Case Review of Tractors And Tillers Marketing Essay
Deployment of tractors is a main thrust in the functions of mechanisation and modernisation of farming in India. The sector has come a long way since the inception of the first units in the late 1960s. Today, India generates over 350,000 tractors annually and the total tractor population over the years is continuing to grow to over 3.5 mn. There are 14 systems generating tractors in India. The purchase in the segment is estimated at Rs 60 bn.
The industry marched onward slowly but steadily during the eventful 1990s, marked since it was by a entire paradigm change from a closed to a globalised sector. The development moved up from 117,700 units in 1989-90 to over 257,000 units in 1999-00, representing a CAGR of over 8% in the decade of the 1990s. The first years of the brand new millennium witnessed a sagging craze. The development progressively dropped to a level of 162,000 in 2002-03, an gross annual decline of 14.2% between 1999-00 and 2002-03 while the automobile sector, especially the four-wheeler segment, acquired also gone under much recessionary pressure for sometime. Total product sales of tractors in 2000-01 at 230,000 cars reflected a decline of nearly 20,000 systems, registering a negative growth of around 9% over the prior year. An additional slide straight down saw the revenue dip to a minimal of 171,600 devices in 2002-03. In the following year, however, there is an excellent recovery with product sales in 2003-04 at 190,350 units, almost 11% greater than those in 2002-03. Almost all main players except HMT witnessed positive growth.
Escorts’ sales heightened by 21.6% to 25,550 tractors from 21,000 units; product sales of Tractors & Farm Tools Ltd (TAFE) revealed a modest gain of just one 1.75% to about 24,900 tractors, while Eicher product sales expanded by over 6% to 16,775 tractors. Sonalika recorded a 21.6% growth in revenue to 20,020 tractors during 2003-04 from 16,460 products sold in the previous year. HMT’s sales, even so, contracted by 18.2% to 5,560 tractors from 6,800 tractors.
From 2003-04 onwards, the industry witnessed an upward expansion in production from 191,630 systems to over 352,000 units in 2006-07. In the 3 years, the production elevated at a phenomenal 22%, with a corresponding effect best research paper on sales.
The year 2007-08, on the other hand, witnessed a decline of over 2% in creation matching sales decline of 1 1.8%. Regardless of the global financial meltdown, the Indian tractor sector has were able to stage a restoration, unlike other segments of the auto industry. While the production in the primary half of 2008-09 registered over 11% growth over the half of the previous year, the product sales were up 6.3% during the period.
The total industry of tractors was estimated at Rs 115 bn in 2007-08 which represented a rise of about 10% over that of the preceding year.
The growth could be sustained in view to the fact that the agricultural procedures in India have hardly any linkages with the global market. Agriculture in India fared fairly well in 2007-08.
The expansion has been maximal in tractors with potential exceeding 50 HP followed by tractors of much less that 20 HP potential mainly because of a relatively low base. Go up in sales provides been fuelled by larger credit availability, go up in rural incomes and increase in irrigated area.
The potential is, on the other hand, much larger. Given the continuing – aside from intermittent droughts – prosperity of the farming sector, the demand will probably maintain a high degree of growth. The present density is really as low as 15 tractors per 1000 ha of cropped area against a higher global average of 250.
The sector has undergone a number of shakeouts. As indicated, there are 12 systems in the organised sector making agricultural tractors. Of the, six are leading types, specifically, Mahindra & Mahindra (M&M), Eicher, Escorts, HMT, Punjab and TAFE. Bajaj Tempo and VSL (Vazir Sultan) started manufacturing, rather later, while Gujarat Tractors was acquired by M&M Foreign entrants like New Holland and John Deere (in collaboration with L&T) have also gone into production.
The tractor industry is continuing to grow on the back of imported technologies from countries as varied as the USA, the united kingdom, the then USSR, Germany, Poland, erstwhile Czechoslovakia and Yugoslavia, which were fully absorbed over time. The producers ventured into bigger HP tractors of 75 HP and above based on imported components to meet the precise requirements.
This process of technology induction has enabled the sector to manufacture a variety of tractors, from a low of below 20 HP to a higher of 50 HP and in this article. The tractors in the range of 31-40 HP claim a share around 57% in the overall production of tractors, followed by tractors in the 21-30 HP spectrum with a show of practically 21%. The latter is normally accompanied by tractors in the number of 41-50 HP with a share of over 14%. A substantial talk about of 7.5% is certainly claimed by tractors of 51 HP and above, while under-20 HP category has a negligible presence on the market.
The regional distribution of tractors is usually skewed. With the adoption of advanced tilling procedures, the states with round 22% of the cropped spot in the north make up for over half of the tractor people in the country and continue steadily to have a higher demand. The states of Punjab, Haryana and Uttar Pradesh, influenced by the Green Revolution with an increased option of assured irrigation, became leading runners in the deployment of tractors.
Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat and actually Rajasthan have recorded large rates of growth of tractor use, although not commensurate with the obtainable cropped location. The demand, steadily shifted to the emerging marketplaces of southern and western India. At the beginning of the new mellinnium, these emerging markets contributed about 50% of sales, while the talk about of the mature states (northern) experienced fallen to under 44% against a near 63% earlier.
Punjab Tractors was in the forefront in developing variations of its designs, in consonance with the crop and soil conditions. The business innovated the idea to have an area-particular branding like Swaraj Andhra in Andhra Pradesh. It possessed also doubled its capacity to 60,000 tractors a time to widen its marketing net. Punjab Tractors can be, however, faced with the task from global majors like New Holland of the UK, John Deere of the
US and SAME of Italy. These three entrants in the 31-40 HP product line, offered immediate competition to the merchandise range of Punjab Tractors. Subsequently, its ability utilisation had come down to 50%. The business has, even so, been sold.
