Indian Tractor Industry: Issues, Challenges and Strategies
Key points One
third of world’s tractor production is in India
Total
turn over 10,000 Cr
Total
investment 8000 Cr
Employment
28,000 people directly, 1,50,000 people indirectly
Tractor
population 3,000,000 compared to 900,000 in China
F07 H1: Market Update Monsoons:
Normal Kharif Production: + 1.2 % vs. last year Higher MSPs announced Good Farm credit: 2005-06:
Rs.1,16,370 Crs. 2006-07(est.): Rs.1,75,000 Crs. Bank
NPAs increasing – slow down in disbursements
Tractor – empowering the farmer 50 40 30 20 10 0 1970-71
2005-06
% share of farm power
Scope of improving share of mechanical power in agriculture At present following agricultural operations are not fully mechanized Spraying Inter-culture Harvesting Drying Packaging
Mechanized tomato harvesting
Mechanized broccoli harvesting
Sales Data and Analysis
Category Car UV MPV M&HCV LCV Scooters Motor cycles Mopeds Three wheeler Tractors Total
Units sold 2005-06 1,052,287 199,063 67,459 221,542 169,722 992,032 6,201,619 375,922 437,072 292,908 10,009,626
2004-05 980,849 180,865 66,260 211,980 136,390 983,127 5,241,876 351,169 374,657 247,531 8,774,704
% growth 2005-06 2004-05 7.28 19.37 10.06 21.02 1.81 9.56 4.51 25.04 24.44 26.28 0.91 4.72 18.31 20.28 7.05 5.47 16.66 16.38 18.33 31 14.07 17.91
TRACTOR INDUSTRY GREW AT A CAGR OF 11% BETWEEN 2004-05 AFTER THREE YEARS CONTINUOUS SLUMP Tractor Industry (F-94 to F-2006) (Number of tractors)
R G C A .0 % 0 1 1 292908
1.5% CAGR R A G C .0 % 1 6 0 220943
250378 254871 257998
236076
1 2 . 5 % C A G R 247531
215005
191202
190348 171657
164306 138235
17899
18132
19000
18615
15272
9586
10969
10422
11645
14037
14606
14955
13301
4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 0 3 0 4 0 5 0 6 9 F F F F F F - 2 0 F F F F F F F
F 05 SALES 247531
26364
4016 31696
10445
2448 7032
16020 935
65394
52851
30330
FORCE MOTORS
E S COR TS
MGTL
HMT
M&M
P TL
TA FE GROUP
VST
F 06 SALES 292908
32017
4461
28297 2749
13214
7900
19951 1228
85028
66667
31396
FORCE MOTORS
ESCORTS
MGTL
HMT
M&M
PT L
TAFE GROUP
VST
F05 STATEWISE SALES 19894
16615 389
1639
13998
3084
638
366
17078 12408
45958
594 1181 15560 12396
199 11546
23830 32692
11471 4954
1041
AP
ASM
BI H
J HARK
GUJ
HRY
HP
J &K
KAR
KER
MAH
MP
CHTSGR
ORI
PJ B
RAJ
TN
UP
UTRNCHL
WB
OTHERS
E XP ORT S
F 06 STATE WISE SALES 28118 2418 22448 4335 1345
771 9946 2349 23237
44308
14572 758 1300
18302
25394 27949 683 12051 17804 6679
4940
23201
AP
ASM
BIH
JHARK
GUJ
HRY
HP
J&K
KAR
KER
MAH
MP
CHTSGR
ORI
PJB
RAJ
TN
UP
UTRNCHL
WB WB
OTHERS
EXPORTS
History of Indian tractor industry 1945 to 1960. War
surplus tractors and bulldozers were imported for land reclamation and cultivation in mid 1940's. In 1947 Central and State Tractor Organizations were set up to develop and promote the supply and use of tractors in agriculture and up to 1960, the demand was met entirely through imports. There were 8,500 tractors in use in 1951, 20,000 in 1955 and 37,000 by 1960.
History (contd…) 1961 to 1970. Local
production began in 1961 with five manufacturers producing a total of 880 units per year. Eicher, Gujarat Tractors, TAFE, Escorts, M&M.
By
1965 this had increased to over 5000 units per year and the total in use had risen to over 52000.
By
1970 annual production had exceeded 20000 units with over 146000 units working in the country.
History (contd…) 1971 to 1980.
Six new manufacturers were established during this period although three companies (Kirloskar Tractors, Harsha Tractors and Pittie Tractors) did not survive. Escorts Ltd began local manufacture of Ford tractors in 1971 in collaboration with Ford, UK. Others were HMT and PTL (SWARAJ) Total production climbed steadily to 33000 in 1975 reaching 71000 by 1980. Credit facilities for farmers continued to improve and the tractor market expanded rapidly with the total in use passing the half million mark by 1980.
History (contd…) 1981 to 1990.
A further five (Auto Tractors, Haryana Tractors, United Auto Tractors, Asian Tractors, VST Tillers) manufacturers began production during this period but only last one survived in the increasingly competitive market place.
