be free to offer finance to all deserving customers with clear
intention to pay. At the same time, there must be a clear and transparent process to weed out
fraud and
‘no intention to pay’ categories. There needs to be a uniform loan policy and standardized
application format across all banks.
70
71
Agriculture In India
India ranks second worldwide in farm output.
Agriculture GDP
72
The agricultural sector of India has occupied almost 43 percent of India's geographical area.Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per cent of the country's gross domestic product (GDP) in 2009-10, and 10.23 per cent (provisional) of the total exports. Furthermore, the sector provided employment to 58.2 per cent of the work force.India is the second largest producer of rice and wheat in the world; first in pulses and fourth in coarse grains. India is also one of the largest producers of cotton, sugar, sugarcane , peanuts, jute, tea and an assortment of spices.The total geographical area of India is 328.7 million hectares of which 140.3 million hectares is net sown area, while 193.7 million hectares is the gross cropped area, according to the Annual Report 2009-10 of the Ministry of Agriculture.Production According to Annual Report 2009-10 of the Ministry of Agriculture,
production of food grains during 2009-10 is estimated at 216.85 million tonne (MT) as per 2nd Advance Estimates.
India’s record of progress in agriculture over the past four decades has been quite
impressive. The agriculture sector has been successful in keeping pace with rising demand
for food. The contribution of increased land area under agricultural production has declined
over time and increases in production in the past two decades have been almost entirely due
to increased productivity. Contribution of agricultural growth to overall progress has been
widespread. Increased productivity has helped to feed the poor, enhanced farm income and
provided opportunities for both direct and indirect employment. The success of India’s
agriculture is attributed to a series of steps that led to availability of farm technologies which
brought about dramatic increases in productivity in 70s and 80s often described as the Green
Revolution era. The major sources of agricultural growth during this period were the spread
of modern crop varieties, intensification of input use and investments leading to expansion in
the irrigated area. In areas where ‘Green Revolution’ technologies had major impact, growth
has now slowed. New technologies are needed to push out yield frontiers, utilize inputs more
efficiently and diversify to more sustainable and higher value cropping patterns. At the same
time there is urgency to better exploit potential of rainfed and other less endowed areas if we
are to meet targets of agricultural growth and poverty alleviation. Given the wide range of
agroecological setting and producers, Indian agriculture is faced with a great diversity of
73
Agriculture development in IndiaPre Green Revolution(Before 1960’s)
Boost in the productivity growth of coarse grains and pulses per unit of land
Green Revolution(Mid 60’s to Mid 80’s)
•Expansion of arable area and rapid growth in productivity of wheat and rice•Expansion of agricultural research•Establishment of national infrastructure
Post Green Revolution (mid 80’s to 2010)
•Continued growth in productivity through intensification of chemical and labor •Expansion of area under maize, cotton, sugarcane and oil seeds
needs, opportunities and prospects. Future growth needs to be more rapid, more widely
distributed and better targeted. These challenges have profound implications for the way
farmers’ problems are conceived, researched and transferred to the farmers. On the one hand
agricultural research will increasingly be required to address location specific problems
facing the communities on the other the systems will have to position themselves in an
increasingly competitive environment to generate and adopt cutting edge technologies to bear
upon the solutions facing a vast majority of resource poor farmers.
In the past agriculture has played and will continue to play a dominant role in the
growth of Indian economy in the foreseeable future. It represents the largest sector producing
around 28 percent of the GDP, is the largest employer providing more than 60 percent of the
jobs and is the prime arbiter of living standards for seventy percent of India’s population
living in the rural areas. These factors together with a strong determination to achieve self-
sufficiency in food grains production have ensured a high priority for agriculture sector in the
successive development plans of the country.
An important facet of progress in agriculture is its success in eradication of its critical
dependence on imported food grains. In the 1950’s nearly 5 percent of the total food grains
available in the country were imported. This dependence worsened during the 1960’s when
two severe drought years led to a sharp increase in import of food grains. During 1966 India
had to import more than 10 million tons of food grains as against a domestic production of 72
million tonnes. In the following year again, nearly twelve million tones had to be imported.
