Diversified conglomerate Mahindra & Mahindra Group has announced ambitious plans to set up a greenfield manufacturing facility under its subsidiary Mahindra USA in the next 3-5 years. The company is optimistic about making the most of growing demand for its tractors in the country.
The Houston-based Mahindra USA, a wholly-owned subsidiary of the Mahindra Group markets tractors and utility vehicles, currently imports the majority of its parts from its operations in India, Japan and South Korea, while assembling them for sale in the USA. Its range of tractors for the American market spans from 22hp to 105hp.
"The company is looking to expand its operations for the bigger segment of tractors – up to 160 hp – with the setting up of the new facility. We already have invested a lot, whether in brand, technology, distribution points, dealers and people. The number of products being made for the US market alone is very high. It will call for more localisation. It makes sense down the line to have a factory in the US. The numbers are already there to have a factory in the US," Mahindra USA President and CEO Mani Iyer said when asked about expanding operations to PTI.
According to Mahindra USA, the existing facility will not be able to cater to new demand as the sales have tripled over the last three years alone. When queried about the timeframe for setting up the plant, Iyer said: "We are yet to figure out the exact details, but it should be there in the next 3-5 years."
Currently, the company generates revenue of around US$ 600 million (Rs 3,790 crore) annually and is a major player in tractors in the range of up to 120 hp. It currently stands third in terms of market share in the segment, just behind the likes of Kubota and John Deere.
M&M USA has seen growth of 20-30 percent and currently has a market share of around 12-13 percent in the up to 120 hp tractor segment. It has over 40 launches planned this year including new models and refreshes of the existing tractor line-up. Over the years, it has been increasing the localisation content in vehicles in the US, which has now grown to around 30-40 percent.
"What we do here is localise the peripheries – batteries, seats and all the attachments," Iyer said.
The company currently sells 32,000 vehicles in a year – 26,000 tractors and rest being UVs mainly used in agricultural and recreational activity, compared to around 500 vehicles in 2006-2007.
Eyeing Latin American market too
It also aims to ramp up its sales network across North America and is eyeing Latin American countries, including Brazil, for future growth too. With its current distribution network of 550 dealers in the US is being planned to be scaled up to around 750 over the next 2-3 years. The automaker also has five distribution centres in the country and one in Canada. Along with the process of setting up a distribution centre in Mexico as well, that will be operational by this month-end.
"Besides, we are looking to scale up business in Brazil, the largest market in Latin America," Iyer said. The US will be the focal point for North America and Brazil for Latin and South America, he added. The company is targeting a market size of 100,000 tractors in the region.
Currently, Mahindra USA employs around 2,500 people, directly and indirectly, constituting over 99 percent Americans. "Today, we are considered very local. We are an American company headquartered in India," Iyer signed off.