Hiring Farm Implements – The New Agri-Business Model

Mahindra and Mahindra Ltd want to achieve for the tractor market what Ola (ANI Technologies Pvt. Ltd) and Uber Technologies Inc. have done for the automobile rental industry. The country's top tractor manufacturer by sales is considering beginning agricultural equipment rentals, the firm announced on Monday during a press conference in Mumbai.

Trringo is a franchise-based enterprise that seeks to introduce digital technologies to the tractor rental sector.

Mahindra will establish this company as a startup and would spend up to 10 crores. The business believes that the tractor hiring industry is worth over 15,000 crores per year.

The new company's business strategy will be similar to that of Mahindra First Choice, the group's used automobile sales division. It will provide a digital platform to link people wanting to hire tractors with those ready to rent their own. A location-based mapping system will connect the two and direct them to the nearest franchisee.

The new organization will begin operations in June 2016 and will eventually expand to five states by August 2016. It will later be replicated in nations where Mahindra has a presence outside of India. Mahindra is starting the new business at a time when tractor sales have plummeted as a result of years of drought.

According to the Tractor Manufacturers Association, tractor sales fell 13% in the ten months ending in January 2016 to 422,997 units. According to Rajesh Jejurikar, Mahindra's chief executive, tractor and farm mechanization, the effort would help expand agricultural mechanization, which is now about 35% and manage equipment hire, a procedure that has been in place for many years.

He explained that the company concept is founded on the notion that tractors and other farm equipment are not always accessible when they are most required. "The technology-based model will assist in optimizing tractor utilization," Jejurikar stated.

The cost to the firm will be low because the new business is a franchisee-based, asset-light model, he said. The model will generate revenue in two ways: royalties paid by franchisees and a commission fee on each tractor leased by the franchise.

This is Mahindra Group's second such business, and it is part of the company's wider e-commerce plan. In October of last year, the firm announced the development of SmartShift, an online network that connects cargo owners and carriers. It is one of the numerous businesses that the corporation intends to establish as it attempts to capitalize on the expanding e-commerce market.

SmartShift is a load-exchange platform powered by technology. Cargo owners, including corporations and individuals, can use the SmartShift service via a mobile app for the Android operating system, a website, or a dedicated contact centre.

The Mahindra Group announced in September that it will establish M2ALL.com, an e-commerce initiative that would provide the full line of Mahindra products and services.

M2ALL.com would be run by a completely owned subsidiary called e-Marketplace Pvt. Ltd. To be sure, two years of low and inconsistent rainfall have drained demand for products and services in rural India, pushing tractor and agricultural equipment manufacturers such as Mahindra to look beyond items and instead focus on solutions.

Other companies are making similar efforts.

Escorts Ltd's chief executive officer, S. Sridhar, stated that the company is working on "structural adjustments" to combat weak demand. As part of this, the firm will provide small and marginal farmers with equipment solutions based on a hire-purchase model, in which the farmers will not be required to own the machines and implements.

According to Sridhar, the action will assist Escorts in de-risking itself.

"We have already launched it in a narrow context, and we aim to considerably expand it in fiscal 2017," he said last month in an interview.

Trringo, according to Jejurikar, will make tractors and implements more inexpensive, as well as assist farmers in increasing production via the use of more accessible technologies.

A franchisee may also form alliances with nearby tractor owners, allowing them to rent out equipment to farmers on a commission basis. Farmers that possess pricey, high-end equipment can rent it out, maximizing usage dependent on seasonality.

Greater budget money will go toward irrigation projects, crop insurance, the establishment of a national e-market for agricultural produce, increased pulse output, and interest subsidies to reduce the strain of loan repayment for farmers.

According to Umesh Karne, a director at Mumbai-based consulting firm Armaan Business Services Llp, while Mahindra's new endeavour may not have an immediate influence on the business's income, it will assist the company in the long term by extending its market.

"It makes sense to focus on solutions rather than simply products," Karne added.

Many agricultural firms are considering or have already used e-commerce as a method to circumvent COVID-19 limitations. Whether this or another reason is driving your interest in e-commerce, be sure you are not just aware of the benefits you may see, but also prepared by knowing the problems you may face.