On the average well over seven percent of the total availability of food grains during the
1960s had to be imported.
Indian agriculture has progressed a long way from an era of frequent droughts and
vulnerability to food shortages to becoming a significant exporter of agricultural
commodities. This has been possible due to persistent efforts at harnessing the potential of
land and water resources for agricultural purposes. Indian agriculture, which grew at the rate
of about 1 percent per annum during the fifty years before independence, has grown at the
rate of about 3 percent per annum in the post independence era.
74
Prior to the 1960s, India had to import most of its food. But improved farming techniques,
Including farm mechanization, the use of irrigation and high-yield grains, have greatly
Increased the food production and allowed India to become self-reliant with regards to food.
However, since most of the cropped area, even now, does not have any assured irrigation,
Monsoons assume a crucial role in influencing agricultural production.
1.1 Agricultural development
Agricultural development in India can be categorized into four major periods:
1. Pre-Green Revolution –This was before 1960s, when there was boost in the
Productivity growth of coarse grains and pulses per unit of land.
2. Green Revolution (mid 1960s to mid 1980s) – This was a period of expansion of
area and rapid growth in productivity of wheat and rice, expansion of agricultural
research and establishment of national infrastructure.
3. Post-Green Revolution (mid 1980s – 2000) – This was a period of continued
growth in productivity achieved through intensification of chemical use and labor,
and also expansion of area under maize, cotton, sugarcane and oil seeds.
4. The Current Stage (2000 – present) -- The current stage is characterized by the
following:
• Further diversification of cropping patterns from low- value to high-value crops,
such as fruits, vegetables, flowers and other horticultural crops for domestic
consumption, processing and export
• Regaining “Agricultural Dynamism,” a key goal of eleventh Five Year Plan
• Aiming to achieve a sustained growth rate of four to five percent.
• Improvements in farm mechanization
75
Indian Agriculture Industry Overview
SWOT Analysis
Strengths
The Indian agriculture is large, competitive and well developed, offering products at low
prices. The sector experiences a constant demand, as Indians have a strong preference
for fresh rather than processed foods and for local spices and ingredients. (The World
Bank, 1997).
Provides employment for a large Indian population,living in rural territories. Recent advances
in technology and government initiatives support the development of the sector. In pursuance
of the government policy to strengthen and promote IT led governance, the department of
agriculture and cooperation has been taking various measures to promote the use and
application of technology with the aim of making agriculture “online” for the use of farmers,
exporters, and traders, etc.
Weakness
One of the major weaknesses present for the agricultural sector in India is in the lack of
government support. Unlike in East Asian countries, the shift of the labour force from
agriculture to non-agriculture in India is peculiarly slow, largely attributable to rigid labour
laws in both the agricultural and industrial sectors. Inadequate road linkages also remain a
major constrain for the development of well functioning agricultural markets. A continuing
fragmentation of land-holdings, poor maintenance of existing irrigation systems and
declining soil fertility in some areas are other factors.
Another weakness is based on seasonality and the fact that agricultural sector output heavily
depends on the annual monsoon, as less than one-third of cropland is irrigated. The main
foodgrain crops, for example, and some cash crops (oilseeds, cotton, jute and sugar) depend
on the south-west monsoon (This brings 80% of India's rain, usually within a three-month
period from June to mid-September.
Opportunities
A growing population, rapid economic development, and political and social demands exceed
the mandate and capabilities of any corporation in an emerging economy (Bhagwati, 1998),
and India is no exception to this. A growing population has made industrial development one
of the Indian government's highest policy priorities; it is an important element of economic
76
development as it assists in raising national income at a more rapid pace. It is also a
precondition for continued agricultural development.
Although there are no food security concerns at present, better agricultural productivity will
hold the key to stable growth in food production, given the limits of the resource base. There
is an opportunity for the economic growth to benefit more people only if the country raises
agricultural productivity, improves its system of general education to help the millions who
must leave farming, and encourages labor intensive manufacturing industries.
