13 May, 2021
New Delhi: Mahindra and Mahindra Ltd (M&M), India’s largest tractor company is witnessing growth in demand for farm equipment, triggered by the people movement seen over the last year. Besides seeing record sales for tractors last year, it sold over 1,000 units of rice transplanters as demand outstripped supply.
M&M plans to double volumes this fiscal and is investing Rs 200 crore with its suppliers at Pithampur to set up a dedicated plant for farm machinery, Hemant Sikka, president, farm equipment sector, M&M told ET Auto in an interview. Meanwhile, the development of its ambitious K2 tractor series remains on track. Excerpts:
Q: How do you think the fast-spreading virus in the rural areas would impact tractor demand this year?
The agriculture-related factors are very positive. We have had a very good Kharif procurement season, Rabi sowing has happened very well too. It is 3% more than last year, which itself was a bumper cropping year. With a good monsoon forecast, we are expecting a bumper crop this year again. So cropping, sowing, monsoon and government procurement – all factors are looking very good.
Farm mechanization in India is lagging behind as the country largely deploys tractors but not farm machinery. We have 10% of the global tractor market in India but only 1% of the global farm mechanization market here. Hemant Sikka
However, the second covid-19 wave is very different from the first wave when the rural areas were largely not impacted. But this time what we have seen in the second wave is that it is now spreading wider and deeper into the rural areas and that is a matter of concern for us. Obviously, if it spreads into the rural hinterland, it will certainly disturb sentiments in those areas.
So while we are very positive with the Agri factors, sentiments around covid-19 is a clearly visible risk factor. However, we will get a better idea over the next 3-4 weeks. If we are able to control and bend the curve timely, the rural economy will bounce back sooner.
Q: How does reverse migration impact the demand for tractors and farm equipment?
Large-scale reverse migration impacts us in two ways. Firstly, the supply chain gets disturbed because suppliers employ migrant workers. When this workforce goes back to its native places then obviously the suppliers cannot recruit new people in a jiffy. So, as a result, the production output at our supplier's end is disturbed, which impacts our production too.
Secondly, when migrant labour goes back to their villages, they get involved in local work. Last year, we saw that many people who returned to their native places bought tractors because they wanted to work on the farm fields. So incoming manpower to the rural areas adds to the rural economy.
Q: But when we have more manpower on the fields, do they prefer less farm mechanization as there are more hands at work?
This has to be understood on a state-by-state basis. For example, there is a lot of migrant labour that works in rural Haryana, Punjab, Tamil Nadu, Gujarat, and Maharashtra. When they return to their native places, their states see a surge in economic activities as the returning workforce also brings cash.
However, the states from where the migration has happened to see reduced availability of labor for farming activities. As a result, the landlords are opting for farm equipment. We have clearly seen that over the last year two of our products, the potato planter, and the rice transplanter, are doing very well.
We saw very strong demand for our rice transplanters and we were able to sell more than 1,000 units in the last one year. The demand outstripped supply. Hemant Sikka
In fact, last year we launched two new products, one was MP461, which is a walk-behind four-row rice transplanter. The other is a four-row ride rice transplanter, on which you can either walk behind or also ride. It’s called the LE4. We saw very strong demand for both these products and we were able to sell more than 1,000 rice transplanters in the last year. The demand outstripped supply. This is a clear indication that states such as Punjab, Haryana, Maharashtra, Gujarat, and others would increasingly deploy farm machinery in near future.
So while the trigger was reverse migration, the landowners are opting for farm mechanization. Repeat farmers as customers are coming back with demand as they have realized that they may have good hands working on the fields but productivity, yield, and quality improve with farm mechanization and the work becomes easier.
Q: But does it increase the overall cost of farming?
We believe that farm mechanization is a step in the right direction. Farm mechanization in India is lagging behind as the country largely deploys tractors but not farm machinery. We have 10% of the global tractor market in India but only 1% of the global farm mechanization market here. So I think there is a huge scope to bring mechanization solutions at Indian prices to our farmers, even the government subsidizes many of these products.
We are trying to bring the best solutions from our overseas arms. For example, both the above-mentioned rice transplanters are from Mitsubishi Mahindra Agricultural Machinery. We have localized these products and launched them at a very aggressive price. As a result, we believe that the farmer is able to see the value, and we have set a target to double this volume to 2000 units this year.
