India firm aiming for tractor capital | The Journal Gazette Mahindra making big gains in compact models May 26, 2008
You don't have to be a farmer to own a tractor. Anyone who owns several acres - from a country homeowner to a school district - may need a
small tractor to mow the grass and do other yardwork.
The Mahindra Group wants to leverage that broad market to become the world's largest-selling tractor brand by next year, said Ashok Sharma,
senior vice president of strategic planning and business excellence for the company's farm equipment sector.
The Indian tractor manufacturer plans to reach that goal - which would involve leapfrogging market leaders Deere & Co. and Case-New Holland
Global N.V. - without selling full-size tractors to U.S. farmers.
Northeast Indiana farmers typically use tractors with more than 100 horsepower to plant corn. Mahindra does not make a tractor that size. The
company's most powerful tractor engines top out at 80 horsepower, said Dinkar V. Khobrekar, deputy general manager of Mahindra's engine
plant in Mumbai's Kandivali neighborhood. He gave journalists a plant tour last month.
The smaller tractors - called compact utility or utility tractors in the industry - meet the needs of Indian farmers, who often farm only a few acres.
The same small tractors make up close to 65 percent of the American tractor market because of high demand among rural landowners who keep
a few horses or farm part time, Sharma said. Mahindra's American subsidiary, Mahindra USA, has captured about 10 percent of that market.
"We've found our product has been well accepted by weekend farmers or hobby farmers" - those who farm part time as a lifestyle rather than a
career, he said.
The Mahindra Group had annual revenues of $344.4 million after taxes and exceptional charges for the fiscal year that ended March 31, 2007,
according to the company's Web site. It had not released revenues for its 2008 fiscal year last week.
Deere & Co., which makes the iconic green and yellow tractors, had net income of $1.8 billion last year, according to its annual report. The
company wants to maintain its position as a leading tractor manufacturer, said Barry Nelson, a company spokesman based in Lenexa, Kan. He
declined to comment on Mahindra's ambitions to increase its sales volume.
Mahindra & Mahindra Ltd.'s farm equipment sector has more than 1.2 million customers worldwide, according to its U.S. subsidiary's Web site.
The company wants to enlarge its share of the United States' largest tractor segment. Consumers bought 194,027 tractors with less than 100
horsepower last year, according to the Association of Equipment Manufacturers, an industry trade group based in Milwaukee. That segment
made up 90 percent of the two-wheel-drive tractors sold last year.
Compact utility tractors appeal to many kinds of landowners, said Charlie O'Brien, AEM's vice president of agricultural services. Sales of smaller
tractors have slowed slightly with the faltering economy, but they remain a major factor in the tractor industry.
Some full-time farmers buy utility tractors as well as full-size ones, but the biggest local market is rural homeowners, said David Bleke, sales
manager for commercial products at East Allen Ag & Turf in Woodburn. The John Deere dealership typically sells compact and utility tractors to
people who own three to 10 acres of land, he said.
"They need something to take care of that ground," Bleke said.
Tractors with less than 60 horsepower are particularly big sellers for the Woodburn dealership, Bleke said.
Even though tractor manufacturers sell fewer large machines, Bleke said they can bring in more revenue because of their high prices.
John Deere's suggested retail price for compact and utility tractors ranges from $14,000 to $70,000, Nelson said. The large tractors used to
plant corn cost between $67,000 and $225,000, depending on the options and features. John Deere sells various tractors to meet the needs of
rural landowners and large farms, Nelson said.
Mahindra probably will add larger tractors to its lineup in the future, Sharma said. For now, the company plans to focus on the smaller horsepower
tractors in its quest to become the world's largest tractor manufacturer. Mahindra is several years away from venturing into the large tractor
business, he said.
"We realize that's a very specialized market," Sharma said, "and currently our product portfolio and our distribution channel is not geared up for
that."
That limitation has kept Mahindra out of some local farm fields. John Deere still seems to be the most popular tractor brand among local farmers,
Allen County farmer Rex Coomer said. He buys mostly John Deere tractors for his farming operation, which exceeds 3,000 acres. New Holland
and AGCO Corp. tractors also are popular in northeast Indiana, he said.
Those tractors are not necessarily made in the United States. Some John Deere and New Holland tractors are made in India or at other
overseas plants.
A growing number of manufacturers based overseas, including Mahindra and the Japanese company Kubota Corp., want a share of the
American utility tractor market, Nelson said. Companies see the potential to sell to the growing number of rural landowners who have extra
income.
"That's where we're getting a lot of competition," Nelson said.
Coomer had a broad selection to choose from when he bought his 95-horsepower utility tractor. He picked a New Holland tractor for mowing
grass. He plants corn with a tractor that exceeds 200 horsepower.
Although Kubota and Mahindra sell utility tractors, Coomer said he prefers to buy tractors from companies that have a long-standing reputation in
this market. He looks for a helpful local dealer and reliable source of tractor parts.
The closest Mahindra dealership is located in Farmer, Ohio. Farmer Center Equipment sells Mahindra tractors primarily to the growing
population of rural homeowners, said Brad Ford, whose family owns the Defiance County dealership about 35 miles from downtown Fort Wayne.
He said the dealer sees little demand for larger tractors, so its business strategy matches Mahindra's.
Although Mahindra does not produce the large tractors farmers rely on for planting, Sharma said the American market continues to be an
important part of its strategy.
To boost sales, Sharma said Mahindra is focusing on fulfilling global customers' expectations, keeping manufacturing costs low and getting new
models to market quickly. The company also has ventured into selling fertilizer and other supplies to Indian farmers. Meeting farmers' needs will
help the company succeed, Sharma said.
"The way we look at our customers, we are thinking beyond tractors," he said. "Our job is to create farmers' prosperity. Then we will stay in
business."
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Mahindra Going For Number One! 
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