Threats
About one-fifth of the country, 69m ha, is covered by forests and woodland, and one-half of
this area is reserved for the production of timber and other forestry products. However, there
are increasing concerns from environmentalists and local government over the rapid
depletion of forest areas, ecological factors, and scarcity of natural resources.
As income rises, India is becoming an increasingly important market for processed foods,
especially in the cities and among young people. Aware of quality and international brands,
consumers are less likely to support national products, and are more vulnerable to pay
premium prices for foreign products of better quality. This represents a potential substitution
to the local products, impacting the production levels of agriculture sector. Food support
prices for wheat and rice have given farmers little incentive to diversify and have filled
government storage facilities to overflowing, while keeping the market price of food grains
artificially high. Current agricultural policy, which supports cereal production, is exceedingly
expensive and will be unable to deal with the likely scenario of a shift in consumption from
cereal food towards non-cereal food. A lack of market infrastructure also hampers the
movement of crops, leading to sudden shortages. India has considerable potential as an
exporter of rice, cotton, many types of fruit and even flowers, but this has so far not been
tapped.
77
CURRENT TRENDS IN FARM MECHANIZATION
• Increased usage of haulage and non-agricultural applications. The nonagricultural customer
does not necessarily possess agricultural land.
• Moving towards secondary mechanization, leading to more use of new attachments like
reaper, combine, or seed drills.
• Due to land fragmentation (bifurcation of property and formation of nuclear family),
farmers with small land holdings (two to four acres) are buying tractors.
• Reduced availability of cheap farm labor.
• Business through tractor exchange (joint use) has gone up significantly in northern and
western states of India.
• In the traditional northern Indian states, most of the tractor sales in the last few years were
replacement in nature, signifying old markets. But in most other states, new markets have
developed.
78
Need For Agriculture Mechanisation
AGRCULTURE MECHANISATIO
N
Reduction In Work Force
Increasing Productivity
Agriculture Based Energy Policy
Achieving Sustained Growth Rate Of 4-5%
Chapter-
IV
Growth Of Tractor Industry Technological Status Of The Tractor Industry Capacity Utilization Tractor Penetration Industry Sale Across The Region
79
Growth of Tractor Industry
The Indian Tractor Industry, the world's largest, grew by 31.7% this year to touch 4,00,203
Tractors, compared with 3,03,921 Tractors sold in the corresponding period last year. This
growth, despite a weak monsoon and a badly-affected Kharif crop this year, is because the
dynamics of the rural economy has undergone some fundamental changes in recent times.
The Government has enhanced its support
for the Agriculture Sector with increased levels of credit and better minimum support prices.
Increased rural outlays including those under initiatives like the National Rural Employment
Guarantee Scheme ("NREGS") have helped improve rural incomes. New employment
80
+37% Growth In F10
No. Of Tractor
avenues have emerged and on an average, farm incomes now contribute to less than half of
rural incomes. All this has resulted in higher rural liquidity, ensuring strong demand, despite
the poor monsoon.
TECHNOLOGICAL STATUS OF THE TRACTOR INDUSTRY
The tractor industry, in India, has completed, more than, 25 years During this period, there
has been a large growth, in its production capacities and capabilities A wide choice of
competitive models, ranging from 12 to 75 HP, is now available, to the farmer. The tractor
industry, represented by the successful units, has now attained a maturity, as judged by its,
capacity and capability, to expand production, as and when, needed, to meet any sudden
surge in demand The successful units have, also, developed, expertise and capability, for
effecting horizontal transfer of technology, to other developing countries
The ancillary and support industries have, also, grown with the tractor units and, have
developed necessary capabilities, to supply components and subsystems in the required
quantities The ervicing and maintenance, facilities, have also, been well established.
