The latest chapter in the uneasy relationship between TAFE and AGCO has drawn the spotlight onto the Indian tractor market, which is considered the largest in the world, with 945,000 units sold in the 2023 financial year.
A market that absorbs nearly one million tractors annually is one that will attract a good deal of attention, from both home and abroad, and two of the big three western corporations are certainly taking an increasing share.
However, it is the indigenous manufacturers which dominate with Mahindra and Mahindra (usually known simply as Mahindra) selling well over a third of those tractors having 390,000 machines to its credit, while TAFE came in second, with less than half that number, at 170,000 units sold.
Sonalika and Escorts came third and fourth respectively, with John Deere taking fifth place at 83,000 units, well ahead of New Holland who came sixth, having sold 35,000 tractors.
Western brands up
John Deere appears to be building on that position, for in July of this year, it enjoyed a 10.6% increase in sales over July 2023.
New Holland was not far behind with a 7.6% increase, while Kubota took a hit of a 33% drop in sales – something which must have caused a few brows to crease with consternation back in Japan.
Missing from all this data is one significant name, and that is AGCO, for it is AGCO that licenced the Massey Ferguson brand to TAFE, and so excluded themselves from selling directly in to the country, leaving the Indian company to cover the Indian market on its behalf.
Perhaps then we should not be surprised that AGCO summarily stopped this long-standing agreement, with the company citing TAFE’s “continued poor operational performance as a supplier, brand licensee and distributor to AGCO, as well as TAFE’s continued lack of focus on AGCO customers in several key markets”.
Given the increasing influence of its two major competitors, John Deere and CNH, in India, the AGCO board was obviously getting restless and decided that it wanted to take control of its own operations rather than rely on a third party.
This impatience could only have been inflamed by TAFE’s insistence that the AGCO board make changes to its housekeeping protocols, while the Indian company remains permanently under the stewardship of Mallika Srinivasan.
Indian farm size down
Aside from this rift, the Indian tractor market is a growing one, yet the ambitions of the home suppliers to expand beyond its boundaries are severely handicapped by the size of Indian farms.
While farm sizes in the west are increasing, in India they are actually getting smaller, as plots are divided up between families as land is passed on after a farmer’s death.
It is estimated that small and marginal land holdings account for around 86% of all farms and it is only through government schemes such as SMAM (Sub Mission on Agricultural Mechanization) that machinery of any type is finding its way on to the fields.
All attempts to achieve greater efficiency through mechanisation are to be appreciated, yet the fact remains that Indian tractor makers are serving a market based on smallholdings, which will require only the simplest and lightest of machines.
Problems of scale
Manufacturers from outside who already produce advanced machinery for larger farmers will find it easier to scale down than producers of small tractors will find it to scale up, especially as they have no home market in which to sell and develop a bigger tractor.
We see CNH and Deere taking a bigger slice of the market in India, while attempts to sell Indian-made tractors in the west are confined to sub 80hp machines where, for instance, 170hp is the modal average in Ireland, according to many dealers.
Mahindra is the largest Indian producer and so likely to have the biggest development budget, yet it only reaches as far as 74hp with its Novo 755 DI PP 4WD V1 model, which might top the power tables in India, but is little more than an estate and landscape tractor here.
This is not to to decry the abilities of Indian engineers, TAFE has already showcased both hydrogen and battery powered tractors, it is that a solid home market for a product is usually required before it can be exported.
John Deere forges ahead
John Deere is already producing its 5M tractors in India. These range from 75hp to 130hp, but they are built exclusively for export.
However, between its two plants in India, at Dewas and Pune, the company has the capacity to build 132,000 tractors per year, compared to 40,000 at Mannheim in Germany.
CNH was planning to expand its capacity in India to 80,000 units by 2024 in addition to sourcing many components from the country.
Back in 2022, it indicated that intended to source more from India as a hedge against placing too much reliance upon China.
AGCO is not even at the table – yet.
While we over in Europe see the the big three as offering large and advanced tractors, they themselves view tractor manufacturing purely from the business point of view, so if a market only wants small simple machines, that is what they will provide.
They’ll do this while giving the impression in the west that they only make sophisticated tractors, so the farmer has no choice but to stump up the euros.
There is obviously a great threat to India’s native tractor industry looming, but it is not standing still. A year ago, Mahindra launched its new Oja range of tractors of between 21hp to 40hp.
These are specifically designed for export and it is hoped that 36,000 will be sold by 2026, trebling the company’s sales outside of India.
