CHAPTER- 1

1.1 Introduction

Tractor industry plays an important part as agriculture sector has a major contribution to India's

GDP. Tractors are part of agricultural machinery industry. Tractors came to India through imports

and later on were indigenously manufactured with the help of foreign collaborations. The

manufacturing process started in 1961-62. Indian tractor industry is relatively young but now has

become the largest m

1.2 Tractors in India

As commercialization of agriculture grew in intensity in the mid-to-late 19th century the British

Raj and the local legislatures and provinces began investing in agricultural development through

support and establishment agricultural research farms and colleges and large scale irrigation

schemes yet the level of mechanization was low at the time of independence in 1947. The

socialist oriented five year plans of the 1950s and 60s aggressively promoted rural

mechanization via joint ventures and tie-ups between local industrialists and international tractor

manufacturers. Despite this aggressiveness the first three decades after independence local

production of 4-wheel tractors grew slowly. Yet, by the late 1980s tractor production was nearly

140,000 units per year and by the late 1990s with production approaching 270,000 per year,

India over-took the United States as the world's largest producer of four-wheel tractors with over

16 national and 4 multi-national corporations producing tractors today. Despite these impressive

numbers FAO statistics estimate that of total agricultural area in India, less than 50% is under

mechanized land preparation, indicating large opportunities still exist for agricultural

mechanization

1.3 History of Indian tractor industry

1.3.1 1945 to 1960

War surplus tractors and bulldozers were imported for land reclamation and cultivation in mid

1940's. In 1947 central and state tractor organizations were set up to develop and promote the

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supply and use of tractors in agriculture and up to 1960, the demand was met entirely through

imports. There were 8,500 tractors in use in 1951, 20,000 in 1955 and 37,000 by 1960.

1.3.2 1961 to 1970

Local production began in 1961 with five manufacturers producing a total of 880 units per year.

By 1965 this had increased to over 5000 units per year and the total in use had risen to over

52,000. By 1970 annual production had exceeded 20,000 units with over 146,000 units working

in the country.

1.3.3 1971 to 1980

Six new manufacturers were established during this period although three companies (Kirloskar

Tractors, Harsha Tractors and Pittie Tractors) did not survive. Escorts Ltd. began local

manufacture of Ford tractors in 1971 in collaboration with Ford, UK and total production

climbed steadily to 33,000 in 1975 reaching 71,000 by 1980. Credit facilities for farmers

continued to improve and the tractor market expanded rapidly with the total in use passing the

half million mark by 1980.

1.3.4 1981 to 1990

A further five manufacturers began production during this period but only one of these survived

in the increasingly competitive market place. Annual production exceeded 75,000 units by 1985

and reached 140,000 in 1990 when the total in use was about 1.2 million. Then India - a net

importer up to the mid-seventies - became an exporter in the 1980s mainly to countries in Africa.

1.3.5 1991 to 1997

Since 1992, it has not been necessary to obtain an industrial license for tractor manufacture in

India. By 1997 annual production exceeded 255,000 units and the national tractor population had

passed the two million mark. India now emerged as one of the world leaders in wheeled tractor

production.

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1.3.6 1997 to 1999

Five new manufacturers have started production since 1997. In 1998 Bajaj Tempo, already well

established in the motor industry, began tractor production in Pune. In April of the same year

New Holland Tractor (India) Ltd launched production of 70 hp tractors with matching

equipment. The company is making a $US 75 million initial investment in a state of the art plant

at Greater Noida in Uttar Pradesh state with an initial capacity of 35000 units per year. Larsen

and Toubro have established a joint venture with John Deere, USA for the manufacture of 35-

65 hp tractors at a plant in Pune, Maharashtra and Greeves Ltd will produce Same tractors under

similar arrangements with Same Deutz-Fahr of Italy. Looking to South American export markets

Mahindra and Mahindra are also developing a joint venture with Case for tractors in the 60-

200 hp range. Total annual production was forecast to reach 300,000 during the following year.

1.3.7 1999 to Present

Facing market saturation in the traditional markets of the north west (Punjab, Haryana, Western

Uttar Pradesh) tractors sales began a slow and slight decline. By 2002 sales went below 200,000.

Manufacturers scrambled to push into eastern and southern India markets in an attempt to reverse

the decline, and began exploring the potential for overseas markets. Sales remained in a slump,

and added to the market saturation problems also came increased problems of "prestige" loan

defaults, where farmers who were not financially able took tractors in moves to increase their

families prestige. There are also reported increased misuse of these loans for buying either

lifestyle goods, or for social functions. Government and private banks have both tightened their

lending for this sector adding to the industry and farmers woes. By 2004 a slight up tick in sales

once again due to stronger and national and to some extent international markets. But by 2006

sales once again were down to 216,000 and now in 2007-08 have slid further to just over

200,000.

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1.4 Current Manufacturers of Tractors in India

1.4.1 SAS Motors Limited

SAS Motors Limited, the manufacturer of 'Angad' Tractors, is a public limited company

incorporated in April 2003 with the mission of making low cost affordable farm mechanization

technology available to the Indian farmer. Its flagship product is ‘Angad’ 240 D tractor. The

company is engaged in sourcing, assembling, manufacturing, and marketing of ‘Angad’ brand

tractors and farm machineries. SAS Motors also provides a range of agricultural equipments – all

with innovative design and economical price.

Angad Tractors main mission is to make low cost tractors, power tillers, and other farm

machineries designed on ‘appropriate technology ’ platform available to the Indian farmers.