Indian tractor industry, by and large, has yet to develop capacity and capability to innovate
and create new basics designs, of tractors, on its own The time and expense, involved, in
indigenous development, of these products, have acted as a deterrent to their innovative
efforts. Most of the successful units have set up R & D facilities approved by the DSIR
Though the R & D in industry lacks the standards and the. depth commensurate with Indian's
standard as a leading
tractor manufacturing country, which India is today. Manufacturers appear to be satisfied
with, the limited role, of their R & D establishments, in improving the existing products by
minor modifications, in the aggregates to bring out new models, prefer the case with the units
who have a substantial foreign equity participation Choose, an even earlier route of entering
into collaboration, for new models. Some progressive units, generally without foreign equity,
have developed capabilities to innovate and, have introduced new models, by improving
and/or up scaling some aggregates, in the tractors.
81
Capacity utilisation- the tractor industry had hit a low during 2002-03, following
large capacity additions and a volume slump. After that, capacity utilisation improved
steadily, but remained moderate at around 50% during 2008-09. In 2009-10, the
tractor volume growth has helped the OEMs improve their capacity utilizations;
however, there is still excess capacity in the industry. Thus, over the medium term,
most tractor manufacturers would not need to make any significant capital
investments in building capacities.
The domestic tractor industry has to cope with demand volatility on account of
cyclical trends and the strong linkages it has with agricultural production and
monsoon rains. for tractor exports, while a major part of that currently goes to USA,
the OEMs are now exploring various other markets across Europe, Asia and Africa
for future exports.
82
India
World
USA
2.5 7.5 12.5 17.5 22.5 27.5
India World USA
tractor 13 19 29
Tractor Penetration On Every 1000 Hectares
83
India Having Defer Penetration From The World And Other Country
Industry Sale Across The Region
The biggest markets for the tractor industry include States like Uttar Pradesh (UP),
Andhra Pradesh (AP), Madhya Pradesh (MP), Rajasthan, and Maharashtra, which
together accounted for around 50% of the total tractor sales in India during 2009-10.
The tractor industry witnessed a strong y-o-y growth of 28.3% during 2009-10, with
most of the States reporting positive growth during the year.
Northern Region - Remains the largest tractor market in India with sales of around
1,67,000 units as of 2009-10. This region reported a growth rate of 35.7% in volume
sales in 2009-10 over the previous fiscal, with the key contributors including UP,
Punjab, Haryana and Rajasthan. The northern region benefited from higher MSPs (for
crops), limited availability of labour (forcing higher mechanisation. In some cases,
farmers also received compensation for the Government’s acquisition of select land
patches (adjoining highways), which increased the availability of cash with them.
84
Industry Sale Across The Region
Feedback from industry players suggests cash purchases (including purchases using
Kisan Credit Card) in some northern States increased to 35-40% of the total tractor
volumes in 2009-10 from 10-15% in the past.
Eastern Region- tractor volumes continued to report strong growth in 2009-10, albeit
on a small base, and went up by 53.8% over 2008-09, being driven mainly by the
higher MSPs announced for paddy. Within the region however, many financiers
remained reluctant to finance tractor purchases in some States like Bihar.
Nevertheless, in Bihar, tractor volumes grew 66% over 2008-09 to around 29,000
units in 2009-10, thereby accounting for over 50% of the total sales in the eastern
region. The Bihar market, where tractor penetration had been low historically, has
shown sustained growth over the last few years and become one of the important
markets for the tractor industry. Overall, in the eastern region, growth in tractor
volumes is expected to moderate, going forward, as the benefit of a low base get
diluted gradually.
Western Region - sales of around 92,000 tractor units during 2009-10—a growth rate
of 35.7% over the previous fiscal—benefiting particularly from the strong
performance that Maharashtra, Gujarat and MP posted during H2, 2009-10 (55% y-o-
y growth over H2, 2008-09). The factors contributing to the strong growth in the
region during H2, 2009-10 included a benign base effect, higher crop prices (of
sugarcane and cotton in Maharashtra, and of cereals and soyabean in MP), and greater
availability of retail finance.
