John Deere plans second tractor facility in India

John Deere plans to invest around $80 million for setting up a new tractor factory in India in addition to its existing plant at Pune.

The proposed facility, the location of which is not yet decided, will primarily manufacture small 30-40 horsepower (HP) tractors, Mr Samuel R. Allen, Chairman and Chief Executive Officer, Deere & Company, told presspersons here on Wednesday.

The $25-billion Moline, Illinois-based farm equipment major manufactured 50,000-odd tractors from its Pune plant in 2010, of which 35,000 units were sold domestically and the balance exported to 46 countries.

The Pune unit mainly makes large (50 HP and above) and medium (40-50 HP) tractors.

“We now have an eight per cent share of the Indian market. Within that, we are the No. 1 player in the large-HP segment in India, with a considerable presence in the medium-HP segment as well,” claimed Mr Ranjit Nair, Managing Director and CEO, John Deere India Pvt. Ltd.

The Indian tractor market has seen significant growth in recent years on the back of remunerative crop prices and rising farm labour shortages. In 2008, 3.1 lakh units were sold, increasing to 3.47 lakh in 2009 and 4.40 lakh last year.

Indian plants

Mr David C. Everitt, President (Agriculture & Turf Division), said that Deere & Company proposes to invest, in all, $100 million over the next two years in the country. Of this, $20 million would be for expanding the engine and painting capacity in the existing Pune factory. The rest would go for the proposed new plant.

“We are now in the stage of negotiating land purchases. Our expectation is to have the official groundbreaking ceremony by May-June this year and production to commence towards end-2012,” he said.

Small segment

John Deere in 2009 launched 35, 36 and 38 HP tractors in India. The new plant is aimed at further bolstering the company's presence in the small-HP segment.

“The Indian market is very cost competitive, which, in turn, requires a very high percentage of localisation. The local content in our Pune facility is 98 per cent. It will be so in the new plant too,” Mr Everitt pointed out.

Mr Allen said that India and China were crucial to the company's strategy of doubling sales to $50 billion by 2018.

“Right now, 65 per cent of our sales are in the US and Canada. By 2018, we want at least 50 per cent of our sales to come from other markets,” he noted.

Besides tractor, John Deere's investments in India include a combine harvester plant at Patiala and a micro-irrigation equipment unit that manufactures extruded plastic emitters and drip tapes at Vadodara.

Both these – plus a 50:50 construction equipment joint venture with Ashok Leyland for production of backhoe and four-wheel drive loaders – were commissioned in 2010.