ANGAD Tractors ares built around the theme of power optimized, affordable and low

maintenance cost, value for money tractor suitable for multipurpose operations. Moreover, since

most tractors are purchased through bank loan, low cost advantage is reflected in loan servicing

(lower repayment installments) for the farmer and lower exposure for the banker. The product –

price combination is guaranteed to generate surplus income to farmer to not only defray the cost

of ownership but also create an additional perennial income /livelihood source. Currently, SAS

Motors Limited manufactures tractors ranging from 15-35 hp. [2]

1.4.2 Balwan Tractors, Force Motors Ltd

Formerly known as Bajaj Tempo Ltd. until 2005, Force Motors Ltd., makers of India's

ubiquitous 3-wheeler Tempos since 1957 in a collaboration with Vidal & Sohn Tempo Werke,

Germany. In 1999 began production of Ox and Ox 45 Brand Tractors both which incorporated

transmission technology from the German manufacturer ZF. Additional line Balwan was

introduced in 2004 and between the lines Force Motors offers a line of two-wheel and four-

wheel tractors in a horsepower range from 10 - 50 HP.[3]

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1.4.3 Captain Tractors Pvt. Ltd

Founded in May 1994 and located in Rajkot, India, Captain Tractors manufactures mini-tractors

under the Captain brand.[4]

1.4.4 Crossword Agro Industries

Located in Rajkot, India, Crossword manufactures small tractors under the Nissan, Atmak and

Captain brand names.[5]

1.4.5 Eicher Tractors

In 1949, Eicher GoodEarth, was set up in India with technical collaboration with Gebr. Eicher a

of Germany, imported and sold about 1500 tractors in India. In April 24, 1959 Eicher came out

with the first locally assembled tractor from its Faridabad factory and in a period from 1965-

1974 became the first fully manufactured (100% indigenization) tractor in India. In December,

1987 Eicher Tractors went public and in June, 2005 Eicher Motors Limited sold Eicher Tractors

& Engines to a subsidiary of TAFE called TAFE Motors and Tractors Limited.

Eicher also produced tractors under the Euro Power and Eicher Valtra brands under license from

Valtra, an AGCO brand

1.4.6 Escorts (Escort, Powertrac and Farmtrac)

Escorts Ltd began local manufacture of Ford tractors in 1971 in collaboration with Ford, UK and

total production climbed steadily to 33,000 in 1975 reaching 71,000 by 1980. Ford (Ford - New

Holland) was sold in 1992. Ford Motor Company proper quit the tractors business, but the name

was allowed to continue as per agreement until 2000, when Escorts relabeled its Ford models

under the Escort brand. Escort manufactures produces tractors in the 27-75 HP range and has

already sold over 6 lac tractors. Its tractors are marketed under three brand names, Escort,

Powertrac and Farmtrac.

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1.4.7 HMT Tractors

HMT is a large public sector unit and began manufacturing Agricultural Tractors in 1972 under

the HMT brand name with technology acquired from Zetor of the Czech Republic. It

manufactures its tractors in Pinjore, Mohali in a large factory that also manufactures machine-

tools, and Hyderabad It has a capacity of 20,000 tractors per annum. In the Machine-tool

company is a large foundry. It produces tractors in a range from 25 HP to 75 HP. For a short

time, HMT exported tractors to the USA under the Zebra brand, which were marketed by Zetor

distributors and dealers there. The company is controlled by the Ministry of Heavy industry that

provides, on a monthly basis to the public its financial performance.

1.4.8 Indo Farm

Founded in Baddi, Himachal Pradesh, India in 1999, Indo Farms builds tractors in the 30-50 hp

ranges.

1.4.9 John Deere Tractors

In 2000, John Deere set up production in a joint venture with Larsen & Toubro Ltd in

Sanaswadi, in a rural area near Pune, Maharashtra. It was known as L&T John Deere Private Ltd,

and manufactured tractors under the L&T - John Deere name for sale in India, and under the

John Deere name for worldwide sales.

In 2005, Deere & Company acquired nearly all the remaining shares in this joint venture. The

new enterprise, is known as John Deere Equipment Private Limited. The factory currently

produces tractors in of 35, 40, 42, 47, 50, 55 and 70 HP capacities for domestic markets and for

export to the USA, Mexico, Turkey, North and South Africa, and South East Asia. Pune factory

started to produce new 55 to 75 Hp 5003 series tractors for European market in 2008.

John Deere India Private Limited is a subsidiary of Deere & Company, USA in India. Its factory,

located near Pune, manufactures 5000 Series agricultural tractors. The Indian operations of

Deere & Company include a technology center located at Magarpatta City Pune and John Deere

Water Vadodara. The technology center provides services in the areas of Information

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technology, engineering, supply management, embedded systems and technical authoring for

company’s operations world wide. John Deere Water, formed by the acquisitions of Plastro

Irrigation Systems, T-Systems International, and Roberts Irrigation Products, is one of the

leading irrigation companies in the world today.

1.4.10 Mahindra & Mahindra

M&M's Farm Equipment Sector origins lie in a joint venture in 1963 between the Company,

International Harvester Inc., and Voltas Limited, and was named International Tractor Company

of India (ITCI). In 1977, ITCI merged with M&M and became its Tractor Division. After

M&M's organizational restructuring in 1994, this division was called the Farm Equipment

Sector. The Farm Equipment Sector has also ventured into manufacturing of Industrial Engines.

M&M Industrial engines are used for various applications like generator sets, industrial,

construction, marine, compressors, etc. These engines are manufactured at the Company's engine

assembly plants at Kandivli and Nagpur. M&M has two main tractor manufacturing plants

located at Mumbai and Nagpur in Maharashtra. Apart from these two main manufacturing units,

the Farm Equipment Sector has satellite plants located at Rudrapur in Uttarachal and Jaipur in

Rajasthan. The Farm Equipment Sector as reported by the Company has a dealer network of over

450 dealers. This dealer network is managed by 28 area offices, situated in all the major cities

and covering all the principal states and M&M tractors has sold more than 13,00,000 tractors

since its inception. M&M's Farm Equipment Sector is perhaps the largest exporter of Indian

tractors to the USA and the west. And in a reversal to earlier trends of Indian tractor

manufactures with joint ventures with western tractor companies, M&M, in 2004 announced that

they had bought majority stake (80%) in Jiangling Tractor Company, and renamed it Mahindra

Jiangling Motor Co Group (JMCG). This is the first instance of Indian tractor industries

participating in India's reverse FDI. The plant in China reportedly has a production capacity of

12,000 tractors annually.

In March 2007, M&M bought a controlling 43% stake in the Mohali-based tractor firm Punjab

Tractors (Swaraj) that will reportedly increase M&M's share in the domestic farm equipment

market from just over 30% to 40%. The 43% stake includes 29% owned by private equity firm

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Actis Capital and 14.2% by the Delhi-based Burman family. In July 2007, Mahindra upped its

stake to 64.6%.

