A G R I C U LT U R A L E Q U I P M E N T

October 2007

www.ibef.org

AG R I C U LT U R A L E Q U I P M E N T
October 2007

The share of Agriculture in Indias GDP has been diminishing

Growth rate of Agriculture sector has been erratic
Agriculture Growth rate (%)

and the share of the sector in overall GDP is declining

Agriculture share of GDP (%)

10.7%

20.8

2004-05

2004-05
2005-06

0.7%

19.9

2005-06
2006-07

2.7%

18.5

2006-07
0

10

12

However, it continues to be of high significance, as more than

60% of the population are involved in it
The Agricultural Equipment Industry is a key sector that
contributes to Agricultural growth and productivity

17

17.5

18

18.5

19

19.5

20

20.5

21

AG R I C U LT U R A L E Q U I P M E N T
October 2007

The Agricultural Equipment Industry spans all activities across the value chain
Indias agricultural equipment industry has a
diverse product portfolio catering to activities
across the value chain
Land development, Tillage,
Seed bed Preparation

Sowing and Planting

Weeding, Inter cultivation,

Plant Protection

Harvesting
and Threshing

Post harvest
and Agro processing

1. Tractors
2. Levelers
3. Ploughs
4. Dozers
5. Scrapers

1 Drill
2 Seeder
3 Planter
4 Dibbler
5 Transplanter

1 Shovel/Plough
2 Harrow
3 Tiller
4 Sprayer
5 Duster

1 Harvester
2 Thresher
3 Digger
4 Reaper
5 Sheller
6 Sickle/ Dao

1 S eed Extraitor
2 Extraitor
3 Dehusker
4 Huller/ Dehuller
5 Cleaner
6 Grader
7 Mill
8 Dryer

However, the organized market largely

revolves around tractors, tractor driven
devices and tillers.

AG R I C U LT U R A L E Q U I P M E N T
October 2007

The Agricultural Equipment market is driven by several factors

Key Drivers for the Agricultural
Equipment Industry:
Driver
Improved availability of credit
Emergence of Contract farming and
dedicated sourcing with corporate
partnership
Focus on Productivity to maximize ROI
from agriculture
Opportunity for employment in urban
areas pressurizing agricultural wages
Increased competition driven by
WTO Norms

Impact on agricultural equipment industry

AG R I C U LT U R A L E Q U I P M E N T
October 2007

There has been an increased focus on Mechanization of Agriculture

Increased adoption of mechanization in an
attempt to ensure greater ROI and sustainability
of agriculture

Use of power for agriculture

1971-72

0.30

1981-82

0.47

1991-92

0.76

2001-02

1.23

2005-06

1.50
0

0.2

0.4

0.6

0.8

1.2

1.4

1.6

Total Power, kW/Ha

AG R I C U LT U R A L E Q U I P M E N T
October 2007

There has been an increased focus on Mechanization of Agriculture

Mechanisation primarily driven by increased
use of tractors, which is replacing manual and
animal labour

Source of Power-Percentage share over 4 decades

Agriculture
worker

Draught
Animal

Tractor

power
Tiller

Diesel
Engine

Electric
Motor
0

n 1991-92

10

15

n 2001-02

20

25

30

n 2005-06z

35

40

45

50

AG R I C U LT U R A L E Q U I P M E N T
October 2007

The sector has grown steadily over the past 25 years

Tractors, Sales

350000
300000

Tillers, Sales

250000
200000
150000
100000
50000

2003-04

2000-01

1997-98

1994-95

1991-92

1988-89

1985-86

0
1982-83

Sales in numbers

The growth in domestic volumes has been

due to an urge for productivity enhancement,
aided by imminent threat of low cost imports
aided by WTO

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Exports, primarily in Tractors, have been a key driver for growth

India is developing into a hub for manufacture
of Agricultural Equipment, primarily tractors

2000-01

78

2001-02

98.5
CARG 31%

2002-03

149.4

2003-04

176

2004-05

235.4
0

50

100

150

200

250

n Agri Equipment Exports, US$ Million

Consistent growth in exports at CAGR of 31 percent

in value terms
Exports primarily driven by Tractors

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition
HIGH
MEDIUM
LOW
Threat of New Entrants
Current players well established
N
 ew entrants will need to invest in Brand,
Distribution, Financing and Service Network

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition
Supplier Power
Well developed supplier industry
Most suppliers are small and lack of economies
Competitive Rivalry
N
 umber of well established players, with new players
entering
Good technological capability
Increased mechanisation presents new growth
opportunities

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition
Customer Power
Wide variety of choice for customers
M
 any customers do not have access to organised
finance
Threat of Substitutes
N
 ew innovations in semi-automated mechanisation
being tried out, in place of capital intensive equipment

AG R I C U LT U R A L E Q U I P M E N T
October 2007

There are also a few key issues that impact growth in the sector
Key Concerns / Dampeners
Sub-optimal irrigation infrastructure
M
 any farmers still lack access to financing and depend
on unorganised moneylenders
Increasing fragmentation of land, skewing cost
structure of agriculture against capital investment
H
 igh product life, resulting in low rate of replacement
and upgradation
Increasing prices of fuel leading to greater cost
of operations

