Same Deutz-Fahr to plough deep and wide

Chennai: It is going to be a different Same Deutz-Fahr (www.samedeutz-fahr.com) that the Indian tractor market is going to witness hereafter.

The Rs 20-crore buyout of Greaves’ stake in two joint ventures (the Rs 35-crore turnover tractor company Same Greaves Tractors and the Rs 8-crore turnover diesel engine JV Same Diesel) and the two-year learning (test marketing) of Same tractors have given the Italian group the confidence to plough the domestic tractor market deep and wide.

In line with the ownership the tractor company has been renamed Same Deutz Fahr India. The $830-million turnover and the fourth largest tractor manufacturer in the world is aiming at a 10-per cent domestic market-share in three years. It also plans to turn the Ranipet plant near Chennai into an export base for Southeast Asian and even African markets.

India is the only country outside Europe where the Italian group has manufacturing facilities.

Says Same Deutz-Fahr (sales and marketing director) Dr Ing Luigi Coppa: “Our ultimate aim is to sell 50 per cent of our production here and export the balance. The other part of our strategy is to sell to OEM as we do elsewhere.” Same Deutz Fahr sells its machines to Massey Ferguson, another world tractor major.

With the European market getting saturated global tractor majors are looking at newer markets, and India is one among them. The country already has companies like New Holland and John Deere setting up manufacturing base here.

But why didn’t the Italian group opt for China, another big tractor market? Says Coppa: “In China the market is for walk-in-tractors and hand-operated machines, and we don’t have a product for that segment. The Indian market is slowly following the global trends as far as going in for high powered/high HP tractors is concerned. Earlier the market used to be for 35 HP tractors. Now the trend is moving towards 40-50 HP tractors, which augurs well for us to cater to Indian as well as other Asian markets.”

While exports will take some time to happen, the group’s immediate concern is to build market on its two-year market learning. Started two years back as a technical tie-up with Greaves, the company has since then launched 50 HP tractors like other MNC counterparts.

Says Coppa, “Initially we had a joint venture for diesel engines. When the tractor market grew Greaves approached us for technology to manufacture tractors with the engines supplied by our other JV.” According to officials the import content in the machines is just 2 per cent.

But soon after the launch the market declined and Greaves decided to re-look at its business segments. For the global tractor majors like Same Deutz Fahr growth can come outside Europe. The combination of these two factors made the Italian group to firm up the technical tie-up into a 50:50 JV.

In the meantime, finding the market for high-powered tractors tough, the Italian company decided to study the market in detail before making further forays. “Tractors are not like cars that could be designed and sold straight from the factory. They have to be customised to regional soil, crop and farming conditions. For instance, in Andhra Pradesh, the puddling operations are done in deep waters and tractor manufacturers should take this into account to have proper sealants for its components,” he says.

Curiously, unlike other MNC tractor players, Same Deutz Fahr’s modest 10,000 units per year capacity was a blessing in disguise. Says Same Deutz Fahr managing director Pier Marco Plebani: “We started to focus region-wise and decided to customise our vehicle to the Punjab market where the soil conditions are similar to Italy. The learning included understanding the current application and upgrading the machine.”

“When they started studying the market others in the industry, including me [then with Escorts], started taking this company seriously,” says Same Deutz Fahr commercial director (Asia) Kamal Bali.” The company has sold 2,000 numbers till date in Punjab, Maharashtra and Madhya Pradesh.

Fully under control, the Italian group decided to overhaul the Indian subsidiary’s marketing set-up and roped in Bali from Escorts. “The learning for two-year test marketing has helped us to draw up our strategy,” says Bali. “The company is not interested in chasing numbers and would still be a significant player in the 2-lakh units tractor industry.”

“Upper middle and top-end are our target segments,” Bali says. The company will soon launch high-power tractors (42HP, 60HP and 70 HP) and is now expanding its distribution network with a target of having 100 dealers in two phases from the current number of 60. “In the first phase we will have dealers in Punjab, Haryana, west Uttar Pradesh, Gujarat, Maharashtra and three southern states. The eastern region will be in the second phase.”

“All our vehicles will be robust and fuel-efficient with high-torque backup, oil-immersed brakes, planetary reduction with straight-axle and heavy-duty hydraulics. These will be our standard offerings and will not be at an extra price like our competitors charge,” says Plebani.

The company will be launching at least three basic models; each will have variants to suit different states. But Bali expects the market to remain flat for the next couple of years and later, he thinks, the growth will not be more than 3 per cent. “There will be fundamental correction in the market and the industry may witness mergers and acquisitions. The market will plateau at 2.25 lakh units per annum.”

Bali says the overall growth will be flat. “But there will be growth within the segment, as farmers will graduate to higher HP tractors.” About the company’s one-year warranty period while competitors are offering two years, Coppa says: “Tractors are capital equipment for farmers and they would like to have machines with less downtime and are not bothered by the warranty period.”

In addition, what stands in favour of MNCs is buyer behaviour. Coppa says selling the same brand tractor to a farmer for a second time is quite a difficult proposition. “And companies like Same Deutz Fahr stand better chance vis-à-vis existing players. In addition agricultural fields are populated with 35 HP tractors and their owners would like to graduate to higher-powered machines.”

Apart from tractors, the Italian group has lined up serious plans for the other subsidiary, Same Greaves, the engines company. The company has a capacity to roll out 30,000 units, far in excess of the tractor company needs. Plebani says there are plans to merge this company with the tractor outfit after concluding the legal formalities related to the buyout.

Bali says Same Greaves is getting into the stationary diesel engines segment in the capacity 20-40 kva. “Already some compressor manufacturers have approached us for supplies. Residential and commercial complex genset markets will also be targeted.”