1.4.11 New Holland

New Holland Ag's entry into India was facilitated by FIAT's acquisition of Ford-New Holland in

1991. By 1998 New Holland Ag. (India) completed the construction of a new plant in Noida,

near New Delhi, with a capacity of 5000 tractors in the 35 - 75 hp range. In 1999, New Holland

Ag.'s parent company FIAT bought 70% of holdings of Case Corporation and created Case New

Holland Global (CNH one of the top three tractor/agricultural/construction machinery

manufacturers in the world), the new holding company New Holland Ag. (India). In 2000, the

capacity of the Noida plant rose to 12,000 tractors per year and in 2007 the company

manufactured 24,000 tractors for the domestic and export markets.New Holland India exports

fully-built tractors to 51 countries in Africa, Australia, South-East Asia, West Asia, North

America and Latin America.The India plant of New Holland was originally built in 1998 to cater

only to India domestic market. However due to slow down of economy by year 2001-2002 and

slump in domestic demand, it became a challenge to utilize the installed capacity of the

factory.Hence the company started looking its market beyond India borders. Its then CEO Mario

Gasparri guided the vision and handed over the task of overseas business to its dynamic manager

Bhanu Sharma. The efforts paid off well. Bhanu Sharma in capacity of Head-International

Business Operations, took op the export volumes from the level of almost nil in 2003 to 8000

units in year 2007. The export business last year in 2007 contributed over 50% of the company

business of total USD 250 millions.This also made New Holland the second largest tractor

exporter from India after John Deere. In year 2007, India exported around 32,000 tractors of

which 25% share was of New Holland.

1.4.12 Preet Tractors

Preet Agro began manufacturing tractors in 2002 in Punjab, India. They currently manufacture in

the 35-70 hp range.

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1.4.13 Swaraj Tractors

Punjab Tractors Ltd In 1965, Government of India research institute Central Mechanical

Engineering Research Institute, Durgapur, WB initiated design and development of Swaraj

Tractor based on indigenous know-how. In 1970, Punjab Government acquired the Swaraj

tractor's design and established Punjab Tractors Limited (PTL). It was India's first large-scale

totally indigenous project. The company exports Tractors to various countries including USA. It

manufactures nine models of tractor and several models of combine harvesters.

The manufacturing units are located at Mohali District, Asron Village of Nawanshahar

District and Nabha of Patiala District, Punjab. Today Swaraj tractor is the second most selling

brand of tractors in India after Mahindra More than 800000 lacs tractor sold.

The popular models sold under SWARAJ brand are: SWARAJ 744, SWARAJ 735, SWARAJ

855, SWARAJ 978, SWARAJ 834, SWARAJ 939, SWARAJ 733, SWARAJ 724, and SWARAJ

722. Swaraj also manufactures Forklifts and Combines, which are assembled in their Mohali

Plant. a private equity firm acquired 29% of Punjab Tractors in mid-2003 from the Punjab

Government. In March 2007, and currently subject to the receipt of requisite approvals, M&M

bought a controlling 43% stake in Punjab Tractors Ltd. that will reportedly increase M&M's

share in the domestic tractor market from just over 30% to nearly 40%. The 43% stake in Punjab

Tractors includes the 29% owned by Actis Capital and 14.2% by the Delhi-based Burman

family. In July 2007, Mahindra upped its share in Punjab to 64.6%.

1.4.13 Same Deutz-Fahr Ltd.

SAME Tractors is an USD 4 billion company for past 7 Decades of Rich Experience in

Agriculture Segment. It was found by Francesco Cazzani along with his brother way back 1927.

Greaves Ltd, joined in collaboration with SAME for manufacturing of tractors in 1996 under the

SAME-Greaves brand. By 2000, Greaves sold its shares to SAME and formed 50:50 Joint

Venture as SAME Greaves Tractors Ltd.

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By 2002, Greaves Exited from SAME, SAME Greaves has become a wholly owned subsidiary

of SAME, Italy. The company has been renamed as SAME DEUTZ Fahr Group India, Ranipet,

Tamil Nadu, India.

1.4.13 Sonalika (International Tractors Ltd.)

International Tractors Limited was incorporated on October 17, 1995 and began manufacturing

tractors designed by Central Mechanical Engineering Research Institute (CMERI). ITL currently

is manufacturing Sonalika tractors between 30 HP to 90 HP, and the CERES brand between

60HP to 90HP. ITL went into collaboration with Renault Agricultural of France in July 2000.

Renault Agriculture is a subsidiary of the Renault Group. Renault Agriculture was bought by

CLAAS of Germany in 2003. Incidentally CLAAS already has a strong presence in India market

producing its Crop Tiger range of Combine Harvesters in a plant in Faridabad (near New Delhi)

since 1992. CLASS has opened a new plant in Punjab at Morinda in 2006.

1.4.14 Standard

Standard Combine began building tractors in Barnala, Punjab, India. In Standard Tractors,

tractors are being manufactured in the range of 35, 45, 50, 60, and 75 HP with respective model

names: Standard 335, Standard 345, Standard 450, Standard 460, and Standard 475. Engines for

all these tractor models, except the last one, are manufactured within the plant as ‘Standard

Engines’, in specific names – SE 335, SE 345, SE 450 and SE 460, respectively. All the above-

mentioned models of Standard Engines have shown compliance to the TREM-III emission

norms, as have been verified by the ARAI. However, two new variants of tractor of 35 hp

(Standard 335-I) and 45 hp (Standard 345-I), equipped with famous Perkins engines (assembled

within the Standard Tractors plant), and two completely new models of tractor of 30 hp

(Standard 330) and 40 hp (Standard 340) are on the verge to be launched. Besides these, three 3-

wheelers (two passenger-carriers and one cargo), one 4-wheeler (cargo), a crane, an electric 3-

wheeled mini-car, and two 2-wheelers (scooters) are either in the process of development or on

the verge of launch from the Standard Tractor Division.[14]

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1.4.15 Tafe

Tractors and Farm Equipment Limited (TAFE) was established in 1961 to manufacture and

market Massey Ferguson tractors and related farm equipment in India. AGCO, the owner of

Massey Ferguson, now owns 24% of TAFE. Tractors are built and sold in India under both the

TAFE and Massey Ferguson brands, and exported under both brands as well. In 2005, TAFE

bought the Eicher Motors tractor and engine division.

arket worldwide. There are currently 14 players in the industry

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1.5.1 Overview of Tractor Industry in India:

The Indian tractor industry has around 13 national players and a few regional players. The

industry is dominated by Mahindra and Mahindra (M&M) with a market share of around

42.04%, followed by Tractors and Farm Equipments TAFE, which holds around 22.32% of the

market. The other major players include Escorts (13.03%), L&T-John Deere (7.02%), and

International Tractors Limited (8.71%) and New Holland Fiat India Pvt. Ltd. (5.0%). During the

last few years, the industry has seen some consolidation with M&M acquiring Punjab Tractors

(PTL) and TAFE acquiring Eicher Tractors. Most of the tractors sold in India are in the 21-50

HP range, with the 31-40 HP category alone accounting for around 50% of this.

