Despite the slowdown in tractor demand, Mahindra & Mahindra (M&M) is setting up its second satellite plant for assembling tractors at Jaipur, in Rajasthan.
The plant, which will have the capacity to assemble up to 1,500 units annually, will give M&M a presence in Rajasthan and reduce transportation costs.
The initiative comes at a time when the slowdown in the rural economy has badly affected volume offtakes, and almost all tractor companies, including M&M, are working overtime to clear huge inventory pile ups.
In fact, M&M has cut down production of both tractors and utility vehicles to clear its inventories and reduce operational expenses. Senior M&M officials said they were looking at satellite plants as a low-cost means to improve sales.
These plants would produce tractors suitable for the soil and crop pattern in that particular region, they added. M&M already operates another satellite plant at Rudrapur in Uttar Pradesh. Over time, the company plans to set up around ten satellite plants in different states.
M&M, which has a manufacturing facility at Kandivali in Mumbai, will supply tractor kits to these satellite plants, which will then be assembled as per customer specifications.
The satellite plants will have the capability to assemble M&M's entire tractor range, including Bhoomiputra, Sarpanch and Arjun, aimed at the low-end, mid-end and high-end customers, respectively. M&M, which has an over 33 per cent marketshare in the domestic tractor segment, is currently the world's largest producer of tractors in the 25-45 HP range.
At present, it manufactures around 80,000 units annually for the domestic market. Outside India, the company's US subsidiary, Mahindra USA, targets the "hobby farming" segment in the US, which uses low-end tractors for non-agricultural purposes.
