Japanese equipment maker chooses Indian tractors to crack African market

By establishing a supply chain that takes advantage of India’s cheap labour and material costs, Japanese multinational company Kubota intends to sell inexpensive made-in-India tractors in Africa, securing a significant market share on the continent.

Due to lower labour and material costs in India, tractors may be produced for around 30% less than they would in Japan. Japan’s industrial sector hasn’t had much luck entering the African market. According to a Japan-based study, approximately 30% of the 80 or so Japanese companies currently doing business in Africa anticipate operating losses in fiscal 2021.

The chairman of Suzuki Motor’s Indian subsidiary Maruti Suzuki, Ravindra Chandra Bhargava, was appointed by Kubota as an independent director of Escorts in July. Suzuki’s early entry and its substantial market share in India are both attributed to Bhargava, who played a key role in that process. In order to expand his market share in Africa, Kubota plans to use his expertise.

Products from Indian tractor manufacturer Escorts Kubota, which became a subsidiary in April, will mostly be shipped to nations like South Africa, Tanzania and Nigeria where farmers are embracing agricultural equipment.

In 2017, a local subsidiary was established in Kenya although it had trouble establishing a sales network and gaining reputation. Market share didn’t increase by more than a couple percentage points. However, the business does not intend to back down as President Yuichi Kitao predicts that the African market will definitely grow, Nikkei Asia reported.

By 2028, the Osaka-based Japanese equipment manufacturer hopes to sell 5,000 tractors inAfrica, bringing in close to 10 billion yen (around 590 crore) in income. Kubota will have an Indian subsidiary ship smaller versions to the small-scale farms that make up the majority of the agricultural industry in Africa rather than exporting from Japan.

Thanks to a significant number of Indian immigrants working in Africa as wholesalers handling agricultural machinery, Kubota hopes to utilise Escorts’ well-established sales network. By 2028, the target is for its share to rise to just under 20%.

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