1.5.2 Market Share of various competitors in Indian Tractor Industry:

Total domestic tractors sold in 2009 from January to December was 361,141 with a growth of

17.2 % over what sold in 2008 i.e. 308173.

Table 1.1

Figure 1.1

The long-term prospects of the Indian tractor industry are highly dependent on Government

policies for the agriculture sector. Historically, most tractor sales are done on credit even as over

the last few years financial institutions, facing an increase in their non-performing assets (NPAs),

have resorted to some tightening of credit norms. Also, during 2009-10, there has been a sharp

increase in cash purchases, reflecting the rise in disposable incomes in the rural markets. Most of

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JAN-December Calendarised- Only DomesticManufacturer Jan-December M.S.%

2009 2008 GR% 2009 2008M&M GROUP 151807 125795 20.7% 42.1% 40.8%TAFE GROUP 80609 70178 14.9% 22.3% 22.8%ESCORTS 47046 42876 9.7% 13.0% 13.9%ITL 31462 27426 14.7% 8.7% 8.9%NHFI 18030 16342 10.4% 4.9% 5.3%JOHN-DEERE 25342 15783 60.6% 7.0% 5.1%HMT 4694 4114 14.1% 1.3% 1.3%FML 614 1471 -58.3% 0.2% 0.5%SAME 1537 4188 -63.3% 0.4% 1.7%TIV 361141 308173 17.2% 100.0% 100.0%

the tractor financing done by banks comes under priority sector lending, a directed-lending

mechanism of the Government of India.

In terms of volume, India is one of the largest tractor markets in the world, besides China and the

USA. The prospects of the domestic industry are highly linked to monsoon rains, which remain a

key factor in determining agricultural production. Better irrigated States like Punjab and Haryana

have a high tractor density (over 100 per 1,000 hectares), while States like Rajasthan, Gujarat,

Himachal, Tamil Nadu, Maharashtra, Andhra, MP and West Bengal have low levels of tractor

penetration—a pointer to the substantial growth potential that the latter set offers. On an all-India

basis, tractor penetration remains low at around 13 per 1,000 hectares. Besides being used in

farming, tractors find application in activities such as harvesting and irrigation, land reclamation,

drawing water and powering agricultural implements. In addition, lately, the tractors are also

being used for non-agricultural purposes including haulage in construction and infrastructure

projects which has expanded the tractor market. The Indian tractor market, thus, is expected to

grow in future and remain one of the biggest tractor markets in the world.

1.5.3 Present Scenario & Industry Economic Features:

Tractor industry in India reported a strong growth of 28.3% in sales volumes during the year

2009-10, ending cyclical correction that had pulled down tractor sales in preceding years.

Significant revival in 2009-10 happened despite the drought-like conditions in many States

during the Kharif1 season because of many factors like:

Higher minimum support price (MSP) for crops

Greater ability of farmers to make cash purchases (including the usage of Kisan Credit

Card which are increasingly being used to part-finance tractor purchases);

Enhanced employment opportunities (with rural employment schemes being

implemented by the Government of India)

An improved credit environment and continuation of replacement demand.

Apart from these factors non-agricultural use of tractors (for haulage in construction and

infrastructure projects) continued to increase, benefiting tractor demand. Due to infrastructure

projects and rural employment schemes, employment opportunities has increased and availability

of labour for agricultural activities continued to decline, persuading even farmers with medium-

sized land holdings to either rent or purchase tractors.

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Tractor volumes reported strong growth in the northern and western regions during 2009-10,

especially in the second half (H2) of the year, benefiting from a low base (H2, 2008-09). The

southern region reported moderate performance (growth of 11.9% in 2009-10), in terms of

tractor demand being impacted largely by de-growth in Andhra Pradesh a key southern market

where rainfall was irregular in 2009-10. However, in Karnataka and Tamil Nadu, higher MSPs

for rice along with some revival of interest of public sector banks (PSBs) in tractor financing led

to strong tractor sales volumes.

Historically, tractor demand has been fairly volatile, being influenced by cyclical trends,

availability of finance, and crop patterns (monsoon). After four years of strong growth during

2003-07, the fiscal years 2007-08 and 2008-09 both reported a marginal decline in tractor sales

volumes, largely reflecting cyclical corrections. In addition to the cyclical dips, during H2, 2008-

09, the industry also had to cope with the liquidity crunch, which pushed up interest rates, even

as financiers resorted to more stringent lending norms in the face of rising non-performing assets

(NPAs). However, the situation improved during 2009-10 as credit availability improved on the

strength of greater liquidity in the banking system. While tractor financing has traditionally been

done by PSBs, of late, private banks and non-banking finance companies (NBFCs), despite their

higher interest rates vis-à-vis the PSBs, have been able to increase their penetration of this

market on the strength of faster loan processing and use of more liberal credit norms.

Overall, with tractor demand being closely linked to agricultural output, growth in farm

mechanisation and farmers’ remuneration, the long-term demand drivers for the industry remain

robust. The currently low levels of tractor penetration in India, strong Governmental focus on

availability of finance for agriculture mechanization tools and on rural development, increase in

the use of tractors for non-agricultural purposes, and the growing emphasis on tractor exports

augur well for the industry.

