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Wednesday, Nov 10, 2004

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Mahindra enters Chinese tractor market; in venture with Jiangling

Our Bureau

Mumbai , Nov. 9

MAHINDRA & Mahindra Ltd (M&M) is to hold 80 per cent equity stake in a proposed joint venture with Jiangling Motor Co Group (JMCG) that will mark the company's entry into tractor manufacturing in China.

The joint venture will acquire tractor-manufacturing assets from JMCG's subsidiary, Jiangling Tractor Company (JTC), producing tractors in the 18-33 HP range.

M&M's official spokesperson said that JTC has capacity to produce 12,000 units annually. The transaction value is pegged at $10 million and M&M will invest $8 million.

Late in October, while indicating a likely acquisition in China, senior M&M officials said that the company was targeting a 12-15 per cent share of the Chinese market for 30-80 HP tractors.

They estimated the relevant Chinese market at 70,000 units per annum, growing at 6-8 per cent. Further, China has over a million small tractors in the 15-18 HP category and 0.8 million power-tiller units.

Mr K.J. Devasia, Executive Director, M&M, said that the Chinese tractor industry has 20-25 big players from which M&M would make its choice.

For M&M, currently the fourth biggest tractor manufacturer in the world and planning to be the biggest by 2008-10, the JTC acquisition reduces slightly the gap of 30,000-40,000 units between itself and AGCO, the third biggest globally.

Not long ago, AGCO pipped M&M to the post in the race to acquire the Finnish company, Valtra.

"JTC will provide the joint venture with a strong manufacturing base, an existing distribution network in China and a complementary product range," said M&M's notice to the BSE.

The Indian company is on record, wanting 30 per cent of overall tractor sales from exports by 2008.

It has a growing market for tractors imported from Korea and Japan and re-badged for sale in the US.

Dealer Web sites in the US cited Jiangling's Lenar, Ningo/Benye's Hercules and Allied, Changzhou's Task Master and DFAM's Dong Feng and Avenger as among the best of Chinese small tractor imports.

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