M&M to draft new China script for farm machinery

Murali Gopalan Mumbai | Updated on March 12, 2018

Rajesh Jejurikar, President, Farm Equipment Sector,M&M

After tying up with local partners in two earlier ventures, co seeks to go it alone

Mahindra & Mahindra (M&M) is working on a China business plan for its tractor/farm machinery business, which will, in all likelihood, be a wholly-owned subsidiary.

“If we have to succeed in China, we should be able to build our own strategy while leveraging everything we have in brands or products in the farm-machinery space,” Rajesh Jejurikar, President, Farm Equipment Sector, told BusinessLine.

M&M is no stranger to China’s tractor landscape, having been part of two alliances with local manufacturers earlier.

The first took place in 2004, when it bought 80 per cent of Jiangling Tractor Company. The second happened in the form of a joint venture with Yancheng Tractor in 2008, which M&M exited by selling its 51 per cent stake this August.

“We are now evaluating how to enter China and the kind of product strategy that can be adopted as well as (how M&M can) leverage our alliances and assets around the world. We have not left China but are looking at the right plan,” reiterated Jejurikar.

One of the biggest advantages for M&M is that it has learnt a great deal about China during the past decade through its tractor operations. These lessons will come in handy as its goes about working on its new business model.

“We have lots of people who have lived there and know the country inside out. Many of our leaders have spent years in China and bring terrific experience to the table,” said Jejurikar.

Beyond India

Mahindra has been in overdrive in recent years building its global farm machinery presence through acquisitions in Japan, Finland and Turkey. These are part of a vision to increase business beyond India to 50 per cent by 2019 while ensuring that the company is reasonably insulated from downturns in the agricultural equipment space owing to poor rains or tepid economic growth. China, however, will be not be part of the 2019 vision as localisation of products and preparing a business case will take time. “The idea is to create a feasible business model that will enable us to succeed,” says Jejurikar. A full fledged strategy is more likely to be in place by 2020-21.

“Once we have a stronger and clearer global plan, we would want to leverage our acquisitions and build a China strategy rather than operate out of a joint venture,” said Jejurikar. This is true for a host of other tractor multinationals operating in China, a list that includes big brands, including John Deere, Claas and New Holland.

From M&M’s point of view, likewise, operating through a 100 per cent arm makes more sense in a larger China plan for tractors and farm machinery. For this to happen, the key is to develop products that meet the requirements of the market.

Published on October 11, 2017

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