Mahindra War Room 2016

Tractor and Farm Equipments Caselet

MAHINDRA AUTOMOTIVE & FARM SECTORS:

TRACTOR AND FARM EQUIPMENT: TRRINGO BUSINESS CASELET
Mahindra Automotive & Farm Equipment Sectors (AFS) comprise businesses ranging
from Automotive (including Cars, UVs, Small Commercial Vehicles, Trucks and Buses),
Agri-business (including Dairy, Seeds and Applitrac equipments), Construction
Equipment, Powertrains (Engines, Transmissions & Gensets) to Tractors. This caselet
pertains to the Tractors & Farm Equipment Business of Mahindra AFS.
BUSINESS BACKGROUND:
Mahindra began manufacturing tractors in 1963, through a joint-venture with
International Harvester of USA (which had a strong DNA of Tractor Manufacturing) and
Voltas Limited. The first tractors rolled out of the Mumbai plant in 1965. Since then, the
company expanded steadily, championing farm-mechanization in India. By 1983,
Mahindra achieved leadership in the Indian Tractor Market, with Eicher being a strong
competitor in the Northern Part of India. TAFE a leading Tractor manufacturer in the
South of India made an aggressive entry into the Northern market, by acquiring Eicher
Tractors and increasing its market share to 22%, coming within striking distance of
Mahindras 31% then. The acquisition gave TAFE an entry into Punjab, Uttar Pradesh
and Himachal Pradesh, which account for a third of all tractor sales. Mahindra
responded by acquiring Punjab Tractors, renowned for its Swaraj brand of tractors, in
2007, and executed a near perfect integration, thereby retaining its long-held leadership
position.
Mahindra Tractors kept exploring new markets periodically, entering into the American
market in 1994, the Chinese market in 2004, the Australia & New Zealand markets in
2005, apart from the African (Nigeria, Mali, Chad, Gambia, Angola, Sudan, Ghana,
Morocco), Latin American (Chile, Argentina, Brazil, Venezuela, Central America and the
Caribbean), South Asian (Sri Lanka, Bangladesh, Nepal), the Middle Eastern (Iran,
Syria) and Eastern European (Serbia, Turkey, Macedonia) markets. Having won a
Deming Application Prize in 2003, Mahindra went on to sell its millionth tractor in 2004,
a year that also marked Mahindras entry into the Chinese Market when it purchased an
80% stake in Jiangling tractors in China.
With the steady entry in world markets and successful inorganic growth thrusts,
Mahindra became the #1 Tractor Company in the World by Sales Volume in 2009. In
2011 it was ranked 21st in the Fortune India 500 list and made it to the Top 10 in the list
of most trusted brand in India by Brand Trust Report, India Study in 2014.