Similarly, we are trying to bring some harvesting technologies from Sampo Rosenlew. It is in the pipeline, we will let you know once we are ready to launch that product. So, it is a very exciting time for farm mechanization in India and M&M views it as a very promising space.
Q: Are these farm equipment locally assembled or produced?
The key to growing farm mechanization in India is being Atmanirbhar. We have to localize all this equipment. All our rice transplanters are heavily localized in India. Similarly, all farm implements follow a strong localization strategy. We don’t believe in importing these products as we want to pursue local manufacturing and that’s how we will be able to give world-class technologies to our farmers at Indian prices.
We are setting up an all-new plant just for farm machinery in Pithampur (Madhya Pradesh). The civil work is almost done and we want to commence operations in Q4 this fiscal.
Q: How much is the company investing in the upcoming plant for farm machinery?
We, along with our key suppliers, would be investing Rs 200 crore. We plan to make rice transplanters, potato planters and harvesters at the upcoming unit. In the next 5 years, we expect farm mechanization to gather momentum like never before in India.
Q: Has farmer agitation in North India impacted tractor demand?
Last year the tractor industry grew by 27% year-on-year touching 9 lakh units in 1 year, the highest ever in the Indian tractor industry. These volumes were recorded despite two months of nationwide lockdown. It underlines that the tractor industry witnessed very strong sentiments across the country.
I will not single out any state but at the country level all the agriculture factors are looking positive, we just need to keep a close watch on how covid-19 progresses over the next 4-5 weeks. And if we are able to bend the curve in most of the states, I think the demand would come back.
Q: How are tractor exports shaping up?
Our largest market outside of India in the USA and we exported more than 21,000 tractors in the USA last year despite all production and supply chain bottlenecks that we faced. This was despite the priority that we gave to the domestic market till Diwali on account of robust demand. We were able to support export orders only after Diwali last year.
Similarly, our growth in Turkey was almost 80% last year compared to the year before. So, the turkey market has also stood very well for us.
Even the Brazil market is shaping very well for us. And overall other export markets in the nearby countries – Nepal, Bangladesh, Sri Lanka also did well. So overall it was a very satisfying year despite so many constraints. We were able to carve a 6% growth in export volumes last year.
Q: Is the tractor industry witnessing any parts shortage like automotive is witnessing for semiconductors?
Thankfully the tractor industry does not use semiconductors so it did not face any problems with regards to it as the auto industry. However, we faced few issues with certain parts, which were more localized. For example, the large size tyre capacity is still very short. We are in touch with all large tractor tyre companies and everyone has been putting investments, which we believe will start coming in Q2. There is no shortage for small-size tires but only for the large-sized ones, especially 14.9 inches and 16.9 inches (width) variants.
Q: Steeply rising commodity prices have been one of the key concerns for automakers lately. How are the input costs playing out in the farm equipment industry?
The commodity prices have seen a kind of unprecedented growth that I have not seen in the last three decades. We are very concerned about the steep rise in commodity prices in the last 5-6 months. As a result, we have taken 2 price increases – 1 January and 1 April this year. More price hikes may happen in subsequent quarters.
Q: With Rs 100 crore of incremental investments, last year M&M announced that the Zaheerabad unit would be the hub for the upcoming K2 tractor series. Is the project on track for commercial launch?
The K2 platform is the most ambitious tractor project that we have undertaken at Mahindra. This is a project that would be simultaneously launched in India, Japan, and the USA. We are very optimistic about the product and currently, it is a work-in-progress. We have already said that we will be making a new investment at Zaheerabad (plant) to manufacture the K2 series of tractors. All that work is on track and is a work-in-progress, and we will let you know more in the next few quarters.
Sonalika Sold Overall 9,130 Tractors In April’21, Registered 851% Domestic Growth
M&M Decides To Advance The Schedule Maintenance Shutdown Of All Its Plants In May For Four Days
Escorts Ltd. will temporally and selectively shut down manufacturing operations this weekend
7 steps to improve the battery life | Tractorgyan
Tractors are an essential part of the farmer. Taking care of a tractor is also an essential part of...
Importance and types of Cash crops in India | Tractorgyan
Cash Crops like any other crop are important. As we know farming has a required season and required...
Top 10 Tractor Companies in the World in 2022
For farmers, tractors are the most precious asset. Farming in the twenty-first century would be unth...