The Hindu : Business : M&M ties up with Chinese tractor firm

Online edition of India's National Newspaper
Saturday, Dec 25, 2004

Business

Business

M&M ties up with Chinese tractor firm

By Our Staff Correspondent

The President of the Farm Equipment Sector, Mahindra & Mahindra, Anjanikumar Choudhari (left), with the Chairman of Jiangling Tractor Company, Chou Ming, at the joint venture agreement signing function in Mumbai on Friday. — Photo: Shashi Ashiwal

MUMBAI, DEC. 24. Mahindra & Mahindra (M&M) has signed an agreement with the Chinese Jiangling Motor Company Group (JMCG) to acquire an 80 per cent stake in Jiangling Tractor Company (JTC) for a consideration of $8 million. The total deal is for $10 million with the parent JMCG will invest $2 million in cash in the joint venture for the 20 per cent stake.

JTC has a current capacity to make 12,000 tractors annually and the joint venture will provide M&M a strong manufacturing base in China, an existing distribution network and a complementary product range. It will also acquire the Fengshou (`Good Harvest') brand under which JTC tractors are sold.

Addressing the media, Anjanikumar Choudhari, Executive Vice President, M&M, who will take over as President of the Farm Equipment Sector at M&M, said, "The Chinese tractor industry is poised for rapid growth with the Government giving high priority to the development of the rural economy and providing attractive incentives for farm mechanisation. Our joint venture will help us participate in this growth.'' JTC is a wholly owned subsidiary of the $700 million JMCG, which is a leading group in tractors and automotive business in Nanchang, Jianxi province of China. JMCG already has in place joint ventures with auto majors such as Ford and Isuzu for their automotive business. JMCG has been looking to exit the tractors business and has decided to concentrate on the automotive business.

China is a large market for tractors and is structurally different from India. While geared tractors dominate the Indian market with the market size around 2.20 lakh units, China sells around 7 lakh power tillers annually and a million, less efficient, belt-driven tractors annually.M&M has a 27 per cent share in the Indian tractor industry and has been aggressively exploring opportunities in China as part of its overseas growth strategies.

It is already test marketing its own 60 hp products in the Henan province. "We will continue to export these higher HP tractors while the JTC facility will make lower HP tractors,'' said Mr. Choudhari.

M&M is established in the U.S. market (being the fourth largest player there), offering its products in the 10 hp to 75 hp range.

The company will, over a period, phase out Jiangling's U.S. distributor's brand and replace it with its own.

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