Farmers, tractor dealers bogged down in agri crsis

The weak recovery signs in India have dampened sentiments in its agrarian market, which continues to grapple with recurring challenges.

Tractor manufacturers, dealers and farmers are battling it out to counter the exogenous risks faced by the sector.

As the industry experiences increased pressure on agricultural machinery sales, the need of the hour is to implement targeted strategies to address farmer concerns, manage dealer profitability and mitigate downside risks.

Farmers’ aspiration to be debt-free is increasingly becoming a distant reality.

While on one hand their incomes have been impacted by a drastic drop in productivity, the ban on commercial use of tractors in several talukas has further intensified their cash-flow problems. Lack of access to credit facilities and inadequate technical support fail hinder investment in agricultural machinery for many. This reduces their willingness to adopt improved mechanised solutions to increase yields.

Furthermore, inaccurate product specifications such as the actual horsepower of the tractor has put farmers at a high risk of machine damage due to misuse.

This adds to their repair and maintenance expenses. Poor servicing support from dealers also impairs efficiency levels, particularly during peak seasons.

The JD Power 2015 India Tractor Studies showed that less than half of tractor owners surveyed unanimously agreed that their dealers went out of their way to help them. If given a choice, close to 70 per cent of respondents expressed a likelihood of using an independent workshop or local mechanic.

Tractor dealers are also under constant pressure from original equipment manufacturers (OEMs) to meet monthly volume targets, expand business and are struggling to continuously reinvent themselves. However with growing market uncertainty, dealers are wary of investing in their own infrastructure.

The dealer’s survival is no longer reliant only on sales of new equipment.

In order to assist cash-strapped farmers, not only are they required to provide flexible financing options but also need to facilitate trade-ins for aging farm equipment to help farmers pay for new machinery upgrades. However, the accumulation of used tractor stock across the network is forcing residuals and making it hard for dealers to make any profit from trade-ins.

Managing soaring customer expectations adds another layer of complexity.

Customers expect repair and maintenance to be provided instantly and at a location that is convenient to them.

As the findings of JD Power study shows, farmers who took their tractor to the dealer workshop for servicing or repair are less satisfied than those who had their tractor attended to at their farm. Farmers are also cost-sensitive as satisfaction scores drop by more than a 100 index points when servicing fee was far more than expected.

In contrast, farmers who mentioned that the amount paid was better than what they expected reported an upward swing of 48 index points above the Index. Findings from the study suggests that there is an urgent need to offer farmers more advanced products that meet the needs of varied farming applications.

Service support-wise, farmers want dealers to provide complete services and parts solutions, and have a network of talented and experienced staff with access to inventory.

With 75 per cent of tractor customers being first time buyers and thus inexperienced with equipment, OEMs can actively communicate and educate buyers on the direct benefits of investing in enhanced farm mechanisation.

Additionally, manufacturers can address the credit demands of customers by providing appropriate financing options. Without access to finance, farmers will continue to operate in a low investment-low productivity mode. Whether it is supporting the network with trade-ins for old machines or providing leasing options to customers who want to curtail costs, there are many ways in which OEMs can also aid dealers in managing their resources and improving profit margins.

Rethinking prevailing strategies by exploring opportunities of working with customers will drive change across the sector. Also staying attuned to network demands will enable manufacturers win long-term commitment and loyalty from their dealers.

Moreover, government intervention to aid this entire ecosystem by providing the required infrastructure for promoting efficient farming practices will add impetus.

The sector that feeds over a billion holds immense potential over the medium- to long-term. This is echoed by the positive outlook of the tractor owners covered in the JD Power study, where three quarter of all farmers surveyed across the country anticipate their future incomes from agriculture to improve.

The writer is Manager, JD Power

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