M&M to review global farm subsidiaries, unveil revamped plan in Q4 FY25

Mahindra & Mahindra Ltd expects to take a decision on its international farm equipment business strategy in the January-March quarter of financial year 2025. The company is reviewing the factors responsible for the decline in farm industry in Europe, US, and other countries, and will come up with a strategy to address these issues, according to Mahindra Group’s Chief Financial Officer Amarjyoti Barua.

Barua explained that the decline in international operations was driven by macroeconomic headwinds such as high interest rates and election in the US, and structural decline in Europe, and not market share loss.

"One of the things we are doing as we are looking at the overall farm international strategy is where is it that we see a structural decline in the market and do we have a clear organic play there and if not, then what do we need to do to pivot our business to be different with a structurally mature and declining market effectively," Barua said in a press conference held to discuss M&M’s December quarter earnings.

M&M is the world’s largest tractor manufacturer, with a vast customer base in India. In FY24, it sold 364,526 tractors in India and exported 13,860 units. Till January in FY25, the company sold a total of 364,180 units, registering a growth of 10% on year. 

The company’s farm equipment business has a strong international presence, with full ownership of Erkunt Sanayi Traktor in Turkey and a 75.1% stake in Hisarlar, also based in Turkey. The company holds a 35% stake in Sampo Rosenlew, a harvester manufacturer in Finland, and a 33% stake in Mitsubishi Mahindra Agricultural Machinery in Japan. It also operates across North America, Brazil, and Mexico.

Throwing light on the farm machinery business in the US, Rajesh Jejurikar, executive director and chief executive officer of auto and farm divisions said, in the country’s farm equipment market, M&M’s share has been stable. However, the category has been under pressure due to continuous degrowth in the last two and half years. The market size has reduced to 50%-60% of what it used to be two years ago.

“The second thing is there has been a wait and watch on what happens on the Fed interest rate… All through last year there was uncertainty. The category is fairly sensitive to interest rates, and because interest rates had moved up over the last couple of years in the US, there was an anticipation that they will start coming down,” he said. 

In January, M&M saw some uptick in the farm equipment category in the US after the Presidential election. Jejurikar exuded confidence about seeing a bounce back in the US market. “January-March is not a big season there because it's winter…that's not really a time for selling large numbers of tractors in many parts of the country. So the season will pick up in the April-June quarter, but we're building up and preparing towards that,” he said. 

“We are reasonably confident that the market will come…and we'll get back to a growth path. In the US, it will be focused around the launch of OJA,” he said. M&M has got a good response to OJA tractors. The OJA is a range of lightweight tractors designed to be used by small property owners, hobby farmers, and landscapers. 

On the farm equipment business in Japan, Jejurikar said that the company is seeing a trend similar to that in the US. While the M&M’s market share has remained stable, the industry has been in decline. “The category has been on a decline for a long period of time. The average age of the farmer in Japan is more than 65 (years). So the country is facing a problem of (farm) labour…We need to reckon that because that's affecting all the categories,” he said. The Mahindra Group company sells tractors, rice transplanters, and harvesters in Japan, and is the fourth largest player in the farm equipment segment in terms of market share. 

In October-December, M&M posted healthy growth in consolidated farm revenue, led by 20% on year increase in volumes. According to a press release, the company’s consolidated farm revenue was Rs 9,537 crore in Oct-Dec, up 11% on year. It achieved the highest-ever third quarter market share at 44.2%, with volumes reaching 121,000 units. The company’s exports also rose by 14% on year, to 3,700 units in the December quarter.

M&M expects tractor industry sales to grow by 15% in the March quarter, and has forecast overall growth of 6-6.8% for FY25. As per the Tractor and Mechanization Association (TMA) data, In the first half of this financial year, the industry volumes remained almost flat at 472,000 units, compared to 469,000 units in the same period last year. After reaching a peak of 945,000 units in 2022-23, industry volume dropped 7% to 876,000 lakh units in the previous financial year.

The calendar year 2024 saw domestic tractor sales falling 1.5% to 902,000 units, though strong sales in the second half helped offset the decline. Exports, however, rose by 1.6%, reaching 97,745 units. Experts anticipate that with the upcoming TREM-V norms, tractor sales under older emission norms may surge, potentially driving volumes to the 1 million mark.