Unlike the established tractor makers, the last decade has seen an influx of newcomers that face an entirely different set of issues in getting a foothold in the American market. Two of these are Mahindra U.S.A. and McCormick U.S.A.
Among their challenges are establishing a dealer network and creating a presence among American customers.
Mahindra, a manufacturer of compact and utility tractors based in India is aiming to become a preeminent brand for the rural lifestyle market.
McCormick tractors, which are manufactured in Europe, is a well-known brand that is re-introducing itself into the American market with not only its established row-crop equipment, but a new line of compact and utility tractors.
Spokesmen for these two upstart tractor makers also presented their views of what it takes to compete in the American marketplace during the annual meeting of the Far West Equipment Dealers Assn.
"I don't see any risk to having too many dealerships in the neighborhoods where people want to use our equipment."
— Anirban Ghosh, president
Establishing a Presence. Normally, the first question we get is "Who are you?" To give you some idea, John Deere's size in India is about the same as Mahindra's size in the U.S. While we may be small in the U.S., we've sold more than 115,000 tractors worldwide. So, this business is one we understand.
At the heart of everything, we are in the business to help people cultivate their dreams. This is our advertising slogan. Our job is to equip our dealers to help them deliver that customer experience.
Our business model is based on the evolution of the ruralpolitan, and their wants and needs. We know they want a variety of products, services and parts offered through a dealer. We know we want dealers that are capable of accepting the responsibility for servicing the consumer and ensuring customer satisfaction.
One of our first investments when we got into the business here was in parts availability. Our first IT system was for parts. We now have a separate parts warehouse in Texas to reduce the time lag between when a customer needs it and when he gets it.
Expanding the Dealer Network. During the last few years in India, we grew from 300 dealers to nearly 500. Many are very small. The logic behind this is that the people who use the equipment appreciate the presence of someone nearby who they can fall back on when they need service and assistance. We think this logic applies in the U.S., too. We believe that when a person buys a tractor, he also buys a dealer. If this is true, then it makes sense to have our dealerships in the communities we wish to sell our products.
Given this, it is an advantage to have a large number of dealerships and perhaps more than we have now because there are pockets where we aren't well situated. I don't see any risk to having too many dealerships in the neighborhoods where people want to use our equipment.
Beyond Tractors. What we've seen happening across the U.S. is that most successful dealerships usually offer a bundle of products to their customers. The bundle makes sense because it makes it so much easier for the consumer. We've been exploring the possibility of offering our dealers a sensible bundle of products, including implements for dairy and small commercial farmers.
Dealer Purity. We don't see this as pressure coming from the majors, but the pressure of one major in some cases. We are actually honored by the attention the majors tend to give us. As I mentioned, Deere's presence in India is about the same as ours in the U.S. While we respect them, we certainly don't let them worry us. We don't see this as a problem.
There are many businessmen in the U.S. who are not doing business with the majors, and who are capable and willing of taking on this business and serving the community with our products and services. So, even if there are 1,000 dealers with this major, and maybe 5,000 all together, there are still many more businessmen who can do a very good business with our products and services.
At the end of the day, what matters is that the consumer should have a choice. Whether it comes from an existing dealer or not, the consumer must have a choice. The opportunity exists and I'm sure there are dealers here who may want to take advantage of it.
In fact, we've been pleasantly surprised that more than one-third of our dealers carry Mahindra as their only tractor brand. It's not something we did by design, but it tells us that the brand has value and the brand can sustain a business. It gives us hope that there will be many more who will take on Mahindra as their only tractor line. Not because they were forced to do so, but because they choose to do so.
Market Share. Market share is a report card. Are you doing well or well enough? In isolation, it doesn't mean much. It is a reflection of whether the brand is able to combat competition. Market share seems to indicate that you are becoming increasingly competitive in your area. To that extent it is good. But market share is not something you can plan for — it must be grown. If you grow and grow well, you will begin to gain market share. Market share is the result of the pursuit of customers, which is really the final driver in business.
Dealer Consolidation. The new entrants into the business recently have all been extensions of an existing business, like Bobcat and Yanmar. Most are not true tractor makers. With that said, will there be consolidation? Perhaps there will be — in some form. If you look at it closely, there are probably 3 or 4 others besides the majors that will ultimately survive. That's how we see it today.
McCormick International U.S.A.
"When we go into a dealer that's carrying a major line of tractors, it's risky for us because we're only engaged. We're not really married. We don't get the focus from the dealership."
— Rodney Miller, executive vice president, sales and marketing
Establishing a Presence. Compared with the big boys, McCormick is a smaller company. While we're a billion dollar operation worldwide, we're only about $100 million company in the U.S. In the early days of McCormick, we had a natural buyer because Case IH did not have the same products we had, but those days are gone. Now we're faced with trying to find quality dealerships around the country.
In terms of being competitive in the small tractor market, we are very competitive. When we specified our compacts, we set the standards very high and we priced them competitively, but we're not the lowest.
Within the next year, we intend to offer a quality, entry-level tractor. Some of our competitors have done an outstanding job of this and they've been around a long time and know what they're doing. We can we learn from good competitors. But we're not looking to get into a pricing game that we'll never win. There's always going to be someone else with a lower price. We believe people buy from people they like. So if we're offering apples to apples, we're in the game. Then salesmanship comes into play.
Expanding the Dealer Network. I just started with McCormick last June, and saw that only about 30% of our dealers handle McCormick tractors only. The rest we share with one of the major tractor lines. This is uncomfortable for me because it makes us a target. With the consolidation of the industry and the majors' push for brand purity, the majors can pressure dealers to drop a tractor line in order to let another deal go through. We've lost some dealers this year. So that isn't the direction we want to continue.
When we go into a dealer that's carrying a major line of tractors, it's risky for us because we're only engaged. We're not really married. We don't get the focus from the dealership.
What we'd really like to find is that dealer that sells a lot of shortline products or maybe is dropping his major line for whatever reason. This makes the best marriage for us in our big tractor lines. Our focus is in the Midwest, in big tractor country.
For our compact sales, we need to get into the Southeast and other areas of the country. We offer a consumer equipment contract now and it covers compacts and utility tractors. That's helped us sign up several new dealers recently.
Next year, our growth will come through full-line dealers, combination dealers and compact dealers. We have no dealers carrying our compacts around metropolitan Atlanta where we're located. This is the type of area where we need to focus.
This is why we need to be very easy to do business with and offer products that people want to buy. We want to be more customer friendly with less layers so that our dealers can speak with our top management. With tractors that people want to buy, at a decent price and being easy to work with, we can attract dealers to McCormick.
Dealer Consolidation. If you would've asked me a year ago if this sector of the industry will see any significant consolidation, I would have said no. But in the last year alone, it's changed a lot and there'll be a lot more changes going forward if the dollar continues to weaken. Almost all the compacts are made overseas and imported into the U.S. So it hurts the compact tractors more than big ones as a general rule. Unfortunately, we at McCormick bring in our big tractors from overseas as well.
With the compacts, we're seeing some move toward consolidation right now. For example, a couple of tractor manufacturers are talking about joining up. A couple of other importers that are fairly strong players in the compact market are really struggling.
We could see some consolidation in the compacts, but then you get new players like Yanmar and Bobcat with their strong dealer network. We'll see if it's strong in compact tractors, or whether lifestyle customers will feel comfortable going into a Bobcat dealership. It's very likely we'll see some consolidation with the compacts.
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