Japanese farm equipment maker to make US$75m a year selling low-cost tractors in Africa

Japanese farm equipment maker Kubota has identified Africa as a growth market for low-cost tractors. It aims to sell 5000 tractors a year by 2028 making an expected annual revenue of around US$75m. The move comes less than a year after the firm acquired a well-established farm and commercial vehicle-maker Escorts whose brands – Farmtrac and Powertrac – are sold widely Nigeria, Angola, Burkina Faso, Egypt, and Tanzania.

Kubota, which established a subsidiary in 2017 in Kenya has been struggling to gain a significant market share for its tractors in Africa mostly due to the higher price point. But now with the acquisition of the Indian tractor firm, Kubota hopes to be able to sell tractors at a price that African farmers can afford. India, which has emerged as a major automobile manufacturing base for automobiles, can produce tractors 30% cheaper than Japan thanks to its lower wage and input costs.

While Africa's smallholder farming sector is increasingly adopting mechanisation the continent still lags other regions, which hinders crop yields and efficiency. Reasons include the high cost of machinery, limited access to contractors operating farm mechanisation businesses, and a lack of maintenance and spare parts centres in rural areas.

To address the affordability challenge, some ‘Uber-like’ on-demand tractor services have emerged in recent years. For example, Nairobi-based Hello Tractor, which recently received investment from US-based tractor manufacturer John Deere, connects small-scale farmers with tractor owners through a farm equipment sharing app. Similarly, Trotro Tractor allows farmers in Ghana and other countries to request ploughing, harrowing, ridging, and planting services from its network of farm implement and machine operators. Farmers can book a tractor from their mobile phones and have the work completed within 72 hours, or book in advance for a specific date.

Jaco Beyers, the managing director for John Deere's business in Africa, has suggested that sharing tractors among several farmers could make the equipment more accessible and cost-effective. "Not all farmers in Africa can individually afford a piece of machinery like a tractor or a planter," he said. "But transformation comes when communities, neighbours, or even families collectively invest in farm machinery." John Deere has also introduced financing options, in partnership with public and private sector organisations, to help bridge the affordability gap.

 

References

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‘Kubota to increase its shareholding in the Indian tractor manufacturer, Escorts Limited’, Kubota Agricultural Machinery India, 20 March 2021

‘Improving smallholder productivity through mechanization’, AGRA, 10 April 2021

‘John Deere’s Africa boss talks selling tractors and agriculture trends on the continent’, How we made it in Africa, 26 May 2021

‘John Deere invests in Hello Tractor’, Deere & Company, 02 August 2022

‘Linking farmers with tractors: The business model of Ghana’s TROTRO Tractor’, How we made it in Africa, 14 August 2022

‘The EKL World’, Escorts Kubota Limited, October 2022

‘Kubota aims to break into Africa with made-in-India tractors’, Nikkei Asia, 26 November 2022

‘Kubota Group Integrated Report 2022’, Kubota, 2022