Mahindra & Mahindra to buy tractors from Korea, sell them globally
mahindraworld.com
Lijee Philip
Mumbai 31 August
IN A MAJOR move aimed at building a global supply chain, Mahindra & Mahindra (M&M), the Rs 3,463-crore company, will source tractors made by Korean tractor major Tong Yang, a part of the $2bn Tong Yang Moolsam group, and sell them around the world under the M&M brand name.The strategic alliance, which may potentially be converted into an equity stake, will see M&M?s 100-per cent subsidiary, Mahindra USA, buying high horse-power, premium range of tractors for the US markets (to start with) and selling them under the M&M brand name. A memorandum of understanding (MoU) to this effect has already been signed between the two, it is learnt.
Mahindra USA already has a presence in the US market, with a five-per cent market share in the 28-30 horse power (HP) range.
Over the last one year, M&M, along with consulting firm McKinsey & Co, has been talking to several players in the Korean tractor market before shortlisting Tong Yang. Through this tie-up, M&M will launch tractors in the 25-40 HP range, which will supplement its existing product range. While M&M?s current range of tractors is sold in the $7,000-11,000 range, the new range of tractors will be priced between $9,000-14,000. The tie-up will benefit both players, industry sources said. The Korean company needs a presence in the US, while Mahindra USA has a strong network of 100 dealers covering almost all of USA.
M&M?s current tractor range is more utility-oriented and lacks the aesthetic appeal that Tong Yang?s tractors have, a must for a strong presence in the US market.
For instance, compact or garden tractors have a 20-per cent market share in a total US market of 30,000 tractors per annum. These tractors are ergonomically designed four-wheel drives, equipped with features like power steering and synchromesh transmission.
Mahindra USA will start selling these tractors from October or November, 1999, and start with a target of 500 tractors in the first year. This would be increased to about 2,000-3,000 tractors in a year?s time. To start with, Mahindra USA will sell the tractors in the US and later in Egypt, Turkey and other international markets.
Mahindra USA sold 1,100 M&M tractors last year. This year, it plans to sell around 1,400 tractors and increase it to 10,000 within a five-year period. |