Southern Region- Tractor sales was relatively modest during 2009-10, with the
growth rate being around 11.9% over the previous fiscal. While most States in the
region reported healthy growth, AP, which is the largest tractor market in the south,
de-grew by 10.4% in 2009-10. The AP market has been undergoing a volume
correction since 2007-08, with the preceding four to five years having witnessed a
large and sustained volume growth; this factor apart, the de-growth of 2009-10 was
also aided by irregular monsoons. The other big market in the southern region,
Karnataka, reported growth of 74% in tractor volumes in 2009-10.
85
86
Region-wise Market Shares of Various Players
Chapter-
V
Future Of Tractor Industry SWOT Analysis Of Tractor Industry Challenges For Tractor Industry Rate Of CAGR Of Domestic Market
87
Future of Tractor industry
The tractor industry in India has been on a growth trajectory since the second half of 2003-
04, after going through a minimum variation for consecutive years. The key factors driving
this growth are increasing farm incomes, aggressive financing resulting in easy availability of
lowcost credit, sharp inventory correction and strong export growth. The demand in tractor
industry is expected to grow mainly due to the agricultural sector, with the expected increase
in agricultural production. Also, the shift in trend for demand towards higher HP tractors is
expected to continue. This will be further strengthened by the launch of several new models.
In the next 2-3 year, demand for tractors is expected to increase significantly in the eastern
states, where traditionally, tractor usage has been low. Exports are expected to increase
significantly as
several Indian players are targeting the “hobby farming” segment in the U.S, which is
considerably large. Also, tractors of most Indianmanufacturers comply with the emission
standards accepted in the U.S.
Most exports are likely to be through overseas partnerships or joint ventures. McKinley has
also forecasted tractor population requirements of 75 lacs over the next 18 years vs. current
population of 26 lacs. The extension of the 150 per cent deduction on R&D expenditure up to
march 31, 2009, in the Budget 2008-09 will also benefit the industry in terms of new product
development besides increase in the area under irrigation under the Bahrat Nirman Project
and the micro irrigation scheme.
Future Expectations of Tractor Industry
The future expectation of tractor industry is to growing the 8% growth rate from 2011 and 2012 CRISIL.
88
Government concern is agriculture growth about to 4% in 2015.
89
SWOT Analysis of tractor industry
Government support for the agricultural sector. high rate of Indian GDP. Government want 4% agriculture growth in 2015 .Easy availability of Finance
Low penetration of tractors in Indian agriculture.Export of tractors worldwide. using for other work like. Airplane careering, commercial use like contraction ,land filling ,etc
s w
O
sale depend on monsoon.Indian farmer are low income .Farmer have little land for farming .
T Government focusing only on growth and agriculture having minimum growth in comparing to other sector.Some part of India is ratio on maximum penetration of tractor.
CHALLENGES FOR TRACTOR INDUSTRY
Buying Capacity –
Reducing of average age of tractor buyers from the age group of
above 40 to younger people
Increasing demands
Higher expectations on comfort levels
Importance for styling and appearance
Better finish (Paint finish like cars)
Importance for brand identities
Fuel economy
Awareness about latest technologies
Likes on new models
Longer life – resale value
New Product Development
Rapid prototyping-component development
Engine performance - power train research and development
Styling – availability of latest software’s and technologies
Accelerated testing techniques reduce the development lead time to help industry to
introduce new models in shorter periods
New Regulations –
Emission norms in near future – Bharat TREM IV / EURO 3/ US TIER 3
Homologation test facilities
Dedicated engine development test cells and research labs
Accelerated durability test rigs
Engine performance improvement
90
New Regulations – Noise/Safety/Other Regulations
NVH Center of Excellence
Availability of anechoic chambers
Quiet rooms for subsystem level development
Latest software tools for NVH(spell out)
Specialized test tracks
Center of Excellence for passive safety
Roll over testing
Crash testing
ROPS Testing
Various gradients
Various braking surfaces
Vehicle dynamics
Alternate Energy - Alternate energy source development and tractor development are
interdependent
Increased focus on agri-based energy policy in near future
Production of fuel oil and biomass power
Lucrative alternate markets for farm produce
Reduce the country’s dependence on imported fuels
Alternate energy development – most important agenda for power train research and
development
Application of electronics - The recent developments in applications of electronics on
agricultural tractors like GPS and Auto Cruise systems have helpedfarmers greatly.
