Less than 10% of tractor users actually own them. Put differently, just a minuscule 1% among the small and marginal farmers who own land less than 5 acre and comprise 82% of total farming households own tractors. Precisely this data has lead the leader in the tractor market, Mahindra & Mahindra (M&M) to explore the below 30 horsepower (hp) market which are apt for small farms around 1 to 2 acre.
The company is also planning to modernise its range of 30 to 40 hp tractors and launch tractors in the above 50 hp range. Tractors are classified into less than 30 hp, 30-40 hp, 40-50 hp and above 50 hp. M&M has tractors ranging from 24 to 80 hp. The company is field testing an 18 hp Chinese tractor from its Mahindra China Tractor Company Limited (MCTCL). It generally takes six months from the testing process to the actual launch. Additionally, given that soil conditions in India are different, the tractors will have to go through some tweaking. MCTCL is a 80:20 joint venture between M&M and China?s Jiangling Motors Company. The company has tractors in the range of 18-35 hp. M&M also has a joint venture with Jiangsu Yueda Yancheng Tractor Manufacturing Company Limited called Mahindra Yueda Yancheng Tractor Company (MYYTCL). MYYTCL have tractors in 16-125 hp range. Says, Anjani Kumar Choudhari, president, farm equipment sector and group management board member, M&M, ?We are field testing below 30 hp tractors from our Chinese joint venture which offer value for money?. He did not divulge more details. It is the small and marginal farmers who highly look at hiring tractors than owing them. A typical tractor may cost anywhere around Rs 3 to 4 lakh and since 80% to 85% of the tractors are bought on loan; availability of credit at affordable interest rates is keen.
Choudhari added that despite low penetration in terms of sales, the usage is as high as 35% in the country as a large number of farmers hire tractors. Hence there is scope for more ownership and greater penetration in the market. M&M expects to grow this sector at a compounded average growth rate (CAGR) of 6%-8%.
?The below 30 hp segment has tremendous opportunity and potential but till now has not been given the right focus by these makers?, said Abdul Majeed, auto analyst and partner, PricewaterhouseCoopers(PwC).
In the last six years, the tractor market has grown by 89%. For FY?09, the domestic market was about 3,04,000 tractors compared with 1,60,000 tractors in 2003. The industry is expected to grow at 5%-8% this year.