New Delhi: Farm and construction equipment manufacturer Escorts Kubota is stepping up its investment in India, with a new manufacturing plant in Uttar Pradesh expected to play a key role in the company’s plans to expand exports to global markets.
The India-Japan joint venture, controlled by Japan’s Kubota and India’s Escorts, has begun work on a 154-acre greenfield manufacturing facility in Uttar Pradesh. The project, estimated to involve an investment of around Rs 2,000 crore, will be developed in phases and is expected to become one of the largest manufacturing sites within the Kubota Group.
According to a report by Nikkei Asia, Kubota President Shingo Hanada said India’s tractor market, with annual sales of around 1.5 million units, is significantly larger than the combined market of the rest of the world, which stands at about 700,000 units.
The scale of India’s agricultural market, coupled with rising demand for farm mechanisation, makes the country an important production and export hub for Kubota. The new plant will manufacture tractors, farm implements, construction equipment and engines for both Indian and international markets.
The first phase of the facility is expected to add annual production capacity of up to 60,000 tractors and 15,000 construction equipment units. Escorts Kubota currently has manufacturing capacity for around 170,000 tractors and 10,000 construction equipment units a year.
The company plans to finance the new project through proceeds from a preferential share issue made earlier to Kubota, along with its internal accruals.
Kubota first entered the Indian market independently in 2008 before forming its joint venture with Escorts in 2018. Hanada acknowledged that the standalone approach did not deliver the desired results, but said the partnership has provided Kubota with greater access to resources and capabilities needed to compete with lower-cost manufacturers.
Escorts Kubota Chairman and Managing Director Nikhil Nanda said the commercial start date for the first phase of the new plant has not yet been finalised, but indicated that the company intends to move ahead rapidly with the expansion.
Exports are expected to become an increasingly important part of the company’s strategy. Europe is currently Kubota’s primary target for tractors made in India, while the company also sees opportunities in Africa and, eventually, North America.
Beyond finished tractors and equipment, India could also emerge as a sourcing base for components used in Kubota’s manufacturing operations in Japan and the US. This would further integrate the Indian facility into the company’s global supply chain.
The expansion comes against the backdrop of India’s relatively low level of farm mechanisation. Nanda said mechanisation in India is estimated at only around 40-45 per cent, compared with nearly 90 per cent in the US and Japan. The gap suggests considerable scope for tractor and agricultural equipment demand to rise as Indian farming becomes more mechanised.
For Escorts Kubota, the Uttar Pradesh project therefore represents more than an increase in domestic production. It could help position India as a major manufacturing and sourcing base for the company’s international operations while allowing it to tap into the country’s large and still-growing agricultural equipment market.
With inputs from IANS