OJA: Mahindra's global ticket for bigger farm play

In 2018-19, a team of 50 engineers from Mahindra’s Farm Equipment Business was assigned on a K2 project in Japan, almost three years after the company acquired a 33 percent stake in Mitsubishi Agriculture Machinery (MAM).

The Indian R&D team, in partnership with MAM, had to develop a modern, versatile lightweight tractor architecture for Mahindra’s global markets.

The engineers from India imbibed Japanese best practices, including the culture by taking part in Sakura Hanami or — the cherry blossom festival, football matches and drum parades. The Indian engineers also went on treks with their Japanese counterparts. 

They also travelled around the world, gathering information from international markets such as the Americas, Africa, ASEAN, Australia and Europe.

These Indian and Japanese engineers visited farms, spent time with local farmers and learnt about the usage of lightweight tractors in Japan, USA and Thailand. The deep insights gathered from each of these regions helped them develop a truly global platform that would address the local market’s needs. 

Five years later, Oja — Mahindra's latest global bet to expand its tractor footprint – was born in Cape Town, South Africa. 

Sowing seeds of globalisation
Despite being a global leader in volumes since 2010, a disproportionate chunk of Mahindra’s revenues came from the Indian market, the world's largest tractor market in the early part of the last decade. While it continued to maintain its strong leadership in India, in tandem with Swaraj, with 40-42 percent share, M&M strategically started getting into mergers and acquisitions (M&A) to build capability and reach globally.

Things started to change after 2014-2015, as Mahindra & Mahindra went on a shopping spree and acquired companies in Europe and Japan.

In his second innings at Mahindra, Rajesh Jejurikar - then head of the Farm Equipment Business – had decided to branch to the global tractor market and the global mechanisation space, which is a much bigger opportunity than the tractor market alone.

The drive to expand internationally began by acquiring companies in the farming space – Mitsubishi Agricultural Machinery in Japan, Erkunt Tractors in Turkey and Sampo Rosenlew in Finland. These purchases supplemented the tractor business with mechanised farming equipment. M&M also had a joint venture in China for close to a decade, but decided to exit the market in 2017 to have a sharper focus on the key markets where it wanted to have a bigger share.

To be sure, globalisation of the tractor business has been on the agenda of Mahindra & Mahindra for over a decade now. It has been strategically moving about its plans on twin tracks — one by serving global markets from India's frugal cost base, the other is by creating local presence in major markets like US, Turkey and now Brazil to turn them into beachheads for adjoining regions.

Localising production
A plant is coming up in Brazil to not only cater to the large domestic market, but to also serve the entire Mercosur region in South America. Similarly, M&M is likely to set up a base in Thailand to cater to the ASEAN market. The plant in Algeria is set to kick off any moment, and is likely to meet the demand in neighbouring countries. The company’s Turkish subsidiary has already been serving the East European region and its base in Houston, Texas, is serving the large American market. Mahindra’s Japanese base with Mitsubishi Agriculture Machinery has been catering to select evolved markets, besides serving the local needs.

Today, Mahindra has product development bases in India, Japan, the US and Europe, with manufacturing footprint in over half a dozen countries – Brazil, Finland, Turkey, Algeria and Australia. The company has a presence across all continents barring Antarctica.

Oja to accelerate global expansion
Back in Japan, the team of engineers from two countries continued to brainstorm. After spending 60 months on intense market research and investing over Rs 1,200 crore on product development, — Oja, energy in Sanskrit, was born to reinvigorate Mahindra's international plans. 

Hemant Sikka, President of Farm Equipment Business at Mahindra & Mahindra, said Oja would lead the doubling of the export volumes to 36,000 units in three years.

“Our tractor business has been truly global for Mahindra. We are very confident of growing our exports significantly in the coming years. Over the last several years, we have worked hard to develop our overseas business. This year, we are celebrating our thirtieth year in the USA. We have on-ground plants in the USA, Turkey, Japan, Finland, Brazil, Australia and Algeria. Our strategy is to be close to our customers in their local markets, yet bring in global products like Oja which can transform their farming and enrich lives,” added Sikka.

The export volumes, interestingly, had remained range-bound at 15,000 to 18,000 units in the last five to seven years, accounting for single- digits share of its total output. This should change now with Oja.

While the volumes were modest so far, the international revenues had sharply increased in the last decade from 10 percent of its total revenues to almost a third of its business. This was primarily due to the company's approach of becoming local in global markets like the US and Japan.

While M&M is not targeting a specific turnover target, the management has guided for 1.6 times growth in international revenues for the farm equipment business in three years, which may translate to about US$1.5 billion to US$2 billion by FY26, according to sources. 

