Mahindra & Mahindra, the world's largest tractor manufacturer, intends to establish an assembly plant in Brazil, the world's sixth largest tractor market, as part of its strategic global expansion. With manufacturing or assembly bases in the United States, Turkey, and India, three of the top five tractor markets, the maker of Arjun and Novo tractors sees its volumes doubling in Brazil over the next few years and is thus expanding its footprint with a local manufacturing base, according to Hemant Sikka, president of Mahindra & Mahindra's Farm Equipment Business.
Annually, approximately 54,000 units are sold in Brazil, accounting for nearly two-thirds of the market for vehicles with up to 110 horsepower, which is the mainstay for Mahindra & Mahindra. Mahindra has already captured about 5.2 percent of the market in a short period of time.
"We're doubling down on Brazil, and I'm very optimistic about our market prospects." Brazil has become a major source of food grain exports in the current global scenario, serving as the world's breadbasket. The country has a large potential for agricultural exports. "With the new assembly plant, we hope to more than double our market share," Sikka added.
Apart from Brazil, Mahindra recently took over the sales and marketing of tractors in South Africa from its distributor in order to sharpen its focus. It is currently developing a strategy to expand into South America and Africa. Mahindra intends to expand its presence in Western Europe and Southeast Asia in the coming years with the new generation K2 platform from Mitsubishi Agricultural Machinery and the Armatrac brand of Tractors from Erkunt -Turkey.
To be sure, international business already accounts for one-third of the company's total revenue. Its subsidiaries in Japan and North America now generate a billion dollars in revenue. Sikka anticipates that the international business will continue to outperform, driven by new generation tractors, farm implements, and expanding global footprints.
Mahindra & Mahindra's global tractor sales stood at around 38,000 units at the end of FY-22. Mahindra North America is the company's largest hub outside of India, where it sells approximately 20,000 tractors per year.
According to the president of Farm Equipment Business, direct exports from India will also double in the next three years. However, in addition to establishing multiple nodes around the world, it is also increasing capacity locally in Zaheerabad and Nagpur. Mahindra aspires to make Nagpur a significant export-oriented unit.
"In the next three years, we hope to double our export volume to 40,000." Aside from international expansion, additional capacity is being added in Mohali, Zaheerabad, and Nagpur," Sikka added. Mahindra will now have a total capacity of 4 lakh units in the country.
All of its international subsidiaries have become profitable and delivered returns ahead of schedule over the last seven quarters. "For the last seven quarters in a row, we have not only been profitable, but we have been significantly ahead of projections," he added.
Mahindra sells approximately 3.7-3.8 lakh units (over 90 percent from India) in a global market of 2.3 million, accounting for 16 percent of the global market share. The company is the largest in terms of volume, led by smaller to mid-range horsepower segments ranging from 25 to 150 hp, and it does not compete in higher horsepower tractors, which are dominated by John Deere, CASE New Holland, and Kubota, among others.