Annual production exceeded 75000 units by 1985 and reached 140000 in 1990 when the total in use was about 1.2 million.
Then India - a net importer up to the mid-seventies - became an exporter in the 80's mainly to countries in Africa.
History (contd…) 1991 to 1997. Since
1992 it has not been necessary to obtain an industrial license for tractor manufacture in India.
By
1997 annual production exceeded 255000 units and the national tractor park had passed the two million mark.
India
has now emerged as one of the world leaders in wheeled tractor production.
History (contd…) 1997 to ...
Seven new manufacturers have started production since 1997.
Bajaj Tempo
New
Holland
John Deere (initially with L&T)
Same Deutz-Fahr (initially with Greaves)
Sonalika
Standard
Indo Farm
Negative growth phase After sustaining a robust 14 per cent growth rate in 1994-98, the tractor industry's growth for the next two-three years had to come down as a natural process of alignment to the long-term growth of 8 per cent. Over-production Billing Drought in 2001 and 2002 Piling of government stock of food grains upto 75 MT
Current situation
Intense competition has led to rapid advances in design and quality Saturation achieved in Punjab with tractor density as high as 82 per 1000 ha against Indian average of 12.4, world average of 17.4 and 32.1 in developed countries. But average HP per hectare is only 0.4 in India as against 2.6 in developed countries and 1.4 in world. This give average HP per tractor of only 32.26 in India where as, developed countries and world HP per tractor is 81.
8 Dimensions of Quality Performance - primary operating characteristics
Features - little extras
Reliability Reliabil ity - no failure in a given time span
Conformance - meeting standards
Durability - length of usefulness
Serviceability Serviceabil ity - speed, ease of repair
Aesthetics - pleasing to the senses
Perceived quality - reputation
160000
Horse Power wise Tractor Sales in India
140000 120000 100000
21-30 HP 31-40 HP
80000
41- 50 HP > 51 HP
60000 40000 20000 0 F-00
F- 01
F- 02
F- 03
F- 04
F-05
F-06
Future prospects
India has currently 168 million hectares of cultivable land which is second largest in the world.
Current tractor population base in India I ndia is 2.4 million tractors.
50 per cent of India's arable area, that is, is , more than 80 million hectares is covered by 10 million holdings. Even if half these holdings own tractors, it would push the total tractor population above five-million.
Driving factors
De-fragmentation and nuclear families De-fragmentation Irrigation facilities Improvement in standard of living Cheap credit Rise in MSP (Minimum Support Price) Other income – poultry, dairy, livestock, infrastructure projects Improved features and quality of products Economic growth
Construction Equipment – The New Frontier Medium sized CE machinery demand has shot up due to various infrastructure projects in progress Tractor manufacturers are providing CE attachments and are giving tough competition to established players like JCB, TATA, CAT and L&T
Export scene
Exports grew by 41% from 19894 in F05 to 28118 in F06
Africa – Libya, Algeria and South Africa offer sophisticated market while other African countries employ government tender system
North
America – Demand of 50 HP tractors for secondary operations in the US has made it the largest emerging market for Indian tractor exports. Because of large cost-advantage from current local volumes, and improved manufacturing and product technology, Indian companies can aim and achieve a significant share in this segment of the US market. This is assuming they meet expectations on quality/feature/delivery fronts and provide top line after-sales-service.
12000
Horse Power wise Tractor Sales in Canada
10000
8000 < 40 HP 40-100 HP
6000
> 100 HP
4000
2000
0 2002
2003
2004
2005
2006
160000
Horse Power wise Tractor Sales in US
140000 120000 100000 <40 HP 40 - 100 HP
80000
>100 HP
60000 40000 20000 0 2002
2003
2004
2005
2006
Export scene (contd…)
European Union – Turkey and Eastern Europe offer a growth opportunity whereas other markets are stagnant
Other major destinations for Indian tractors are the th e Middle East, SAARC and South East Asian countries.
Challenges ahead
Fuel shortage Conformance to European norms on
Safety and ergonomics Noise Emission Electronics
Bottlenecks in form of testing and certification facilities in India Competition from low cost Chinese products Enhancement of farm machinery technology
Alternate fuels Tractor manufacturers are reducing fuel consumption of their models as well as are working with alternate fuels to meet the challenge posed by global fuel price hike •Fuel efficiency improvement project •LPG / CNG operated tractor •Bio-diesel as additive to diesel •Diesel + Electric = Hybrid power •Hydrogen
Safety and Ergonomics India
being a signatory to the WTO, Indian tractor manufacturers have to adhere to global regulations
Emission Tractor industry successfully achieved the emission requirement of EURO Stage II w.e.f. 1-10-2005. Next target is EURO Stage IIIA w.e.f. 1-42010. This will require advanced technologies like, Rotary pump, Turbocharger, Intercooler, Exhaust gas re-circulation, Common
Electronics Precision farming based on GPS Yield mapping Input management Tractor electronics Traction control Engine optimization