Unveiling the new range in South Africa in August 2023, Jejurikar, ED and CEO of automotive and farm business, said the attempt with Oja was to take a leap and attempt something path- breaking or transformational. “The idea is to think big, think scale," he said.

The genesis behind this lightweight platform was to democratise the advanced technologies deployed in higher horse-power (HP) tractors to smaller tractors. This would help the company target even buyers who have smaller land parcels. Oja can cater to a wide variety of applications, from orchards to paddy farms. When the product becomes more affordable, it disruptive. Jejurikar said, “The Mahindra brand was always known for its heavy, rugged and tough tractors. With Oja, the company is attempting to do something absolutely opposite, yet very effective. The tractor had to be lightweight, high on technology and yet accessible to the larger masses.”

What is Oja?
Oja is a versatile family of four platforms — ranging from sub-compact, compact, small utility and large utility tractors with four engine and four transmission options. It weighs 700-2,050 kg and is endowed with high precision hydraulics. Over 40 tractor models are likely to be churned out of this architecture.

The company claims that 4WD (four-wheel drive) capabilities will be standard and automation controls will amplify precision. This will ensure a wide range of performance. It can reduce operator effort and elevate farm productivity in fast-growing segments like horticulture and grape farming. 

Oja tractors will be marketed with three advanced technology-based feature packs — PROJA, MYOJA, and ROBOJA.  

The tractor will be aimed at the growing horticulture segment in India, the wet paddy fields in Southeast Asia – the third-largest rice-growing region in the world – and personal buyers in evolved markets such as the US and Europe. This way, Mahindra seeks to expand its addressable customer base globally. 

According to Precedence Research, 67 percent of the global tractor revenue share comes from the Asia-Pacific, with engines less than 40 HP generating close to 63 percent of revenues in 2022. The global tractor market is set to grow at a compounded annual growth rate of 6.05 percent. Oja is positioned right at the heart of this segment and, hence, becomes a key strategic pillar for the company’s future.

Oja rollout plan
After kick- starting its journey in India, the Oja range will subsequently be launched in North America, ASEAN, Brazil, Australia, South Africa, Europe and the SAARC regions.

Mahindra will also mark its debut in the ASEAN region, starting with Thailand, in 2024. It will be entering 12 new markets with the launch of the Oja range of tractors.

Oja opens up an immediate market potential of 1.75 lakh units in North America, about 70,000 units in the ASEAN region and over 1 lakh units in India. In the ASEAN region, besides Thailand, M&M is keen on capturing a share of markets such as Indonesia and the Philippines – which are largely dominated by Kubota tractors.

Sikka said with the launch of Oja, M&M would be able to target 25 percent of the global light weight tractor industry, which is close to 1 million. In Thailand, Mahindra is eyeing 5 percent market share in the next three to four years. In Brazil, where the brand already enjoys over 5 percent market share, it is looking at a 15-20 percent market share; the company sells 80,000 units there now.

The roll-out in Europe, too, is likely to happen in 2024, but the timeline is yet to be defined. In this continent, M&M will target France, Italy, Germany, the UK and Spain – which accounts for 50 percent of the 1.7 lakh units sold annually. 

Kedar Apte, Head of International Business at Mahindra' Farm Equipment Business, says with the cyclicality of the Indian market, the global presence offers a good hedge and newer growth avenues. "With the right products, assembly basis and long-term global vision, it will be a big growth driver for Mahindra in the future," Apte said.

Pushing the boundaries in India too
Given the sheer size of the market at home, India had to be at the core of M&M’s development process. The company is planning to grow its market share by 10 percentage points or 1,000 basis points in the 1.25-lakh unit light-weight tractor market. With Oja, M&M wants to take its market share in the 20-to-40 horsepower band to 40 percent, from 30 now, in three years. These vehicles cater to the horticulture segment and the paddy sowing market.   

Sikka said, “Apart from participating in the fast-growing segment of horticulture, we also feel that there is a significant opportunity to participate in the paddy farming space, for which 4WD tractors are most suited. And all Oja tractors models will be with 100 percent connectivity."

Mahindra, along with Swaraj brand, has a market share of 41.5 percent in the 9.5-lakh-units tractor market in the country. While the market is growing at a compounded annual growth rate of 7 percent, the horticulture space, where the Oja range will be positioned, is growing in the high double digits.

Though Oja will be available in diesel engines and transmissions, the company has designed it to adopt a zero-emission powertrain in the future. “Oja platform is designed with electrification possibility, though the timeline for the same is not yet defined as the tractor
segment will take some more time for EV adoption,” added Sikka.

Apart from expanding product portfolio, the company will be expanding its footprint from 1,100 to 1,300 points in two years.

This feature was first published in Autocar Professional's September 1, 2023 issue.