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Chart 1: Annual Trends in Tractor Sales Volumes

Figure 1.2

Chart 2: Monthly Trends in Tractor Sales Volumes

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Figure 1.3

The tractor industry reported a compounded annual growth rate (CAGR) of over 20% in volume

terms during the period 2003-07. The long up-cycle in demand was supported by several factors,

including excise duty exemptions on tractors (2004-05), thrust on rural development, improved

availability of finances for tractor purchase, and low interest rates. The growth also came on a

low base, with the preceding three fiscal years (2000-03) having witnessed a prolonged phase of

volume correction. The cyclical correction during 2000-03 had been aggravated by the build-up

of channel inventory with the major players having pushed aggressively for larger sales. In

contrast to this phase of cyclical slowdown, the one that happened during 2007-09 was less

severe, with volumes declining by around 3%, despite the intermittent tightening of the liquidity

situation during H2, 2008-09.

The demand slowdown during H2, 2008-09 also impacted the profitability of the original

equipment manufacturers (OEMs) i.e. the tractor manufacturers, because of the high price

inventory they were carrying. However, the situation improved on the cost structure front in H1

2009-10 with the softening of commodity prices preparing the ground for the industry to earn

higher profitability margins. The pickup in volumes also lowered the overhead expenses for the

tractor manufacturers, boosting their profitability. While the OEMs did not lower the listed sales

price of tractors, the benefit of lower steel prices was passed on to the end customers via

discounts. This is an accepted practice in the industry given that once the prices are lowered it is

very difficult to raise them subsequently. However, during H2 2009-10, the tractor majors

increased the prices with the reversal of commodity prices and the discounts have also come

down.

1.5.4 Industry Trends by Region

The biggest markets for the tractor industry include States like Uttar Pradesh (UP), Andhra

Pradesh (AP), Madhya Pradesh (MP), Rajasthan, and Maharashtra, which together accounted for

around 50% of the total tractor sales in India during 2009-10. The tractor industry witnessed a

strong y-o-y growth of 28.3% during 2009-10, with most of the States reporting positive growth

during the year.

Chart 3: Trend in Tractor Sales across regions

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Figure 1.4

Chart 4: Trend in Tractor sales across states

Figure 1.5

Source: TMA Report 2010

Movement in Regional Market Shares of Select Players 2009-10 vs. 2008-09 (bps)

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Figure 1.6

Source: Industry, ICRA’s estimates

M&M remains particularly strong in the southern region (50.4% market share during 2009-10).

However, L&T John Deere (LT-JD) was able to increase its market share in the region by around

250 bps in 2009-10, mainly at the expense of M&M (market share down by 140 bps) and Escorts

(down by 140 bps). In the western region too, LT-JD performed well in 2009-10, increasing its

market share by 190 bps, even as TAFE lost market share by around 90 bps there.

In the northern region, where M&M has been traditionally weak, the company increased its

market share by 140 bps during 2009-10, even as ITL and Escorts lost market shares by around

90 bps and 60 bps respectively, there. In the eastern region, M&M was able to raise its market

share by around 140 bps in 2009-10 at the expense of Escorts and TAFE.

Chart 5: Trend in State wise market share

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Figure 1.7

The northern region remains the largest tractor market in India with sales of around 1,67,000

units as of 2009-10. This region reported a growth rate of 35.7% in volume sales in 2009-10 over

the previous fiscal, with the key contributors including UP, Punjab, Haryana and Rajasthan. The

northern region benefited from higher MSPs (for crops), limited availability of labour (forcing

higher mechanisation), and increasing non-agricultural use of tractors. Additionally, increased

infrastructure development activities (especially highways) led to appreciation in land values and

use of tractors for non-agricultural purposes. In some cases, farmers also received compensation

for the Government’s acquisition of select land patches (adjoining highways), which increased

the availability of cash with them. Feedback from industry players suggests cash purchases

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(including purchases using Kisan Credit Card) in some northern States increased to 35-40% of

the total tractor volumes in 2009-10 from 10-15% in the past.

Tractor volumes in UP grew by 42.7% during 2009-10, with H2, 2009-10 reporting particularly

strong growth (around 51% y-o-y) mainly on the back of high sugarcane prices for the kharif

crop and improved irrigation facilities. In the case of Punjab, tractor volumes remained strong for

the fifth straight year in 2009-10 (y-o-y growth of 42%). In Rajasthan however, growth in tractor

volumes was relatively subdued in 2009-10 (around 24% y-o-y) as compared with the figure for

the northern region as a whole. Tractor sales in Rajasthan were especially low in H2, 2009-10

versus H1, 2009-10, due to lower kharif output on account of deficient rains and inadequate

financing availability.

In the eastern region, tractor volumes continued to report strong growth in 2009-10, albeit on a

small base, and went up by 53.8% over 2008-09, being driven mainly by the higher MSPs

announced for paddy. Within the region however, many financiers remained reluctant to finance

tractor purchases in some States like Bihar. Nevertheless, in Bihar, tractor volumes grew 66%

over 2008-09 to around 29,000 units in 2009-10, thereby accounting for over 50% of the total

sales in the eastern region. The Bihar market, where tractor penetration had been low

historically, has shown sustained growth over the last few years and become one of the important

markets for the tractor industry. Overall, in the eastern region, growth in tractor volumes is

expected to moderate, going forward, as the benefit of a low base get diluted gradually.

The western region reported sales of around 92,000 tractor units during 2009-10—a growth rate

of 35.7% over the previous fiscal—benefiting particularly from the strong performance that

Maharashtra, Gujarat and MP posted during H2, 2009-10 (55% y-o-y growth over H2, 2008-09).

The factors contributing to the strong growth in the region during H2, 2009-10 included a benign

base effect, higher crop prices (of sugarcane and cotton in Maharashtra, and of cereals and

soyabean in MP), and greater availability of retail finance.

The performance of the southern region in terms of tractor sales was relatively modest during

2009-10, with the growth rate being around 11.9% over the previous fiscal. While most States in

the region reported healthy growth, AP, which is the largest tractor market in the south, de-grew

by 10.4% in 2009-10. The AP market has been undergoing a volume correction since 2007-08,

with the preceding four to five years having witnessed a large and sustained volume growth; this

factor apart, the de-growth of 2009-10 was also aided by irregular monsoons. The other big

20

market in the southern region, Karnataka, reported growth of 74% in tractor volumes in 2009-10

mainly on the strength of higher MSPs for rice; however, volume growth is expected to moderate

in 2010-11 because of the base effect. In Tamil Nadu, tractor sales were flat during H1, 2009-10,

but the performance improved in H2, 2009-10 mainly because of improved retail financing by

the PSBs.

