Kubota plans to build a tractor factory in India, open that will be operational by 2030. The investment is expected to be in the tens of billions of yen. The annual production volume will be increased to approximately 240,000 units, double the current volume.
India accounts for about half of the global tractor market in terms of volume, but Kubota’s market share in the country is only about 25%. The company aims to increase sales by developing new products in cooperation with the local manufacturer it has acquired.
Currently, it produces about 120,000 units a year at three factories, including Escorts, which it acquired in April 2022 for about $953,020,000 USD (140 billion yen). Its production capacity is 170,000 to 180,000 units, but it is expected to fall short of that in the next five years.
The products Kubota manufactures in India are called “basic tractors,” which are relatively inexpensive and can also be used to transport goods.
At the time of the Escorts acquisition, Kubota’s market share in India was 11%, but by 2024 it had increased by only about 1 point to about 12%. By 2030, Kubota hopes to more than double its market share to around 25%.
The basic tractors manufactured in India will be supplied to the global market. They have already started exporting to Europe and Africa, and they also anticipate demand in North America for use in suburban gardening. Although Kubota is the leading manufacturer of small tractors in North America, its market share is currently declining due to the low-price offensive of Indian manufacturer Mahindra & Mahindra and South Korean manufacturers. They will introduce Indian-made tractors to compete.
Source: The Nikkei
PSR Analysis. With a population of 1.4 billion, India has very strong domestic demand for agricultural machinery. What’s more, the cost of sourcing parts and materials is lower than in other regions. However, it is extremely difficult to set up a local production system in India. But because Kubota’s overseas sales already account for nearly 70% of its total sales, it has a wealth of experience in overseas expansion in Southeast Asia and North America.
If tractors produced in India can be made to a certain level of quality at a low cost, then it will be possible to export them from India, using their price competitiveness as a weapon.
The friction between the US and China, the disruption in the global supply chain caused by the Russia-Ukraine war, the escalating protectionism in various countries, and these negative factors related to trade are not unrelated to India either, but at the moment they are not being discussed with India at the center.
The two goals of meeting the demand in India, which is expected to grow in the future, and expanding sales to other countries by manufacturing in India are extremely important, and this may be one of the best ways for Kubota to expand its international competitiveness. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
