M&M plans new tractor facility in Brazil as part of its global push

27 Jul, 2022

As part of its strategic global expansion, Mahindra & Mahindra, the world's largest tractor maker, plans to set up an assembly plant in Brazil - the sixth largest tractor market on the planet.

With a manufacturing or assembly base in US, Turkey and India, three of the top five tractor markets, the maker of Arjun and Novo tractors sees its volumes doubling in Brazil in the next few years and hence it is increasing its footprint with a local manufacturing base, said Hemant Sikka, president for the Farm Equipment Business at Mahindra & Mahindra.

Annually, about 54,000 units are sold in Brazil, almost a two-third of the market is up to 110 horsepower, which is the mainstay for Mahindra & Mahindra. In a short span of time, Mahindra has already grabbed about 5.2% of the market.

“We are doubling down on Brazil, I'm very bullish about our prospect in the market. In the current global scenario, Brazil has become a major source of food grain exports and is like the breadbasket of the world. There is large agri exports potential from the country. We have doubled our market share and we hope to grow it further with the new assembly plant,” added Sikka.

Tractor is Mahindra Group’s flagbearer in the global markets. Apart from Brazil, Mahindra recently took over the sales and marketing of tractors in South Africa from its distributor to itself to have a sharper focus. It is currently formulating a plan to expand into South America and Africa.

With the new generation K2 platform from Mitsubishi Agricultural Machinery and Armatrac brand of Tractors from Erkunt - Turkey, Mahindra wants to penetrate deeper into Western Europe and SouthEast Asia in the coming years.

To be sure, the international business already accounts for a third of the company's total turnover. Its subsidiaries in Japan and North America combined today account for a billion dollars in revenues.

Sikka said he expects the international business to continue to outperform led by new generation tractors, farm implements and expanding global footprints.

Global tractor sales of Mahindra & Mahindra stood at about 38,000 units at the end of FY-22. Mahindra North America is its biggest hub outside of India, where the company sells about 20,000 tractors annually.

The direct exports from India too will double in the next three years said the president of Farm Equipment Business.

But apart from creating multiple nodes around the world, it is also expanding capacity locally in Zaheerabad and Nagpur. Mahindra wants to Nagpur into a significant export-oriented unit.

“We want to double our export volume to 40,000 in the next three years. Apart from international expansion, there is additional capacity being added in Mohali, Zaheerabad and Nagpur,” added Sikka.

With this, Mahindra will have a cumulative capacity of 4 lakh units in the country.

Over the last seven quarters, all its international subsidiaries have become profitable and have delivered returns ahead of the plans.

“For the last seven quarters in a row we are not only profitable, but we are much ahead of the projections,” he added.

In a global market of 2.3 million, Mahindra sells about 3.7-3.8 lakh units (over 90% from India) accounting for 16% of the global market share. The company is the largest in terms of volumes led by smaller to mid-range horsepower segments of 25-150 hp and it does not play in the higher horsepower tractors - a segment dominated by John Deere, CASE New Holland, and Kubota among others.