Rahul Kotwal of Pune has set up a dealership for Escorts tractors despite the fact that Maharashtra is going through a severe drought, says Huned Contractor

Given the continuance of the drought situation in Maharashtra into the second year, the most futile business option that anyone would think of would be to invest in opening a dealership for tractors. But such is the passion of Pune’s Rahul Kotwal for tractors that six months ago he ploughed all his profits from his primary business of selling used cars into opening a grand showroom for the Escorts brand of tractors on the Pune Solapur highway near Loni Kalbhor. Ironically, he admits that the take-off has been slow but the ever optimistic Kotwal believes that the monsoon will be normal this year and his venture will reap the right profits. “It’s just like how the market for cars swings high and low in relation to the economic barometer of the country. Our agriculture equipment sector follows a similar pattern,” he says.

Kotwal is from Loni and his family has been into farming for many years. “During my school and college holidays, I used to work in the fields and till the paddy field with our tractor as well as transport sugarcane from the fields to the factories. That’s how I developed my fondness for the tractor. In fact I had always dreamt of owning a dealership of tractors but it took a long time to be realised,” he says. Prior to establishing Balaji Tractors, Kotwal tried his hand at various entrepreneurial forays, including clothes merchandising, supplying construction material, real estate consultancy and buying and selling used cars. “I saw the opportunity of getting into the tractor business last year when someone told me that there wasn’t a dealership for Escorts in Pune. I applied and fortunately Escorts was very forthcoming and helpful throughout the process,” Kotwal states.

Initially, the turnover was quick and he sold 40 tractors in the first few months. “This was during the winter season when the farmers had surplus funds generated out of the sale of their produce post the monsoon of 2012. It was also despite the fact that the 2012 rains hadn’t been adequate.

However, the order bookings over the past two months have fallen drastically with hardly any sales because the farmers are now wary of making any investments. They are all waiting to see if this year’s monsoon will begin on a normal note. There’s also the cycle of debts and fresh loans from banks to be taken into consideration,” he says.

Balaji Tractors stocks six different types of Escorts’ tractors that include the sub-compact, compact, utility and speciality categories with horse power ranging from 22 to 60 HP. “Out of these, Farmtrac 45 is the most popular among the customers. We have sold 30 Farmtrac 45 tractors since we opened the showroom,” Kotwal informs.

Escorts began local manufacture of Ford tractors in 1971 in collaboration with Ford, UK and total production climbed steadily to 33,000 in 1975, reaching 71,000 by 1980. Ford-New Holland was sold in 1992 following which Ford Motor Company quit the tractors business. However, the name was allowed to continue as per an agreement until 2000, when Escorts relabelled its Ford models under its own brand. Escort manufactures construction and agriculture tractors in the 27-75 HP range and has already sold over 6,00,000 tractors. Its tractors are marketed under three brand names viz. Escorts, Powertrac and Farmtrac.

Providing an insight into the tractor business, Kotwal states, “It is turning into a fiercely competitive business with several brands now being made and marketed in India. There are currently about known 14 players in the industry and Mahindra & Mahindra has been leading the pack. There also are other well-known brands such as John Deere, Eicher, Sonalika, TAFE and VST Tillers, among others.

With the farmers now very conscious and aware about the technology upgradation offered by most of these companies, the choice boils down to the prices and the service networks. Meanwhile, the tractor penetration level in India continues to be very low as compared to the world standards. Also, the penetration levels are not uniform throughout the country. While the northern region is now almost saturated in terms of new tractor sales, the southern region is still under-penetrated. The medium horse power category tractors, 31-40 HP, are the most popular in the country and the fastest growing segment.”

So how does Kotwal ensure that his dealership attracts a steady flow of inquiries and orders? “As with any other vehicle dealership, we have to be proactive in helping the farmer obtain a loan to buy a tractor as also guarantee efficient after-sales service and availability of spares. We also provide the initial training when Escorts introduces any new technology. The tractor is not a luxury item unlike a car. Therefore, there are no frills and fancies involved in its marketing. The sales pitch has to be direct and simple and in a language that a farmer understands because a tractor that will not perform on the fields can be a big drain on a farmer’s meagre resources. It becomes a question of his survival,” he replies.

Point out to Kotwal a report from ICRA that says that overall the tractor sales volumes will witness flat volumes (0-2 per cent decline) for 2013 and he shrugs it off. “I have studied the data and it also says that the tractor industry will maintain a volume CAGR of 8-9 per cent over the next five years.

While the industry is beset with near-term challenges, the long-term prospects continue to derive strength from factors such as support from the Government of India towards rural development and agri-mechanisation, scarcity of farm labour especially during the sowing season, increase in credit flow to agriculture, moderate penetration, shortening replacement cycle and healthy exports. I am pretty confident that Balaji Tractors will post good growth over the coming years,” he says.