International Tractors (ITL), using its Sonalika tractor introduced in 1995, is certainly in the 40-60 HP selection. In the 3rd quarter of 1999, the business possessed signed an MoU with Renault Agriculture, a 100% subsidiary of the Renault group of France, to produce and market Renault-crafted tractors in India and neighbouring countries. These tractors are marketed hand and hand with International’s Sonalika becoming developed at its plant in Hoshiarpur in Punjab. The tie up, with a 20% equity stake of Renault, is known as strategic in the furtherance of the fascination of the Indian enterprise in the European and Asian marketplaces for Sonalika. The two agreed to jointly take part in international marketing in an effort to market products of both the companies.
International Tractors, the makers of Sonalika-manufacturer tractors was presenting 120-HP four-wheel-drive tractors in the domestic marketplace by end 2007. Sonlika ranks third in the united states in sales. The company is likely to infuse Rs 3 bn for doubling the production capacities of 50,000 units a year. At present, ITL manufactures tractors with the Sonalika manufacturer in the power assortment 30-90 HP. The business is also focusing on modalities to introduce tractors of 90-120 HP. With the latest technology induction, the company is giving a very significant price advantage to the buyers.
The imported models cost Rs 1.2 to Rs 1.8 mn, the 120-HP-powered engine of Sonalika was to price Rs 500,000 to Rs 800,000 only. The business has tied up with Category of Germany and Renault of France for the way to obtain high-powered tractors.
Morgan Stanley was eyeing a 5% stake in Sonalika Group. Besides Yanmar, Citibank and 3i hold 12% and 10%, respectively, in the Sonalika Group presently. The business also projects to float an IPO within its strategy to infuse Rs 8 bn over another two years into businesses in India. The IPO can be aimed at increasing Rs 4 bn to Rs 5 bn from the market.
Not resting on its laurels of the numero uno tractor producer in the country, Mahindra & Mahindra (M&M) set sights to earn global status as well. It has emerged currently as the second largest producer in the world. The company with some eleven designs under three main brands on offer – Bhoomiputra (for low-end consumers), Sarpanch (for mid-end buyers) and Arjun (for hi-end customers) has set up regional greenfield plants in India, and assembly models outside India to meet the global standards. The company also worked on a mini-tractor for tiny farmers in India. Besides, the assembly lines are anticipated to be installed in European countries, Turkey, Egypt and in Latin America, depending after financial viability in these regions.
The organization had announced plans to invest Rs 4 bn in October 2006 for the setting up of a fresh plant to create tractors, and expand the capacity at its Nagpur, Jaipur and Rudrapur facilities. The business had identified possible spots for the brand new plant, with the very least twelve-monthly production capacity of 40,000 systems of tractors. It was expected to become operational by October 2008.
The company aimed at achieving a total production capacity of 120,000 units during 2006-07. It had been achieved consequently of increased potential of Jaipur center to 15,000 devices from the prevailing 10,000 models, that of Nagpur to 50,000 products and the Rudrapur plant to 39,000 devices.
The company was also establishing a third tractor assembly plant in the United Stated with an initial capacity of 3,000 tractors. Mahindra started production from its Brisbane assembly center in Australia and was to enhance its present production potential of 3,000 systems in China.
It setup an assembly device in China, and acquired unveiled a ‘world tractor’ style to end up being assembled in China. M&M in addition has entered the Spanish market.
Eicher Motors divested its tractor, engine and gears divisions to TAFE for Rs 3.10 bn in mid-2005. Consequently, the brand of TAFE was improved to Electric motor and Tractor Ltd (TMTL). This catapulted the marketplace share of TAFE through TMTL to close to 33% in the Indian tractor marketplace, spending it to the Zero.2 position. Under the deal, TAFE bought Eicher’s tractor unit at Bhopal, the engine product at Alwar and gears products at Parwanoo.
Power tillers industry in India had grown from 7,200 devices in 1990-91 to over 16,000 models in 2000-01, realising a CAGR around 8.3 % through the decade. During the second 50 percent of the decade (1995-2001), the development was higher at 10.0%. Through the quinquennium 2001-06, the industry revenue went up from 16,020 units to 22,300 an increase marked by a CAGR of 6.3%. The earliest nine months of the year 2006-07 had accomplished sales of 13,375 units.
This segment in India is definitely constituted of two major players. The earliest, VST Tillers and Tractors includes a technology narrative essay topics tie-up with Mitsubishi of Japan keeping 58% share of the market. The other dominant player is usually Kamco, Kerala with a 42% market show.
Spatially, north India makes up about 54% of the market followed by west and south regions with 16% and 20% shares respectively, of the full total market. The industry was projected to achieve a demand of 17,450 units in 2006-07 and 21,000 units in 2009-10, which is expected to rise further to 28,500 by end 2014-15.
Sales turnover and net profit increased for almost all of the firms in 2008-09. For major corporations like Escorts product sales increased simply marginally by 1% while net earnings rose by 33% in 2008-09.
The slowdown study by CII-Ascon for first of all 9 a few months of fiscal year revealed that some sub-segments of auto-sector reported a modest growth (less than 10%) in production which include tractors, amongst others.
Demand : Past & Future
Mahindra & Mahindra
Escorts, HMT, Swaraj, TAFE, Mahindra, Eicher, Sonalika, Ford
Market Growth Rates
Upto 20 HP
Ford Motor, USA
Motokar, Czech Republic
ZF Passau, GmbH, Germany
Int. Harvestor Co. UK
Massey Ferguson, UK
Sisu Tractors, Finland Richards, UK Vattra, Finland Styere, Austria
Demand : Past & Future
Market Growth Rates
VST Tillers & Tractors
Source : Intecos – CIER