AGCO’s sudden decision to part ways with TAFE in late April came as a shock to the Indian business community, as it did to TAFE itself, although the relationship over the past few years has been somewhat fraught.
Over here in the west, they may be familiar as a producer of smaller budget orientated tractors that look like Massey Fergusons, but beyond that, there is usually little known about the company.
This is in stark contrast to the situation in India, where it is the number two tractor manufacturer, behind only Mahindra and in sales volume, and that volume is huge.
Big market
The tractor market in India is for around 600,000 to 700,000 units/year on average, worth well over €2 billion in a country that is home to 18% of the world’s population.
The catch being that the tractors are small and are unlikely to get much bigger, as the average size of a farm in India is actually decreasing, and has halved over the last 50 years as the population grows and the inheritance laws see them divided between heirs.
This is the present situation, yet back in the 1950s subsistence farming was the order of the day, there were fewer people and mechanisation was scarce to non existent.
However, in the early 60s, the country underwent the green evolution as new farming methods came to the fore and yields increased, allowing more land to be taken into production as crops could be grown for cash.
The Green Revolution
Standing at the very beginning of this change was S. Anantharamakrishnan who had created, at the dawn of India’s independence, the Amalgamations group, a company of diversified interests that included the manufacture of car components.
Meanwhile, back in the UK, Standard Motors had been building the Ferguson tractor, and then Massey Ferguson machines at Banner Lane and in Bangalore.
A fall out between the companies led to Massey Ferguson buying the Coventry Factory in the UK from Standard Motors, while also seeking a new manufacturing partner in India.
The Amalgamations Group stepped up to the plate and between the two companies they formed Tractor And Farm Machinery Equipment in 1960, the partnership known as TAFE, which is still partly owned by AGCO who hold 21% of its shares.
S. Anantharamakrishnan passed away at 59-years-of-age, leaving his son, Anantharamakrishnan Sivasailam to take over the reins.
This gentleman is credited with building up the company from 1968, when he took on the chairmanship, until his death in 2011.
He left behind two daughters, the eldest of which is Mallika Srinivasan, who now heads TAFE and holds a position on the AGCO board of directors.
Now 65-years-old, she is married to Venu Srinivasan, chairman of TVS Motors which manufactures scooters and are owners of Norton, the motorcycle company.
TAFE to go it alone
AGCO and TAFE have worked closely over the years, not just in India, but throughout the world, with one example being the agreement to supply MF branded tractors and parts to several African countries in 2009.
Quite how the situation is going to resolve itself over the next few months will be closely watched in India and various other parts of the developing world.
Both TAFE and MF are major brands globally and with them now competing, while still being major shareholders in each others companies, it is set to become an interesting episode in the history of both.