1.5.5 Industry Trends by Tractor Horse Power (HP)

The Indian tractor market has traditionally been a medium HP market, with 31-40 HP tractors

accounting for around 47% of the total industry volumes. In 2008-09, the 31-40 HP categories

had reported sales of 157,602 tractor units, which was about the same as the previous year’s

figure but lower than the 2006-07 statistic by 7%. In 2009-10 however, this category reported a

strong revival, with the volume growing by 22% over 2008-09; the revival was led by UP,

Karnataka and Madhya Pradesh.

The other major segment in the Indian tractor market is the 41-50 HP range, which accounts for

around 23% of the total industry volumes. This segment grew by around 10% during 2009-10,

thereby underperforming the growth in overall tractor volumes (around 19%) that year. The main

reason for this underperformance was the low growth that the southern region, the biggest

market for this segment, reported in 2009-10.

The >51 HP segment of the Indian tractor market also underperformed the industry growth rate

in 2009-10 mainly because of the de-growth in the exports which is a key demand area for these

high HP tractors.

CHAPTER 2

2.1 Reviews of Literature

2.1.1 Bureau (2009), In their study entitled “Automotive Market Research Reports” they

found that automotive sector is growing at a rapid pace with the advancements in the technology.

21

They found that the new innovations are being made by changing the design of the models,

adding new equipments and accessories and launching the new technologies.

2.1.2 Bureau (2009), In their study entitled “Indian Auto Industry in Top Gear Despite global

Gloom” they found that when the global auto industry id reversing the gear the Indian industry is

in the upward trend and is making the profits by launching the new models in the domestic

markets and exporting also.

2.1.3 Darukhanawala (2009), In his study entitled “The Omnipresent Quest for Value” he

found whatever the purpose, value is something inherent to any buying decision and especially

so for us Indians who have obeyed the adage for generations. Be it a question of spending Rs 3

lakh or7, the buyer will invariably turn back a happier person once he gets that bit more for the

dough he is spending.

2.1.4 Moser & Wohlfarth (2009), In their study entitled “Supplier Base Management in the

Indian Automotive Industry: Conceptual Framework and Empirical Analysis” they found that to

be successful in the prospective large scale Indian market, first of all a competitive supplier base

has to be developed through the investments. They also found that cost is the decisive factor for

the selection between alternative suppliers. Quality is not only the decisive factor but also

important for supplier base management in India.

2.1.5 Roy (2007), In his article entitled “Shop till you Drop” the new consumer mantra discusses

consumer preference from all angles, according to renounced management expert Prof. Phillip

Kotler, Marketing is basically need driven. Thus marketer tries to find out the latent needs of

consumer and satisfy them accordingly through suitable product and services. However in

today’s world of consumerism and huge disposable income, overspending has become a

common global phenomenon. Common consumer buy more for status and style rather than need,

the new generation consumer are not driven by satisfaction alone they want more.

22

CHAPTER 3

3.2 Title of the Study:

A Study on purchase behavior of farmers for tractors: A Case Study of

Ludhiana.”

23

3.3 Objectives of the Study:

1) To study the awareness level of farmers toward various brands of tractors.

2) To study the factors influencing the preference of farmers towards particular tractor.

3) To know the satisafaction level of farmers towards the purchase of tractor

CHAPTER - 4

Research Methodology

24

This chapter describes the research methodology adopted to achieve the objectives of the study.

It includes the scope of the study, research design, collection of data, analysis of data and

limitations of the study.

4.1 SCOPE OF THE STUDY:

The scope of the study is to get the first hand knowledge about A Study on purchase behavior of

farmers while purchasing the tractors in Ludhiana. The scope is restricted to study the factors

affecting the preference of consumers while purchasing a tractor in Ludhiana and what are the

problems which they are faced from their tractors. This is done to avoid perceptual bias and for

providing objectivity to the study.

4.2 Research Design:

The present study is descriptive in nature.

4.3 Data Collection:

The present study incorporates the collection of both primary and secondary data for an in depth

investigation.

4.3.1 Primary Data:

For the purpose of collection of primary data, a well structured questionnaire will be given to the

respondents and they were personally interviewed to fulfill the objectives of the study.

4.3.2 Secondary Data:

Secondary data will be collected so as to have accurate results and the required data was

collected from various magazines like Kheti duniya, Moderan kheti, and internet to gather

relevant information regarding the Tractors.

4.4 Sample Design:

25

4.4.1 Universe:

Universe is the infinite number of elements which the researcher is targeting in the study. The

universe for the study consists of all the farmers who are using the Tractors.

4.4.2 Population:

Population is the finite number of elements which the researcher is going to target in a particular

area. All the A-2 segment car owners in Ludhiana form the population of the study. In this the

sample population is restricted to Ludhiana only.

4.4.3 Sample Unit:

Sampling Unit is the single unit of the population. A single individual who owns a Tractor

among the individuals who will be surveyed form the sampling unit of the study.

4.4.4 Sampling Technique:

The selection of the respondents will be done on the basis of convenience technique of sampling.

4.4.5 Sample Size:

Sample size will be the size of sample drawn from the population which is the true representative

of the research. The numbers of respondents included in the study are 50 for convenience in

evaluating and analyzing the data and because of time constraint.

4.5 Research Tools:

26

The tools which we have used in the study are Likert Scale ranking method, mean and average

value calculation methods.

Lickert Scale is the five point scale in which respondent’s satisfaction level is checked and the

mean value is being taken out at the last.

For Highly satisfiedI gave 5, for satisfied4, for neutral 3, for dissatisfied 2 and Highly

Dissatisfied 1 respectively.

Then I divided the total number of these parameters with these values and divided it with the

total no. of respondents.

4.6 Limitations of the Study:

Every study is bound by limitations and as such this is no exceptions.

1. “Change is Constant” rule of nature. Hence, the study undertaken may not hold good for

longer duration.

2. The study was conducted under the assumption that the information given by the

respondents is authentic.

3. The analysis and suggestion are given only with respect to marketing aspects.

4. There may be some kind of biasness or error from the side of the respondent.

5. There were time constraints.

CHAPTER - 5

Analysis and Interpretation:

Table 5.1 .Do you have a Tractor?

