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A Global Harvest


The fate of the nation is tied up with the fate of the monsoons. Any Indian child can rattle off this familiar dictum, having penned innumerable essays on the significance of the balmy ocean wind that brings welcome rain to a thirsty subcontinent.

Indias low irrigated area (30 percent), poor soil conditions and generally depressed purchasing power make its agricultural output heavily dependent on rainfall. With as much as 70 percent of the countrys one-billion-plus population dependent upon agriculture, rural demand has a decisive impact on the economy.

It is no wonder then that the monsoons are a reference point for any discussion on tractor sales: Farm output and tractor demand have a direct correlation. Fuelled by rising domestic sales and exports, overall tractor sales grew by 29 percent to 247,000 units from 2004 to 2005, following several dry and dusty years. The chief factors for robust demand have been two consecutive years of good rainfall, easy availability of financing, rising income from custom hiring (where farmers hire out their equipment for extra cash) – and sizeable tractor exports to the United States for hobby farming.

According to Indias Tractor Manufacturers Association, the Indian tractor industry is the largest worldwide, accounting for 30 percent of global production. Yet tractor density, at eight tractors per 1,000 hectares, is low compared to the global average of 19 tractors per 1,000 hectares. The popular range is 30 to 40 horsepower, compared to 60 hp in Europe and 90 hp in the United States.

Sixteen players, including three multinationals, make the tractor industry truly competitive. Major players include Mahindra & Mahindra (M&M), Tractors and Farm Equipment Ltd. (TAFE), Punjab Tractors Ltd., International Tractors Ltd., Escorts and Hindustan Machine Tools. The multinationals include New Holland, John Deere and Same Deutz-Fahr.

Significantly, tractor exports, accounting for 8 percent of the total production, grew by 20.5 percent last year. Being vulnerable to monsoon cycles and the vagaries of nature, all major manufacturers are focused on exports, explains Gautam Nagwekar, vice president of marketing and sales at Mahindra & Mahindra, the market leader with a 26 percent share. Interestingly, M&M also has a joint-venture manufacturing facility in China, as well as two assembly plants in Texas and Georgia.

Typically, Indian tractors cost a quarter of similar-powered vehicles in developed countries. In the U.S., there is a good demand from hobby farmers, and Indian manufacturers are selling in the 40 to 50 hp range, adds V.K. Browning, corporate communications head at TAFE (market share: 22 percent, after its recent acquisition of Eichers tractor division). India is also a tractor manufacturing hub for players like New Holland, John Deere and Same Deutz for their U.S., Southeast Asian and African operations.

Workhorse Vehicles

Rugged and versatile, Indian tractors are used not only for farm operation but for rural haulage and transportation. It is a common sight to see a tractor laden with sacks of grain or sugar cane on its way to market, or carrying an entire extended family off to the fair. The demand for renting tractors during the sowing season is enormous, and most owners depend on custom hiring income to repay loans taken at the time of purchase.

Most OEMs have their own finance companies or enter into tie-ups with state-owned banks; 90 percent of the tractors bought are on credit. Overloading and abusive usage are common practices as owners and renters extract every ounce of power. A small number of tractors is also used in the mining and road construction industries for haulage.

Most analysts agree that modifications in engine, transmission, axle and hydraulics design in the tractor industry worldwide (and in India) are not as dramatic as those in the passenger car and heavy commercial vehicles businesses. Since the Indian market is highly price sensitive – the rural section more acutely so – tractor technology upgrades have been conservative. Even so the last five years have seen some upward movement.

Emission norms have gradually become applicable, and since Oct. 1 all new tractors are Bharat Stage III compliant. Design changes have been made to ensure combustion optimization in order to reduce NOx and particulates, and technology over the years has ushered in higher specific fuel consumption, or SFC. Emission control technologies like exhaust gas recirculation (EGR) and higher injection pressures are on the medium-term radar.

M&Ms Nagwekar points out, Indian manufacturers in general have risen to the challenge of globalization and are sensitive to customer needs, and adds, M&M is the only Indian corporation to have launched a turbocharged engine variant in the 50-plus hp category.

J.S. Chawla, chief manager of R&D at Punjab Tractors, says, There is pressure on Indian manufacturers to focus on aesthetics and operator ergonomics, and the introduction of new features like synchromesh transmission, wet brakes and power steering. Major OEMs are working towards introducing turbocharged engines in their high-end tractors. The use of oil-immersed brakes in the 35-plus hp category, optional now, might soon become universal. Though most tractors have a common sump for transmission and hydraulic fluids, the majority are still on the non-asbestos-type, organic dry brake platform.

Oil and Buyers

The Indian tractor engine oil market is predominantly at the API CD plus Mack T-7 level, though many still use API CC or MIL-B category oils, mostly of the unbranded variety. Several OEMs recommend API CF engine oil levels and most oil companies make tractor-dedicated 20W-40 grade oils at the API CF level. M&M recommends API CF-4 level for its turbocharged engine range. Drain levels are currently at 250 hours – and some OEMs are working at doubling this.