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Tractors and accessories provide the most significant

Investment Growth opportunity in the sector
18.2
18.8
2.1
0.9
12.5
6.6
2

Penetration,

16.7

No.s per

8.9

1000

8.3

Hectare

4.3
28.5
6.2
84.8
7
36.10
0

10

20

30

40

50

60

70

Tractors and related equipment have low

penetration indicating high growth potential

80

90

n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n

Animal Drawn Seed Cum Fertilizer Drill

Tractor Drawn Seed Cum Fetilizer Drill
Animal Drawn Leveller
Tractor Operated Levellers
Manually Operated Plant Protection Equipment
Power Operated Plant Protection Equipment
Drip & Sprinkler Equipment
Horticultural Tools (Power Operated)
Tractors
Power Tillers
Tractor Operated Dise Harrow
Tractor Operated Cultivator
Tractor Operated Rotavator
Potato Digger
Straw Reaper
Forage Harvester

AG R I C U LT U R A L E Q U I P M E N T
October 2007

There are several states that provide attractive investment opportunities

Several factors are considered for assessing the
attractiveness of a location for investment

Subsidisation of Agricultural Equipment (US$ million)

Andhra Pradesh

Factor consolidation for manufacturer

Karnataka

Demand conditions

Orissa

G
 overnment subsidy to farmers for purchase of
agricultural equipment
Consolidation of farms
Irrigation Infrastructure
Current share of industry output
Proximity to regional markets

Bihar

Rajasthan
Madhya pradesh
Uttar Pardesh
Gujarat
Maharashtra
Haryanna
West Bengal
Tamil Nadu

10

15

AG R I C U LT U R A L E Q U I P M E N T
October 2007

There are several states that provide attractive investment opportunities

Based on the above factors, Punjab and Maharashtra
emerge the most attractive destinations for investment
in this sector.

Share of Agricultural Equipment Output

0.5%

21.0%

0.2%

n
n
n
n

Punjab
Rajasthan
Maharashtra
Karnataka

n
n
n
n

Uttar Pradesh
Madhya pradesh
Bihar
Andhra Pradesh

n
n
n
n

Haryana
Gujarat
West Bengal
Others

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Profiles of Key Players in India

Mahindra & Mahindra Limited (M&M)
D
 istribution and sale of farm equipment and related
utility vehicles
E stablished market leadership in the sector over past
24 years
O
 ne of the top five tractor brands in the world,
the company has its own state-of-the-art plants in
India, USA, China and Australia and has a capacity to
produce 1,50,000 tractors a year

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Profiles of Key Players in India

Tractors and Farm Equipment Limited (TAFE)
A
 unit company of the Amalgamations Group, one of
Indias largest Light Engineering Groups
C
 ollaboration with AGCO Corporation, Georgia, one
of the largest manufacturers, designers & distributors
of agricultural equipment.
H
 as a network of more than 500 dealers, branches,
service outlets as well as its own sales offices and
depots covering the entire length and breadth of India

AG R I C U LT U R A L E Q U I P M E N T
October 2007

Profiles of Key Players in India

John Deere
John Deere established a green field project in 1999
under a 50:50 joint venture with Larsen & Toubro
Limited (L&T)
A
 state of the art tractor manufacturing plant for
5000 series John Deere tractors was set up at
Sanaswadi, near Pune, in the state of Maharashtra
T
 ractors manufactured in Sanaswadi are also exported
to the USA, Mexico, Turkey, North and South Africa,
and South East Asia. The company has received awards
for export excellence in 2005 and 2006 from the
Engineering Export Promotion Council.

AG R I C U LT U R A L E Q U I P M E N T
October 2007

DISCLAIMER
This presentation has been prepared jointly by the India Brand
Equity Foundation (IBEF) and KPMG Advisory Services Private
Limited (Author).

Authors and IBEFs knowledge and belief, the content is not

to be construed in any manner whatsoever as a substitute for
professional advice.

All rights reserved. All copyright in this presentation and related

works is owned by IBEF and the Authors. The same may not be
reproduced, wholly or in part in any material form (including
photocopying or storing it in any medium by electronic
means and whether or not transiently or incidentally to some
other use of this presentation), modified or in any manner
communicated to any third party except with the written
approval of IBEF.

The Author and IBEF neither recommend or endorse any

specific products or services that may have been mentioned
in this presentation and nor do they assume any liability or
responsibility for the outcome of decisions taken as a result
of any reliance placed in this presentation.

This presentation is for information purposes only. While due

care has been taken during the compilation of this presentation
to ensure that the information is accurate to the best of the

www.ibef.org

Neither the Author nor IBEF shall be liable for any direct or
indirect damages that may arise due to any act or omission
on the part of the user due to any reliance placed or guidance
taken from any portion of this presentation.