PARTICULARS NUMBERS PERCENTAGEYES 50 100%NO 0 0%

27

Yes No0

10

20

30

40

50

60

Tractor Users

Number

Figure 5.1

INTERPRETATION:

All the respondent are having tractor.

Table 5.2 . Since how long have you been using this Tractor.

PARTICULARS NUMBERS PERCENTAGELess than 1 month 1 2%Less than 2 month 2 4%Less than 6 month 6 12%More than 1 year 12 24%More than 5 year 29 58%

28

less than 1 month2%

less than 2 month4%

less than 6 month

12%

more than 1 year24%

more than 5 year58%

Awareness level of farmers

Figure 5.2

INTERPRETATION:

Out of 50 respondents, majority of respondent about 58% are using tractor for more than 5 year. 24% using the Tractor from more than 1 year. 12% are using Tractor from less than 6 months, 4% respondents are using tractor from less than 2 months, and 2% people are using Tractor from less than 1 month.

Table 5.3 . Which all brands of Tractors are you aware about.

BRANDS RESPONSE PERCENTAGEJohn Deere 33 11 %Swaraj 49 16 %Sonalika 29 9 %Mahindra 49 16 %Farmtrac 33 11 %New Holland 36 12 %Eicher 26 9 %Standarad 12 4 %Massey Fergussan 21 7 %HMT 15 5 %

29

swara

j

john deere

mahindra

farmtra

c

new holla

nd

sonali

kaeic

her

standara

d

massey

fergu

ssan

hmt0

10

20

30

40

5049

33

49

33 3629 26

12

2115

response

Figure 5.3

INTERPRETATION

As you can see out of 49 peoples are aware about the Swaraj and Mahindra tractors. After that 36 peoples are aware about the New Holland tractors. 33 respondents are aware about the John Deere and Farmtrac tractors. 29 peoples are aware about the Sonalika tractors, 26 peoples are aware about the Eicher tractors, after that 21 peoples are aware about the Massey Fergussan tractors, 15 peoples are aware about the HMT tractors and out of 50 respondents only 12 respondents are aware about the Standard tractors. This diagram is easily define that 98% respondents are aware about the Swaraj and Mahindra brands.

Table 5.4 Rate the following factors you consider while choose a Tractor.

FACTORS VERY IMP

IMP

NEUTRAL

LESS IMP

LEAST IMP

MEAN RATESI

a) Price 10 10 26 3 1 3.5

P.T.O rpm 10 14 20 5 1 3.54

Compatibility 23 12 14 1 0 4.14

Millage 5 15 21 7 2 3.28

Look 14 21 7 6 2 3.78

30

Power 11 19 15 3 2 3.68

b) Brand 8 9 17 11 5 3.08

c) Advertisement 5 8 17 9 11 2.8

Exhibition 22 12 6 7 3 3.86

Print .ad 6 5 8 17 14 2.44

Tv ad 4 2 9 12 23 2.04

Personal selling 4 3 9 10 24 2.06

d) Loan facility 36 8 1 3 2 4.46

00.5

11.5

22.5

33.5

44.5

3.5 3.544.14

3.283.78 3.68

3.082.8

3.86

2.442.04 2.06

4.46

Mean Rate

Figure 5.5

INTERPRETATION:

As you can see, loan facility factor is on the top with 4.46 mean rates. Thus its lie in between very important and important factors.. After that compatibility is the 2nd largest influencing factor with their 4.14 means rates, this is also lie in between important and very important factors. Exhibition is 3rd main influencing factor with 3.86 mean rates, this is lies in between neutral and important factors. look is the 4th influencing factor with 3.78 mean rates thus this is also lies in between neutral and important factors, power is 5th purchase decision influencing factor with 3.68 mean. It’s also lies in neutral and important factors. After that another purchase decision influencing factors P.T.O rpm with 3.54 mean rates, this is also lies in between neutral and

31

important factors. price with 3.50 mean rates lies in between neutral and important factors millage with 3.28 mean rates, its also lies in between neutral and important factors. brand with 3.08 mean rates, its lies in some above than neutral but very below than important. Advertisement with 2.80 mean rates, its lies in between less important and neutral. After that Print ad 2.44 mean rates, it’s also lies in between less impotant and neutral. personal selling with 2.06 mean rates this is lies in something above than less important and in the end TV ad with 2.04 mean rates its also lies in some above than less important respectively. Here we can loan facility, compatibility, P.T.O rpm, exhibition are mostly influencing the purchase decision of farmers.

Table .5.5 what brand of Tractor do you have.

BRAND USER PERCENTAGE

Swaraj 10 20 %

Mahindra 12 24 %

John Deere 4 8 %

New Holland 7 14 %

32

Farmtrac 4 8 %

Standard 1 2 %

Eicher 3 6 %

Sonalika 4 8 %

Massey Fergussan 2 4 %

HMT 3 6 %

swaraj16%

john deere11%

mahindra16%

farmtrac11%

new holland12%

sonalika10%

eicher9%

standarad4%

massey fergussan

7% hmt5%

Brand prefrance of farmers

Figure 5.5

INTERPRETATION

Out of 50 respondents 12 peoples are having Mahindra tractor, 10 are having Swaraj tractor, 7 are having New Holland, 4 peoples are having Farmtrac. After that 4 are having sonalika, also 4 peoples are having John Deere tractor, 3peoples are having Eicher and also 3 peoples are having HMT tractor,2 peoples are having Massey Fergussan tractor and only one person having Standard tractor. Thus we can see out of 50 respondents mostly peoples are using Mahindra tractor after that Swaraj tractor. Other tractors are having less users.

33

Table 5.6 How satisfied are you with your Tractor.

Satisfaction level Response Percentage

Highly dissatisfied 1 2%

Dissatisfied 2 4%

34

Neutral 10 20%

Satisfied 25 50%

Highly satisfied 12 24%

highly satis-fied24%

satisfied50%

neutral20%

dissatisfied4%

highly dissatisfied2%

brand prefrance of farmers

Figure 5.6

INTERPRETATION

As you can see out of 50 respondents only 2% respondent is highly dissatisfied with his tractor, 4% respondents are dissatisfied, 20% respondents are neutral satisfied, 50% respondents are satisfied and 24% peoples are highly satisfied with their tractors. Here we are found that mostly peoples are satisfied with their tractor

Table 5.7 Rate the following features on the basis of your satisfaction.