API GL-4 level fluid for transmissions and ISO VG 100 for the hydraulic system are most commonly used. These are very gradually making way for the universal tractor transmission oil (UTTO) category meeting both requirements. Guiding specs for UTTOs are John Deere or Ford, and common current levels are JD 20C and ESW M2C 86 B, with common viscometry being SAE 80W.

Given the critical issue of compatibility with brake material, each OEM of course provides its own individual UTTO spec. Although UTTOs offer advantages like rationalization of oil inventory and avoidance of misapplication, these are not widely used. Most oil companies however predict a pick up in the near future.

TAFE has met with some success in popularizing its UTTO, for which it has a genuine oil tie-up with Indian Oil Corp. Ltd. This was possible due to the cost competitiveness achieved by TAFE and Indian Oil through optimized formulation, innovative packaging and rationalizing the supply chain, explains S.K. Swaminathan, executive director of Indian Oil.

New Holland has an exclusive UTTO tie-up with TotalFinaElf India, whose Senior Vice President P.K. Mittal opines, Though UTTOs may be 35 percent more expensive compared to conventional oils, they prevent mishaps during the critical ploughing period and save on overall downtime expense.

Castrol has a genuine oil co-branding tie-up with M&M for service fill, and has lent its popular CRB brand name to this important segment. Though all oil companies are moving towards co-branding tie-ups for the aftermarket, the urgency is nowhere near that seen in the commercial vehicle business. Factory-fill volume is substantial but generally regarded as a low margin, tender-based business.

Oil companies and OEMs concur that farmers pay little heed to specifications and use the cheapest oils available. In fact M&M data reveals that only 20 to 25 percent approach authorized dealers in the post-warranty period.

However, Sudhanshu Vats, Castrol Indias marketing vice president, feels otherwise: After a robust, qualitative usage-and-attitudes study spread across 10 centers, we found that the farmer does indeed take OEM oil specifications seriously, he reports. Mittal of TotalFinaElf India goes a step further, saying, Consumers value OEM specifications, and our experience is that in remote areas where availability is a problem farmers stock up on the right oils.

Building Loyalty

The bazaar remains the cynosure of all oil companies who approach the farmer through the local mechanic and dealer. The well-oiled system of discounts and incentives to distributors, dealers and mechanics applies here, though reach in remote areas is difficult. Industry sources unhesitatingly acknowledge the longstanding efforts of Castrol and Tide Water in this segment.

Historically, our strength lies in our rural and semi-urban marketing network base and our considerable thrust in this area has built up the companys brand equity, claims Tide Water Chief Executive N.R. Padmanaabhan. Adds Castrols Vats, Apart from long-standing direct work with rural dealers, we also hold larger programs like the recent sponsoring of rural Olympics.

Traditionally, village fairs, youth competitions, health camps, etc., are the means of establishing contact with farmers, mechanics and rural dealers. All OEMs and oil companies agree that the rural consumer is more loyal than his urban counterpart. Rural India has historically received step-motherly treatment, in terms of allocation for infrastructure and social services, and therefore any interaction is welcomed. Any awareness program receives an overwhelming response.

Our villagers have a great thirst for knowledge, and we obtain much goodwill from programs like [our] Swasth tractor swasth chalak [healthy tractor, healthy driver], says M&Ms Nagwekar.

Pumping Up Demand

The rural consumer is, however, poised to receive increased attention from oil companies – all of whom see a spurt in rural purchasing power. Public sector oil companies, who already have a formidable countrywide crisscross of gasoline stations (or pumps as they are known here), have major plans to grow their number.

Hindustan Petroleum Corp. Executive Director K.R. Shankaran explains, Last year we took the lead in establishing over 500 new rural fuel and lube outlets called Hamara Pumps [Our pumps] and now we have launched Indias first-ever mobile retail outlets – tankers fitted with fuel-dispensing pumps that travel to remote villages to deliver fuels and lubricants.

Adds Swaminathan of Indian Oil, We are moving aggressively on the rural front and plan to open 1,000 low-cost retail outlets called Kisan Kendras [farmer centers], taking both fuels and lubes closer to consumption centers.

Also, Bharat Petroleum Corp. has ambitious plans through a tie-up with Indian Tobacco Co.s E-Chaupal [meeting place] venture. This is a unique network of units in villages provided with a PC and a solar-powered connection, whereby supplies can be ordered and farm-related information received.

Through the E-Chaupal network we aim to reach our lubricants to remote quarters, and also to establish retail outlets at huge E-Chaupal rural supermarkets to sell our fuels and lubes, says Deputy General Manager Dr. G. Vasudev.

Most oil companies are upbeat about future tractor oil demand, citing the steady growth of the food-processing industry. Large acreage is emerging under soya, potato and wheat cultivation, and TAFEs Browning predicts, The Indian market will continue to evolve and the demand for crop-specific and application-specific tractors is expected to increase. In addition, the growing preference for higher-horse-power tractors with oil-immersed brakes spells good news for oil companies.

Yet at the end of the day, all OEMs and oil companies have to deal with a price-sensitive market. It is common knowledge that a large number of villagers live in very harsh conditions, where even potable water and two square meals a day are a luxury. And what little purchasing power exists in the hands of medium and large landowners is, alas, invariably subject to the mercy of the fickle rain gods.

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