Mahindra and Mahindra (M&M), the Indian tractor giant has recently acquired 51% stake in China’s third largest Tractor manufacture Jiangsu Yueda Yancheng Tractor Manufacturing at a price of about USD 28 million. It would boost the presence of the Indian company in the global market, making it the third largest manufacturer of tractors globally in terms of the number of tractors produced.
After the deal, M&M’s total output would be around 1.7 lakhs (a hundred seventy thousand) tractors a year including Yancheng’s 26000 per annum as per Ananda Mahindra, Vice-Chairman and managing director of M&M.
The deal would form a joint venture with the Chinese company in China and current tractor related assets and liabilities of Yancheng Tractors would be transferred to this venture entity. The net assets so transferred would be about USD 50 million. This would be the second tractor venture of M&M in China in addition to the Mahindra’s existing business in Mahindra China Tractor Company Limited following the acquisition of 80% stake in Jiangling Tractors in 2004.
Yancheng Tractors has the capacity to manufacture tractors from 16 to 125 BHP. Yancheng exports 8000 tractors annually to US, Russia, Africa Europe,Australia and other countries.
Yancheng Tractors located in Yancheng city of Jiangsu province is a state owned enterprise. It has a strong distribution network in 25 provinces of China.
According to Anjani Kumar Choudhary, President, farm Equipment Sector of M&M, the combined distribution network (along with Mahindra China Tractors) will give us a much larger presence in the Chinese and international markets.
The Tractor industry in China has grown to 2,20,000 units in 2007 from a mere 56000 in 2003 representing a compound growth of 40% per annum.