Strategy: Renault's Next-gen Strategy

STRATEGY
Renault's Next-gen Strategy

The tractor maker unveils its high horse-power gameplan to grab a slice of the Indian pie.

By Ranju Sarkar

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It was just the kind of market entry French auto company Renault could have hoped for. Two weeks after it bought a 20 per cent stake in International Tractors Ltd (ITL) to mark its India debut, it got a letter from the owner of a 34-horse power (hp) Renault tractor bought almost 50 years ago.

Having heard about Renault's tie up in India, the farmer-a grandson of the original owner-had written to tell the company about his family's unique experience with the French tractor. Relying entirely on the service manual that came with the tractor, its owners had managed to keep it chugging along all these years.

Renault needs such happy stories and more. It is the latest entrant into the Rs 6,500-crore tractors market that already has names like Case New Holland, John Deere, and Same of Italy jockeying for space in the higher hp tractor segment. The Rs 40-crore investment in ITL is Renault's vehicle into the 50-hp and above category. Says Bruno Morange, 53, President-Directeur Generale: ''The Indian market is graduating to higher horse-power tractors, and we feel we are ideally placed to tap the growth.''

After the US, India is the world's largest tractor market, with 2,60,773 tractors getting sold last year. Renault plans to introduce its Ceres tractors in the range of 55-85 hp. The new-generation machines will sport synchronised gears, oil-immersed brakes, hydraulic steering, and four-wheel drive. The price? Rs 3.50 lakh. In a price-sensitive and finance-dependent market, not every thing is hunky-dory for France's No. 2 tractor maker.

The market in India is controlled by half-a-dozen players. And the 50-hp plus segment is sewn up practically between just two players: Punjab Tractors (73 per cent) and HMT (25 per cent).

Moreover, tractors with 31-40 hp make up more than one-half of the market, and those between 21 and 30 hp another quarter. The segment that Renault is currently eyeing accounts for less than 5 per cent in volume terms, partly because they cost an average of Rs 3.30 lakh compared to a 35-hp tractor of Rs 2.50 lakh. But Morange believes that growth is likely to come sooner than later. Says he: ''In Europe, the power of tractors bought is increasing by around 2 hp every year, and the same is happening in India.''

While it's a fact that the removal of sales tax concessions to smaller tractors has made farmers shift to marginally more expensive but powerful tractors, the top-end isn't growing fast enough to accommodate so many new players. In fact, the share of 40 hp and higher tractors has fallen from 19.3 per cent in 1994-95 to 18.9 per cent last year.

That doesn't faze Morange, though. He claims that ITL will end up with a 20 per cent share of the 50,000 high-end tractors projected to sell in 2005-06. Renault has put its hand to the plough, but it may be a while before it hits pay dirt.

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