FEATURES VERY GOOD

GOOD NEUTRAL POOR VERY POOR

MEAN RATE

Speed 14 17 17 2 0 3.86

Average 8 11 22 9 O 3.36

Rotawaiter handling

4 16 20 7 3 3.22

35

Compatibility 13 20 17 0 0 3.92

P.T.O rpm 13 20 15 2 0 3.88

Engine rpm 18 20 12 0 0 4.12

Steering smoothness

10 21 16 1 2 3.72

Lift 6 37 5 0 2 3.90

Spee

d

Averag

e

Rotawait

er han

dling

Compatibilit

y

P.T.O rp

m

Engin

e rpm

Steeri

ng smoothness Lift

00.5

11.5

22.5

33.5

44.5

3.86 3.36 3.223.92 3.88 4.12 3.72 3.9

MEAN RATE

Figure 5.7

INTERPRETATION

As figure depicts, Engine rpm is the most promising factor for farmers with 4.12 ratings for choosing a tractor. So this is lies in between good and very good. Second spot is of compatibility with 3.92ratings marginally short from engine rpm. This is lies in between good and neutral Lift is also an important factor with 3.90 ratings at third spot. This is also lies in between neutral and good. P.T.O rpm is 4th important factor with 3.88 rating. This is lies in between neutral and good. After P.T.O rpm is the 5th important factor with 3.86 rating. This is lies in between neutral and good. Average lies in between neutral and good, Rtawaiter handling and steering smoothness are at 6th, 7thand 8th spot respectivel lies in between neutral and good.

36

Table 5.8 Are you facing any problem with your tractor.

PARTICULAR NUMBERS PERCENTAGES

Yes 29 58%

37

NO 21 42%

1

29

21

Farmers facing problems

yes no

Figure 5.8

INTERPRETATION

Out of 50 respondents only 29 people are facing problems with their tractors.

Table 5.9 What are the problems that you are facing with your Tractor.

PROBLEMS RESPONCE PERCENTAGE

Hydrolorics pump 7 14 %

P.T.O rpm 14 29 %

After sale services 8 16 %

38

Non compatibility with attachment 12 25 %

Any other 8 16 %

hydro

lorics p

ump

P.T.O rp

m

after

sale s

ervice

s

non compata

bility w

ith att

achmen

ts

any o

ther02468

101214

7

14

812

8

respondents

Figure 5.9

INTERPRETATION

As you can see 7 peoples are having problems with hydrolorics pump, 14 peoples are faced the probems from P.T.O rpm, 8 respondents are faced after sale services problem s, 12 peoples are faced the non compatibility with attachments problems and 8 peoples are having some another kind of problems from their tractors. Here majority of respondents are faced the problems with P.T.O rpm and non compatibility with attachments.

CHAPTER- 6

Results and Findings

In this the study reveals the behavior of owners of who were having tractor.

39

In this the study reveals that 51% of the farmers were having their tractor for the more than 5

years, 24% who has using the tractor from more than 1years, 12% farmers using the tractor

less than 6 month there were 4% respondents who has purchased the tractor within less than 2

month and 2% of less than 1 month.

In this study reveals that 16% farmers are aware about Swaraj and Mahindra tractors, 12%

farmers are aware about the New Holland tractors, 11% farmers are aware about John Deere

and Farmtrc tractors, 9% farmers are aware about Eicher and Sonalika tractors , 7% farmers

are aware about the Massey Fergussan tractors, 5% farmers are aware about HMT tractor and

only 4 % farmers are aware about the Standard tractors. In this we found that majority of

peoples are aware about the Swaraj, Mahindra, New Holland, John Deere and Farmtrac

tractors.

In this study reveals that Loan facility, Compatibility of tractor, Exhibition, look and Power

are that factors which are very much influenced to the purchase decision of the farmers. TV

and Print ads are not much influenced to the purchase behavior of farmers.

In this study reveals that Mahindra and Swaraj are the most favorable brands.

In this study reveals that 24% farmers are highly satisfied with their tractors, 50% farmers are

satisfied, 20% farmers are neutral satisfied, 4% farmers are dissatisfied and only 2% farmers

are highly dissatisfied with their tractors. Here we found that mostly farmers are satisfied with

their tractors.

In this study reveals the Engine rpm, Compatibility, Lift and P.T.O rpm are the most

important features of tractor. Which are very much influenced to the purchase behavior of

farmers.

In this study reveals that 58% farmers are faced the problems from their tractors.

In this study reveals that P.T.O rpm and Non compatibility with attachments are the major

problems which are faced by farmers. 16 % farmers are faced the after sale services and some

other kind of problems. Only 14% farmers are faced the hydrolorics pump problem.

40

CONCLUSION

41

As per the finding of my research in the end I will like to conclude some of the major points

like some of the brands of tractor namely HMT, Massey Fergussan and Standard are need to

better advertisement because mostly farmers are not aware about these brands. Farmers are

not having knowledge about technology, performance and features of these brands. So these

companies are need to advertising with right sources because according to my study farmers

are not much impressed by TV ad, Print ad and personal selling but majority of farmers are

very much influenced by the exhibition so these companies are need to exhibition. Large

number of farmers are facing the problems with P.T.O rpm and non compatibility with

attachments so the tractors companies are need to improvement in P.T.O rpm, Engine rpm and

compatibility of tractors. Eicher and Standard companies have to need improve the after sale

services and provide easy availability of spare parts.

Bibliography

Magazines

42

. Kheti Duniya (Punjabi)

. Modren Kheti (Punjabi)

. Tractor and Machinery (English)

Web Sources:

1. http://www.deere.com

2. www . escortsgroup.com

3. PREET AGRO Industries Pvt. Ltd.   :: - Manufacturer of World Class Combine Harvestors and

Tractors, Preet Combines, Preet Tractors, Tractor and Combine Harvestor Manufacturer...

4. http://www.mahindra.com/admin/tmpupload//July6-TOI.jpeg

5.http://www.ndtv.com/money/showbusinessstory.asp?slug=TAFE+adds+Eicher+to+its+booty&id=25302

6. .www.swarajenterprise.com

43