Value- Chain

The farm equipment value chain across automobile industry includes all steps of cultivation
that are mechanized to certain extent or usage of equipment is required which reduces
manual labor effort.
The below table provides the steps involved in lifecycle of cultivation and farm equipment
required for the same.
Steps Involved in Cultivation Farm Equipment
Seed and Soil preparation Tractors, Leveler, Ploughs, Mini Dozers

Sowing of seeds and planting Drill, Seeder, Planter, Dibbler

Weed removal, Fertilizer application Harrow, Tiller, Sprayer, Duster

Harvesting and threshing Harvester, Thresher, Digger, Reaper

Post-harvest and agro processing Seed extractor, De-husker, Huller/ De-huller,

Agro Cleaner, Grader

Global Value Chain

GVC tries to include all activities part of the production of farm equipment and focuses upon
global level supply of spares, mechanism of distribution and after sales activities.
The GVC across automobile industry in cars manufacturing or tractor and farm equipment
manufacturing includes similar functionality distribution.

“The Stan shih smile curve “is used to evaluate GVC’s across our industry

Function Cost for Manufacturer Explanation

Design, R&D Low to Location of R&D centers are concentrated in Germany for
medium: Market pioneers, The scope of R&D is comparatively less in
10% case of farm equipment than car manufacturers where
technology integration and concept of connected cars is
more prevalent
 Material Low: <10% Glass, Rubber, Steel, Plastic command the constituents but
Supply do not command higher cost unless a part is produced out
of it
Parts High: 40-70% The cost of components and sourcing it from a right
Sourcing partner at right price and quality matters, hence this
function commands highest cost for manufacturer as at an
average 90% of the 2000+ components that go into an
product assembly are procured from OEM’s
Assembly Low: <10% The assembly units are owned by manufacturers were
labor cost or setup cost are leveraged across the
production capacity
Marketing & Medium to The penetration of the product into any market depends
Services high: 20% not only on marketing but also on after sales service and
support

Indian Industry

The contribution to Indian GPD from Agriculture and allied sectors is approximated at 14%,
With farm equipment market in India growing at a CAGR of over 10% during 2013-18 and with
improves ease of setting up industries lot of internationally renowned players are entering
the market, recently there has been a spike over the exports as well as imports with new free
trade agreements in place.

The level of inter dependence on international factors such as downturns in case of economic
slowdown or crisis have not displayed any viable impact on the growth of farm equipment
industry with respect to India or south east Asia as there is lot of untapped markets still to be
converted to mechanization. Growth in R&D across domestic as well as International markets
has led to reduced cost and pricing, along with supporting financial schemes from GOI pushing
the market growth further.

Focusing on embeddedness across Farm equipment industry that portrays sense of social
relationships between manufacturers, a shared culture, Governments and close cooperation
with developments across supporting institutions tend to help in making products sustainable
and growth of organizations such as TAFE i.e. Tractor and farm equipment limited and
Mahindra & Mahindra limited.
Historical Context and Industry Size

India over centuries has marked its presence in the field of agriculture produce at the global
level. The Farm mechanization dates back to civilizations in developing irrigation system and
hand held tools. Post world war, surplus produce of tractors and bulldozers were pushed to
India to be used for cultivation and primarily land reclamation. Post 1947 setting up of central
and state tractor Organizations took place to promote, produce and develop the usage of
tractors and other small scale equipment in agriculture. Till 1991 the rise in production
capacity was slow, but post economic liberalization the market opened for lot of
manufacturers and by 2013, India had been the world's largest producer as well as market for
tractors having produced 619,000 tractors that accounts for 29% of world's production.
The production and market for other farm equipment has also shown similar progress.

Sources of Competitive Advantage of Industry in India

Key growth drivers such as availability of enormous land for cultivation, ease of availing credit,
electricity and irrigation along with farmers cultivating varied crops have acted as sources of
advantage in driving industry progress. Below graphs showcase growth.
Import and Export markets

India serves many markets throughout the world with equipment such as tractors, harvesters
as well as their spares. Exporting countries based on EXIM data were USA, Bangladesh, Sri
Lanka, France, Nigeria and other South American nations.

India does Import precision spares and advanced equipment from countries such as Germany,
Italy and China.
Tractor Export analysis for period Jan – Mar 2017, data displays below graphs

Industry Cluster & Map

The production facilities of various farm equipment manufacturers are clustered mainly into
north, west and south were in maximum capacity is held in north near Punjab and Delhi
followed by Maharashtra in west and Karnataka, Tamilnadu and Telangana belt in south.
The concentration of production unit in specific locations is due to primarily proximity to
agriculture belts and ease of setting up plants. Similar clusters are found even in case of
other automobile industries such as commercial vehicles, two wheelers and cars.
Focal Firms having high market share

John Deere - established in 1999 under a joint venture with L&T to produce tractors, harvester
and other farm equipment. Tractors are also exported to USA, Turkey, Mexico South East Asia
and South Africa.

Mahindra&Mahindra Limited (M&M) - Market leader for over past 30 years, one of the top
five tractor brands in the world with highest production capacity spread across India, China,
USA and Australia. Holds widest network of dealerships and service centers in India.

Tractors and Farm Equipment Limited (TAFE) - Holds collaboration with AGCO Corporation,
one of world’s largest manufacturers, distributors and designers of agricultural equipment.
Has widest range of product offering across multiple farm equipment.

References

http://www.exportgenius.in/blog/tractor-export-from-india-data-and-report-of-january-to-
march-2017-23.php

http://www.infodriveindia.com/india-export-data/agriculture-equipment-export-data.aspx
http://eimaagrimach.in/pdf/Agri-Brochure.pdf

http://eands.dacnet.nic.in/PDF/State_of_Indian_Agriculture,2015-16.pdf