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Mahindra War Room 2016

Tractor and Farm Equipments Caselet

LIVE CHALLENGE: REALIZING POTENTIAL OF TRRINGO BUSINESS

The Agriculture Sector is one of indias most important sectors, contributing to 14% of
Indias GDP, employing over 200 million people. Blessed with a large, cultivable
geographical area, Indian agriculture and allied sectors support 18% of the worlds
population and 15% of the worlds livestock. Agriculture is a very important driver of the
Rural Indian Economy, with 60% of the rural households depending on the sector for
their daily bread. Over the last few decades, rural agriculture has seen a considerable
decline in the use of anima and human power. A range of agricultural tools are being
deployed, transforming the traditional process to a more mechanised process. Though
the level of mechanisation in India is lower compared to other developed countries, it is
growing over time. Farm power availability on Indian farms has grown from 1.47 kW/
hectare in 2005-6 to 2.02 kW / hectare in 2013-14. Farm mechanisation rate is at about
40-45%, which is significantly lower compared to developed countries such as the
United States (95%) or the BRICS economies such as Brazil (75%) and China (57%).
Estimates conducted in 2012-13 determined the penetration of tractors at about 20 per
1000 hectares. The penetration was lower with small and marginal farmers who own
less than 5 hectares of land. This segment forms over 80% of Indias land holdings,
representing a large opportunity to improve penetration and growing the market size of
agricultural mechanisation tools of all types. Over 138 million farmers account for
ownership of 160 million hectares of land, according to the Indian Agricultural Census,
showing the large potential for mechanisation in agriculture.
Using farm equipment is expected to increase farm productivity by upto 30% and
reduce costs by upto 20%. By 2018, the market size of farm equipment is expected to
be USD. 200 Billion, with Asia contributing to over 60% of the revenues. Farm
mechanisation can provide a number of social and economic benefits to the farmer. Yet
the penetration of these is poor, owing to the vicious cycle of lower ability to invest
leading to lower productivity and vice versa. Tractors, Threshers, Tillers and Rotavators
are among the most popular farm equipment with strong potential to boost agricultural
productivity, if available to all small and marginal farmers. This productivity improvement
is essential, not just aspirational, as food grain production currently is dependent heavily
on monsoons. By 2050, Food Production needs is expected to be at 333 million tonnes,
and this can be achieved only through significant improvement in farm producivity.
Farm Mechanisation is higher in Northern India, states such as Punjab, Haryana and
Uttar Pradesh, due to higher productivity and significant Government support to farm
mechanization. Western and Southern India has much lower levels of mechanisation
due to smaller and more scattered land holdings. Mechanisation thus becomes
uneconomical and leads to lower development.
Smaller farmers who cannot afford a tractor are often left worried on how and where to
arrange a tractor from. Mostly they seek favours from friends or acquaintances,
sometimes waiting endlessly. Even after all this waiting there is no guarantee on the

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Mahindra War Room 2016

Tractor and Farm Equipments Caselet

quality of inputs. The Indian Tractor Industry has matured over the years, and is now run
by established players with standard technologies. Custom hiring of tractors and farm
equipment is a widely prevalent practice in India, especially among small land owners
who find ownership of large farm machines expensive and uneconomical. But the
implement industry is less evolved, with farmers, who are often inadequately exposed to
technology, having to choose among non-standard options. To reduce cost and feel
safer about after-sales service, farmers buy farm equipment which are less efficient,
and with poor technology, from local stores. This causes them to lose productivity
through newer technologies which could be more expensive, but may result in more
profits. The small farmers find it difficult to buy the equipment too, and there were not
many options to rent them so far.
One of the main bottlenecks of the farmer is his or her inability to afford an upfront
investment ranging from INR. 1-15 Lacs to buy a farm equipment he or she needs. But
can Mahindra, with their deep experience in selling tractors to farmers around the world,
solve this problem through technology? Indias rural market accounts for 402 million
mobile phone users, of which 53 million also use mobile internet. About 10-15% of
farmers use an android phone. The awareness of internet is high, with most internet
consumption happening though the phone with an average spend of INR. 100 per
month on internet. Internet is mainly used for entertainment, with only a few exploring
farming related updates and information. Some users are advanced, using even Google
Voice search for browsing. Farmers with smartphones use WhatsApp and Xender
extensively, and are also aware of Facebook. But the apps available for farming needs
is very limited. Decades ago, FMCG companies in India launched shampoos in sachets
to bring down the ticket size of the spend. This is considered a big marketing success,
with millions of new users added to shampoo market through this route each year. Can
Mahindra replicate this in the farm equipment space, by reducing the ticket size of
investment into a small rental cost, to access the farm equipment when needed, where
needed?
With the vision of solving the problem of farm productivity through technology,
Mahindra created Trringo - a tractor and farm equipment rental business that
dreams to make farm mechanisation accessible to every Indian farmer. Trringo is
a Physical-Digital custom hiring model through which farmers can rent farm
equipment in India whenever they feel the need to, at competitive hiring rates.
With Trringo, farmers who need tractors can call a helpline number and place his
or her order. Trringo will ensure the farmer gets the desired tractor and farm
equipment, along with a professional driver (or operator too), without any
conditions or questions asked. Launched in March 2016, Trringo aspires to grow
aggressively through a franchisee network, to reach out to farmers across Rural
India. Based on this background, evolve a franchisee value proposition and
business strategy to grow Trringo, and fill the large gap in penetration of farm
equipment usage among small Indian farmers.

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