91
Export Potential
Testing under various climatic conditions – one of the challenges for export of tractors
Testing and certification as per OECD
NATRIP would represent India in technical committees worldwide
Expert teams to coordinate with standardization
Cooperation with other test agencies worldwide
Advanced homologation labs to test as per regulations by 2015
92
Rate Of CAGR Domestic Market In India
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY150
50000
100000
150000
200000
250000
300000
350000
M&M+PTL
TAFE+EICHER
ESCORTS
SONALIKA
FNH
JD
OTHER
93
94
TOTAL TRACTOR SALES FY05 TO FY10
CAGR +12.1
Chapter-
VI
LIMITATIONS
CONCLUSION & RECOMMENDATIONS
95
LIMITATIONS
Limited Time period but the topic is very large only use those important aspects of the Indian
tractor industry which is important and affect the industry. Tractor industry is very big every
company is famous in its own region.
Although every effort has been in to collect the relevant information through the sources
available, still some relevant information could not be gathered.
Confidential Information: some company on account of confidential report has not
disclosed its figures.
Research includes agriculture and automotive manufacturing this is very large subject.
96
Conclusion & Recommendations
Conclusion
Tractor industry have become an indispensable part of our lives, tractor industry provide
work fast and its give chance to reduce the time taken to forming and its growth is constant
from last years. Behind this betterment go the efforts of those in the industry, in the form of
improvement through technological research. What actually lie behind this betterment of the
automobiles are the opinions, requirements, likes and dislikes of those who use these
vehicles. These wheeled machines affect our lives in ways more than one. Numerous surveys
and research are conducted throughout the world every now and then to reveal one or the
other aspect of tractor industry. The future is very good and India surely becomes the world
power in the years.
The Indian tractor industry and allied businesses are among the select success stories in the
country’s manufacturing sector, but their achievements are not yet widely acknowledged. The
leading Indian tractor manufacturers have gradually built their design, engineering, and
manufacturing competencies over the last couple of decades. The impressive growth of the
domestic tractor market has allowed them to scale up their operations. Several of them now
export to world.
97
Recommendations
1. Tractor industry is very attractive and complicate when u doing business with the
industry know the risk is some factor that always affect the business.
2. Indian brands have to better in on their technology, quality so that they can keep p
with the foreign brands.
3. Indian tractor brands should formulate strategies to improve their brand names.
4. Since foreign brands have better technology, so the Indian brands have to try and
adopt the same technology.
5. Both Indian and Foreign brand have to improve their service quality and offer
various schemes.
By analyzing the industry on various parameters with the help of implementing
Fundamental and Technical tools we came to know that this industry has a lot of
potential to grow in future. So recommending investing in tractor Industry have no
doubt is going to be a good and smart option because this industry is booming like
never before in India.
98
Bibliography
99
Bibliography
Annual Reports & research reports
CNH_ShapingOurWorld_09 (Annual Report) Draft Automotive Mission Plan 2006-2016 Determinants of Competitiveness of the Indian Auto Industry Indian Tractor Industry on Growth Path (KRC RESEARCH) 2009_AGCO_Annual_Report Tractor industry: robust rural liquidity supports demand (ICRA RATING FEATURE
MAY 2010) Tractor Industry in India – Present and Future Tractor-Market-in-India-An-Analysis 2010 Automobiles Sector in India: Fast Growth (BRIC Spotlight Report) Mahindra 03 FES Analyst ppt India’s Role in World Agriculture (Directorate-General for Agriculture and Rural
Development European Commission) GROWINGA BUSINESS AS GREAT AS OUR PRODUCTS (Deere & Company
Annual Report 2009) INTERNATIONAL TRACTORS LIMITED 2009 (ICRA Credit Perspective) M&M_AR_2009-2010 Indian-Auto-Components-Industry-Report-2009 Automobile-Industry-in-India research 2009 Auto India Magazine.
Internet
100
Wikipedia.com Google.com www.icraindia.com
101