Global Sales To Garner 50% Of Total Farm Equipment Revenue In 3 Years: M&M
Mahindra & Mahindra Ltd. is revving up globalisation of its farm equipment sector, targeting 50 per cent of overall revenue of the vertical to come from international markets over the next three years, according to a senior company official.
The company is focussing on three key markets – the Americas, including the U.S., Canada, Mexico and Brazil; Japan and Turkey to be the primary growth drivers.
It expects revenues from the Americas to touch $1 billion in the next three years, up from $600 million at present, while it is also aspiring for business in Japan to touch $1 billion over a period of time as compared to $450 million currently.
Besides, the homegrown farm equipment major is also charting out strategy to re-enter China in the implements segment after exiting from an earlier joint venture for tractors.
The farm equipment sector of the company had clocked a revenue of $3.4 billion in 2017-18.
“Currently, our global operations constitute 37 percent of the revenues of FES. Over the next three years, we hope to see this go up to 50 percent,” M&M President - Farm Equipment Sector Rajesh Jejurikar told news agency PTI in an interview.
He said the company has drawn up a globalisation strategy with a differentiated strategy for each of the three key regions – the Americas, Japan and Turkey.
In the Americas, Jejurikar said the company has recently entered the above 80 hp (horse power) to 120 hp segment in the U.S. and Canada catering to the income producing segment such as commercial operators, landscapers and hay management.
“Up until now in North America (U.S. and Canada) we were only in the 80 hp and below segment catering to rural lifestylers, who are typically hobby farmers. We are number three in the segment,” he said, adding still M&M was not present in hardcore agri segment in North America where there is requirement for very big machines.
The other aspect of strategy in the Americas is to expand further in markets like Mexico and Brazil, where the company is a relatively new entrant.
“These are agricultural markets and we have been there only for last couple of years. We are competing in the agri space there,” he said.
Stating that there is a lot of similarity, specially with Mexico and India from agro-climatic point of view and the type of crops grown, Jejurikar said M&M’s Indian products are suitable and accepted very well in these markets.
The challenge for us is to create brand awareness and build distribution network. We are doing that by creating our own subsidiary Mahindra Mexico and Mahindra Brazil.Rajesh Jejurikar, President - Farm Equipment Sector, M&M
Overall in the Americas, Jejurikar said, “We expect revenues to be $1 billion from $640 million over a period three years.” In Japan, he said, “We are at $450 million at present. Our aspiration is to reach $1 billion but there is no timeline set for it.” The company is the number four player in agri machinery segment and has a market share of around 6 per cent.
“We have two areas of priority in Japan. One is to improve our market share in the local market and second is to enhance exports from there using some of the other markets which come in as a part of the Mahindra network,” Jejurikar said.
M&M is focusing on global centre of excellence for rice value chain to create global access of harvesters and rice transplanters through Mitsubishi Mahindra Agricultural Machinery, he added.
“The intent would be to take farm machinery to a global platform through the rice transplanters as well as rice harvesters thereby taking MAM beyond Japan,” he added.
Currently, Mitsubishi tractors are exported primarily to Mahindra USA, which get branded as Mahindra.
“We are also looking at exporting transplanters from Japan to other markets, including to India. We already have a walk-behind rice transplanter in India and a ride-on should happen by the end of the calendar year and a harvester sometime next year,” he added.
In Turkey, M&M's three subsidiaries Erkunt Traktor, Hisarlar and foundry Erkunt Sanayii account for around $240 million of revenue.
“While Erkunt Traktor has an aspiration to be the number two in its market, up from four at present, Hisarlar will look at proving mechanisation solutions for the complete agri value chain,” he said.
Being the fourth largest tractor market globally, Turkey presents a lot of opportunities, Jejurikar said, adding Hisarlar will be the CoE for farm implements.
When asked about plans for China, he said, “We are putting in place a strategy to return to the $25 billion farm equipment market in due course of time. We plan to venture on our own rather than look at a JV.” There is big potential for M&M to exploit farm machinery opportunity in China with rice transplanters and rice harvesters from Mitsubishi, he added.