Mahindra to export 30% of its China-made tractors

Shanghai, August 3 (Gasgoo.com) India's biggest tractor maker Mahindra & Mahindra Ltd. plans to use China as an export hub for farm equipment in order to lower production costs, Bloomberg reported today.

The company may export as much as 30% of its China production in five years, Bharat Doshi, group chief financial officer of Mahindra, said in an interview on July 31. The company now exports a 'very small number' of tractors from its two Chinese factories, he said.

Mahindra is expanding in China where making a tractor is 25% cheaper than in India. Since 2004, the company has formed two joint ventures in China, the world's most populous nation that is boosting investments in agriculture and has "much lower logistics cost." "Their infrastructure is substantially better," Doshi said.

Mumbai-based Mahindra took an 80% stake in a venture with Jiangling Motors Corp. in 2004. It spent $26 million last year to buy a 51% stake in a company that held the tractor-related assets of Jiangsu Yueda Yancheng Tractor Manufacturing Co.

Mahindra may also source auto parts from China for use at its Indian factories. In the year ended March 31, it sold 119,708 tractors, of which exports accounted for 7,013 units, and is set to introduce a diesel pick-up truck in the U.S. in early 2010.

The Chinese market for tractors has grown by 25% in the past 4-5 years helped by government subsidies on farm equipment purchases. That compares with the 5-7% growth of India's tractor market.