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Indian Tractor Industry: Issues, Challenges and Strategies
Indian Tractor Industry: Issues, Challenges and Strategies
Key points
One
third of worlds 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
Normal Kharif Production: + 1.2 % vs. last year Higher MSPs announced Good Farm credit:
2005-06:
Drying
Packaging
Storage
Category Car UV MPV M&HCV LCV Scooters Motor cycles Mopeds Three wheelers 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) 1.5% CAGR
292908 250378 254871 257998 220943 191202 164306 138235 236076 215005 171657 190348 247531
17899
18132
19000
18615
15272
9586
10969
10422
11645
14037
14606
14955
13301
F97 F98 F99 F20 00 F01 F02 F03 F04 F05 F06
INDIA UK
F94
F95
F96
F 05 SALES 247531
52851
65394
30330
HMT VST
F 06 SALES 292908
28297 2749 13214 19951 1228 7900
32017
4461
85028 66667
31396
HMT VST
AP HP CHTSGR UTRNCHL
GUJ MAH TN
HRY MP UP
AP HP CHTSGR UTRNCHL
GUJ MAH TN
HRY MP UP
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
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
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 is 2.4 million tractors. 50 per cent of India's arable area, that 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 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
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.
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
European Union Turkey and Eastern Europe offer a growth opportunity whereas other markets are stagnant Other major destinations for Indian tractors are the Middle East, SAARC and South East Asian countries.
Challenges ahead
Fuel shortage Conformance to European norms on
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
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 rail injection.
Electronics
Precision farming based on GPS
Yield mapping Input management
Tractor electronics
Traction control Engine optimization