Mahindra & Mahindra buys majority stake in Chinese JV, becomes No.1 tractor maker in world

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Mahindra, which is also India's top utility vehicle maker, said it would invest $26 million, through its wholly owned subsidiary Mahindra Overseas Investment Company (Mauritius), in the venture company, which will acquire Jiangsu's tractor business for $50 million.

Yancheng is the No.3 tractor maker in China, the fastest growing market in the world for tractors. The company's Huanghai Jinma tractor brand was the third biggest in China last year in terms of volume. Besides having a strong distribution network covering 25 provinces in China, Yancheng is a leading exporter of tractors from China, supplying to over 60 countries, including the US, South America, Russia, Europe and Africa.

The tractor industry (domestic and export) in China has grown from about 56,000 units in 2003 to 2,20,000 units in 2007, at a CAGR (compounded annual growth rate) of 40 percent, according to a company statement.

The deal is expected to make Mahindra leap past US-based John Deere & Co., currently the world's No.1 tractor maker. M&M sells farm equipments in the US, through its wholly owned subsidiary - Mahindra USA - with three assembly plants catering to the American market.

"The formation of this joint venture is a significant step in our plans for the China market," Anjanikumar Choudhari, president (farm equipment sector), M&M.

"The Huanghai Jinma brand is extremely strong in the domestic China market and the company (Yancheng) is also one of the biggest exporters of tractors. Along with our current operations, we will have a much larger scale and a cost-effective manufacturing base on which to build up our business in China and for overseas markets," he said. The company began its tractor business in China from 2005.

"'We are delighted to partner with Mahindra and look forward to a successful joint venture. The JV stands to gain by the operational excellence, international sales and distribution network and R&D capabilities of Mahindra and will eventually lead to the creation of China's leading tractor company,'' Shao Yong, president of Yueda Group, said.

The Yueda Group is one of the top 100 business groups in the People's Republic of China. The group has a turnover of $5.8 billion and has a presence in various sectors, including automobiles and tractors, coal and mining, infrastructure and real estate, textiles and garments, and hotels and supermarkets.

Mahindra, which already makes tractors in China through Mahindra China Tractor Co. Ltd, a venture with Jiangling Motors Co. Group, said the new deal would help Mahindra cater to the growing needs of powerful tractors as Yancheng has a wide portfolio of tractors, from the 16-125 hp range.

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