CNH Industrial manufactures tractors under the New Holland brand in the 50 hp and above segment
India’s $8 billion tractor and agricultural equipment market is set to see increased rivalry with foreign heavyweights such as CNH Industrial, one of the world’s largest tractor manufacturers, which is looking to build muscle through new product additions, manufacturing expansion and possible local partnerships.
The company, which is India’s sixth-largest tractor seller, manufactures tractors under the New Holland brand in the 50 hp and above segment. It also sells agricultural equipment such as harvesters and post-harvest machinery generating nearly $1 billion in revenue annually.
The deal struck a few months ago between the Nanda family-run Escorts and Japan’s Kubota set the tone for what the market perceives as an aggressive hunt by participants to grab market share. The Indo-Japanese entity said it is aiming to be India’s biggest tractor player by beating current heavyweight Mahindra & Mahindra (M&M).
CNH said the company was “open” to partnerships in India, when asked if the company wanted to take the acquisition route to expand in the country.
In an interview with Activity area, Raunak Varma, Managing Director of CNH Industrial (India) said, “We are definitely open to it. We are open to partnering with players who can bring some value to the table. Most Indian OEMs have opted for inorganic growth. The barrier to entry is quite high at the moment, which is why foreign OEMs are acquiring stakes in domestic players.
Varma, however, clarified that currently the company is not talking to anyone for a partnership, but asserted that the partner must bring valuable assets to the table, such as competitive production costs. New Holland and John Deere are greenfield players who have established their independent products and distribution reach in the country without partnerships.
“Our products are in the upper 50 hp range, which represents more than half of the market. The meat of the market is the 40-50hp range and this is a segment where we are looking to introduce products. We are looking to double our market share by 4% over the next three years. Our agriculture segment generated ₹6,500-7,000 crore in revenue in 2021. We are aiming to reach a $1 billion business soon,” Varma added.
CNH is pumping ₹350 crore to boost its tractor production by 60% to 80,000 over the next year from 50,000 last year. Investments linked to products will be added to this.
Export and R&D
CNH has set up four research and development (R&D) centers in India, which also include a unit for construction equipment. The newest one which was set up in Gurgaon will become the largest for the company in the world employing 1,000 people over the next two years.
“Our plant in Noida houses R&D for tractors, Pune for harvesting and Pithampur for construction equipment. We have now established a global R&D center in Gurugram, where we plan to consolidate R&D from high-cost countries,” Varma added.
Apart from R&D, the company aims to make India the base market for utility tractors. CNH has established itself as a value player in global markets. Out of a total of 50,000 tractors last year, CNH sold 14,000 in the export market, including 5,000 in the NAFTA market, followed by South Africa and Southeast Asia. East.
“India offers an advantage”
CNH intends to offer Indian-made components to its global sister companies, providing an opportunity for increased parts purchases.
“Given the supply chain challenges that we have seen, India provides cover against China for the group. As a group, we are now looking at how we could leverage India more to make it a ‘best cost country’ and the first goal is to make half a billion more purchases from here. The purchase from 2021 would be $600 million and we want to double that,” added Varma.
April 18, 2022