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Mahindra Plans Cheapest Tractor for First-Time Buyers

Source: Bloomberg

MUMBAI, India (Dec. 1, 2009) -- Mahindra & Mahindra Ltd., India’s biggest farm-equipment maker, plans to introduce the nation’s cheapest tractor to win sales among small farmers unable to afford current models.

The 15-horsepower tractor, to go on sale nationwide next year, will cost about 150,000 rupees ($3,200), Anjanikumar Choudhari, president for Mahindra’s farm equipment business, said in an interview in Mumbai yesterday. The company may sell as many as 25,000 a year within four years, he said.

“For a farmer, perhaps the three biggest investments are a house, a marriage in the family and a tractor,” Choudhari said. “The opportunity in India is huge.”

The new tractor, costing at least 40 percent less than existing 25-horsepower models, is targeted at nine in 10 Indian farmers who don’t own one, Choudhari said. Tata Motors Ltd. also began selling the Nano, the world’s cheapest car, in India earlier this year, as growth boosts spending in the nation of 1.2 billion people.

“Price is a big entry barrier that prevents Indian farmers from going for tractors,” said Umesh Karne, a Mumbai-based analyst at BRICS Securities Ltd., who has an “outperform” rating on Mahindra. “Such a low-priced product will help expand the market.”

Mahindra, also India’s biggest sport-utility vehicle maker, rose 4.9 percent to 1,080.15 rupees in Mumbai today. The stock almost quadrupled this year, the second-best performance in the Bombay Stock Exchange’s 30-stock Sensitive Index.

With the new tractor, Mahindra will target farmers who own about two acres of land (0.8 hectares). The vehicle is being test-marketed in the western state of Gujarat.

The company expects to boost overall domestic tractor sales 24 percent this fiscal year to 140,000, Choudhari said. Salesjumped 42 percent to 110,011 vehicles during April-November, according to the company’s Web site.

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